Bear Creek posts strong scoping study for Santa Ana in Peru

Bear Creek Mining‘s (BCM-V) Santa Ana deposit in southern Peru will be a pure silver producer averaging 4.6 million ounces per year over 11.8 years of a heap leach operation, the company says.

For each of the first six years, the mine will produce 5 million oz. silver, a scoping study has found. Cash costs will come in at about US$7.47 per oz. silver, with capital costs of US$51 million and a payback period of two and a half years based on a silver price of US$13 per oz.

The study calculated a net present value of US$55 million at a 7% discount rate and an internal rate of return of 29%. (The undiscounted after-tax NPV is forecast at US$115 million.) The project envisions a mining rate of 10,000 tonnes per day.

Mark Leduc, senior vice president of engineering and development, says the project can be built and put into production in a short-time frame because the deposit outcrops at surface and the silver will be recovered using low-cost, conventional heap leach pads next to the open pit.

“It’s a straightforward project from an execution point of view [and] we don’t see any permitting issues in front of us,” he says. “We’re looking to advance this along the development process very fast.”

Leduc estimates it would take six months at most to build a mine once the permitting is in place. Before then he estimates it would take between 18 months and two years to get the permits and complete the final feasibility design.

The trick he says will be the recovery rates for silver from the heap-leach process. “The majority of silver comes as a byproduct of base metal mines and recovery is mostly from lead concentrates,” Leduc explains.

With heap leach, it takes cyanide longer to dissolve silver than it does gold. “Silver just has slower reaction kinetics,” he says. “In our case the silver is in Argentite, 87% silver by weight and 13% sulphur … There are not an awful lot of primary silver mines in the world.”

The proposed mining sequence would involve removing ore from the higher grade, near-surface parts of the deposit throughout the mine life, leaving about 33.7 million tonnes of measured and indicated and 16.3 million tonnes of inferred ore behind that could be produced at a later date and at a reduction of cut-off, should metal prices increase.

According to a new resource estimate released earlier this month, Santa Ana’s measured and indicated resources grew 19% to 66.8 million tonnes grading 45.5 grams silver per tonne for contained silver of 97.7 million ounces. The new resource was based on 55,575 meters of drilling in 306 diamond drill holes through December 2009.

But the scoping study focuses on just 42.4 million tonnes grading 56.7 grams silver per tonne (and includes 25% inferred resources), which leaves upside for expansion and high leverage to silver prices.

“The mine plan is easily modified to react to higher silver prices and mine the approximately 61.9 million ounces in total resource not captured in the PEA,” Bear Creek’s president and chief executive, Andrew Swarthout, said in a prepared statement.

Santa Ana is 140 km south of Puno and about 20 km south of a paved highway connecting the city to the port of Ilo. The deposit is about 40 km southwest of Lake Titicaca, Peru’s largest freshwater lake, and about 20 km north of the Bolivian border.

Lead and zinc will not be recovered and metal dore will be produced on site, eliminating the need for smelter contracts.

Bear Creek holds a 100% interest in 6,300 hectares covering the mineral deposits, all surrounding exploration potential, and necessary project infrastructure.

News of the positive scoping study sent Bear Creek up 6¢ apiece or 4.3% to $1.46 per share in mid-day trading.
The Vancouver-based junior has a 52-week trading range of 57¢-$7.65 per share and has 55.5 million shares outstanding.