Southern Silver study ups Mexico project NPV, mine life

An updated preliminary economic assessment (PEA) for Southern Silver Exploration’s (TSXV: SSV) Cerro Las Minitas project in Mexico shows improved economics and added 2.6 years to the mine life. The company’s shares rose 3.9% on the news.

The study forecasts an initial capex of US$388 million and an after-tax NPV (at a 5% discount) of US$501 million — a 45% increase from the first PEA released in 2022.

The underground mine, in north-central Mexico’s Durango state, has a post-tax internal rate of return of 21.2% with a payback period of 48 months and a 17-year life.

Under the updated study, the daily mine production capacity increases by 18% to 5,300 tonnes per day. Production would increase to a peak rate of 7,800 tonnes per day in the fourth year of production when both mine portals are operating.

All-in sustaining costs are estimated at US$2.5 billion, at a silver-equivalent price of US$12.23 per ounce.

“This latest economic update of Cerro Las Minitas represents a new milestone in the ongoing evolution and development of the project which is the culmination of a number of smaller technical improvements, developed over the last 18 months, which together result in a significant increase in the value of the Cerro Las Minitas asset,” Southern Silver president and director Lawrence Page said in a news release.

The study estimates the project, near Durango city, about 900 km northwest of Mexico City, will generate gross revenue of US$4.4 billion, up US$765 million from the 2022 PEA. Silver and gold represent 45% of total revenues, and zinc represents 35%.

More value potential

There are opportunities for mine life extension as mineralization on the eastern and northern sides of the site are under-explored and there are gaps in the resource model at shallow depths, Southern Silver says.

Infill drilling, particularly in parts of the deposit included in the inferred resource could also add value to the project. The resource for the project has been updated once since the 2022 PEA, and now hosts 13.3 million indicated tonnes grading 102 grams silver per tonne, 0.07 gram gold, 0.17% copper, 1.3% lead, and 3.1% zinc, for 43.4 million oz. silver, 32,000 oz. gold, 49 million lb. copper, 374 million lb. lead and 921 million lb. zinc.

Its inferred resources total 23.4 million tonnes at 111 grams silver, 0.14 gram gold, 0.21% copper, 1.1% lead and 2.1% zinc, for 83.4 million oz. silver, 104,000 oz. gold, 111 million lb. copper, 582 million lb. lead and 1.1 million lb. zinc.

Shares in Southern Silver traded at 27¢ apiece on Monday morning, valuing the company at $75.7 million. Its shares traded in a 52-week range of 11¢ and 34¢.