Vancouver – With a US$12.5 million loan lined up, SilverCrest Mines (SVL-V) says it now has the necessary funds to bring its Santa Elena project in Mexico to production.
The loan, from Macquarie Bank, adds to US$12 million SilverCrest is to receive from Sandstorm Resources (SSL-V) in return for 20% of Santa Elena’s life of mine gold production. As part of the gold purchase agreement Sandstorm will also pay the lesser of US$350-per-oz. gold or the prevailing price of gold.
If Santa Elena’s US$20 million capital cost as forecast in a prefeasibility study holds up then combined the gold purchase agreement and the Macquarie loan will more than pay for construction of the proposed 2,500-tonne-per-day heap leach mine about 150-km northeast of Hermosillo.
SilverCrest’s June 2008 prefeasibility estimates annual production of 30,000 oz. gold and 500,000 oz. silver over an 8-year mine life from probable reserves of 6.5 million tonne grading 56.7 grams silver per tonne and 1.61 grams gold per tonne.
In a base case scenario using US$765-per-oz. gold and US$11.95-per-oz. silver the project gives an internal rate of return of 100% and a net present value discounted at 8% of US$67 million.
While overall the stripping ratio is 4.85 to 1, in the first two years of production it is expected to be somewhat less at 3.5 to 1.
Using silver to gold conversion of 64 to 1, SilverCrest estimates cash costs per oz. gold equivalent of US$328. But with higher grades and less stripping SilverCrest forecasts cash costs in the first two years at US$250-per-oz. gold equivalent.
SilverCrest chief operating officer Eric Fier says the company has contracted Sonoran Resources to operate the mine and that major equipment has been ordered.
Fier also notes there is potential to expand the operation underground and that beyond the proposed mine SilverCrest has outlined four more near parallel targets with similar geochemical signatures as Santa Elena, a low sulphidation epithermal system.
Production is expected to start in 2010.
Macquarie’s fee for extending the loan was five million SilverCrest warrants redeemable for a common share at 90¢ over three years. Macquarie agreed to cancel 3.2 million shares worth of warrants it already held.
Further to the US$12.5million loan, Macquarie will extend SilverCrest a $3 million bridge finance so that SilverCrest can complete acquisition of Santa Elena. In 2005 SilverCrest entered into a 100% option agreement with the owners of the Santa Elena property for US$4 million payable in stages over five years. The final payment of the agreement is US$1 million.
On news of the US$12.5 million loan SilverCrest’s share price lost 5¢ to close at 55¢. SilverCrest has 45.5 million shares outstanding.
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