Silver Tiger shares slide on prefeasibility for El Tigre project in Mexico

A prefeasibility study released Tuesday tabled strong economics and a quick payback for Silver Tiger Metals’ (TSXV: SLVR; US-OTC: SLVTF) El Tigre silver-gold project in Sonora, Mexico.

The report pinned the after-tax net present value at US$222 million (at a 5% discount rate) and gave a 40% internal rate of return. The company, with a market cap of $100 million, says it expects the US$87-million mine to achieve payback within two years.

“With such positive parameters, we are confident we will be able to advance the project very quickly,” CEO Glenn Jessome said in a news release.

Shares in the Halifax, Nova Scotia-based company plunged 15.5% Tuesday to 27.5¢, ranging between 13.5¢ and 35.5¢ over the past 12 months. But Jessome said management now has a “clear path” to making a construction decision.  

Silver Tiger plans to develop a modest, open pit, heap-leach mine at El Tigre. The 10 year mine plan will see El Tigre in total produce 8.6 million oz. silver and 408,000 oz. gold. The project is expected to generate an undiscounted after-tax cash flow of US$318 million over its life.

The report estimates all-in sustaining costs of US$14.40 per silver-equivalent ounce.

The open-pit design benefits from a low strip ratio of 1.7:1 and mineralization averages 48 grams silver-equivalent per tonne in the pit from surface, enabling efficient operations. Initial processing capacity will start at 7,500 tonnes per day, but a US$15-million expansion could see it scaling up to 15,000 tonnes per day by year four.

The prefeasibility study was based on the Stockwork Zone outlined in an accompanying resource update using US$26 per oz. silver and US$2,159 per oz. gold. The new El Tigre resource estimate holds 61.8 million tonnes of oxide and sulphide material in the measured and indicated categories. It grades 16 grams silver per tonne for 31.3 million oz. of metal, and 0.4 gram gold for 778,000 oz. of contained gold.

Underground upside

The project also holds an out-of-pit measured and indicated resource of 5.3 million tonnes at 255 silver-equivalent for 44 million oz., and 10.1 million tonnes inferred at 216 grams silver-equivalent for 70 million ounces. Jessome says the company plans to wrap an initial economic assessment around the deposit in the first half of next year.

Silver Tiger believes critical mass for the underground project means hitting an exploration target of 10 to 12 million tonnes at 225 to 265 grams of silver equivalent for 73 to 100 million silver-equivalent ounces.

This near-mine underground resource provides long-term resource upside, coupled with the fact that only 30% of the 284 sq. km property has been explored. The company plans to begin underground drilling immediately.