Ecuador court gives green light for Silvercorp, Salazar’s El Domo project

Silvercorp Metals (TSX: SVM; NYSE: SVM) and partner Salazar Resources (TSXV: SRL) can now build the Curipamba-El Domo copper-gold project in Ecuador it acquired in July after clearing a legal challenge that questioned its environmental approvals.

The Bolivar Provincial Court rejected an early June appeal of the permit by a local non-governmental organization on Nov. 12. It affirmed that Ecuador’s environment ministry consulted properly, the company said in a news release on Friday.

Silvercorp acquired a majority stake in July when it bought Adventus Mining in an all-stock deal valued at $200 million. Adventus had previously partnered with Salazar to advance the project. Salazar retains a 25% stake in the project, carried to production, while Silvercorp holds the balance and leads development.

The ruling removes the last major obstacle for the US$250-million project, located 150 km northeast of Guayaquil. It will allow Silvercorp to ramp up site infrastructure construction. BMO Capital Markets mining analyst Kevin O’Halloran said that his talks with management indicated that dismissing the appeal was a key step before making a formal construction decision.

“While the decision was expected, it is essential for advancing toward the formal construction phase, with production targeted for late 2026,” he wrote Friday in a note to clients.

A 2021 feasibility study for Curipamba-El Domo, envisioned a 10-year operation. It would produce an average of 10,463 tonnes of copper a year, or 21,390 tonnes of copper equivalent. The project hosts proven and probable reserves of 6.5 million tonnes at 1.93% copper, 2.52 grams gold per tonne, 2.49% zinc, 45.7 grams silver and 0.25% lead.

Ecuador is emerging as a mining investment destination with a big government push to grow mining exports to over US$4 billion annually by 2025. El Domo joins other mines in Ecuador like Lundin Gold’s (TSX: LUG; US-OTC: LUGDF) Fruta del Norte and SolGold’s (LSE: SOLG; TSX: SOLG) Cascabel.

Construction funded

But legal challenges, new mining rules, and the Adventus takeover slowed progress. But, Silvercorp said, the project is still on track. Construction is set to start in the second quarter next year after the rainy season, with early site preparation already underway.

Silvercorp will fund construction with its cash and a US$175.5-million streaming deal Adventus secured with Wheaton Precious Metals (TSX: WPM; NYSE: WPM; LSE: WPM). The company recently repaid US$13.25 million drawn under the agreement, freeing up the full amount to support construction. The advance required the delivery of 92.3 oz. of gold per month starting in July until construction achieved certain milestones, or it was repaid.

First discovered by Salazar in 2008, El Domo spans seven concessions across 215 sq. kilometres. It’s among the highest-grade copper-gold projects globally, and and according to economic studies, could be one of the lowest-cost as well.

El Domo has an investment contract with the Ecuadorian government. It cuts income tax rates, exempts import duties, and guarantees tax stability until 2033.

Silvercorp shares dropped 3% to $5.43 in early afternoon trading, and Salazar’s were flat at 8¢. Silvercorp shares have ranged between $3.01 and $7.34 over the past 12 months. It has a market capitalization of $1.2 billion. Salazar shares ranged between 5¢ and 12¢, with a market capitalization of $18 million.