Bear Creek ups silver reserves at Santa Ana

VANCOUVER — Peru-focused Bear Creek Mining (BCM-V, OU6-F) is closer to becoming a serious silver producer with the release of a feasibility study on its Santa Ana project in southern Peru.

The study establishes 63.2 million oz. silver in reserves at Santa Ana, which brings the company’s total reserves to more than 321 million oz. silver. While currently not a producer, Bear Creek plans to develop its Santa Ana project by 2012, followed by its Corani silver project in 2014. With both online, the company could be producing 20 million ounces a year, which would place it among the top pure silver companies in the world.

The feasibility study on Santa Ana outlines an 11-year open-pit mine life with a 2-to-1 strip ratio, producing an average of 4 million oz. silver annually from 3.6 million tonnes of ore. Capital costs are estimated at US$68.8 million with a payback in 3.4 years using base-case figures.

Heap-leach silver recovery is estimated to be 70%, though column leach testing has shown that finer crushing could improve recovery to 75% and ongoing testing indicates a finer crush size could also significantly accelerate recovery times.

Base case financials work out to an after-tax internal rate of return of 21.8%, and an after-tax net present value of US$66.5 million using a 5% discount. The base case uses a silver price of US$14.50 per oz. while the spot price for silver on Oct. 6 was US$22.92 per oz. Factoring in the spot price, the after-tax IRR jumps to 52.6% and the NPV to US$232 million.

Reserves stand at 37.1 million tonnes grading 53 grams silver per tonne for the 63 million contained ounces. Reserves also contain 0.34% lead and 0.58% zinc but only silver will be recovered.

Preliminary mine plans have indicated the possibility of adding 35.7 million ounces to the reserves. In all, the feasibility study pit design did not incorporate measured and indicated resources of 72.8 million oz. silver. The deposit remains open to depth and to the north.

The 54-sq.-km Santa Ana project is 140 km south of the city of Puno on the southern edge of Peru. The project is a volcanic-hosted epithermal system with mineralization contained in numerous structural feeders and in widespread crackle breccias.

Bear Creek’s flagship Corani project is also in Puno with reserves of 139.6 million tonnes grading 57.5 grams silver, 0.94% lead and 0.46% zinc for 258 million contained oz. silver, 2.9 billion lbs. lead and 1.4 billion lbs. zinc.

Bear Creek’s share price dropped 11¢ on news of Santa Ana’s feasibility study to close at $5.97. The company’s stock price has climbed from roughly $3.60 in late July to a recent 52-week high of $6.35 as the price of silver has gone from roughly US$18 per oz. to US$23 per oz. The company has 70 million shares outstanding.