Production from the Penasco and Chile Colorado deposits on Western Silver’s (WTC-T) Penasquito project in central Mexico would have a return of 16%, a feasibiltiy study says.
The study, done by Tucson-based M3 Engineering & Technology, recommends mining from a 50,000-tonne-per-day open pit operation to produce silver, gold, zinc and lead. The operation would have a 17-year life and produce 220 million oz. silver, 3 million oz. gold, 1.4 million tonnes zinc and 631,000 tonnes lead.
Early gold and silver production would come from the Penasco oxide cap, with a reserve of 27.8 million tonnes grading 25 grams silver and 0.27 gram gold per tonne. Production could start by mid-2007, followed by development of a sulphide reserve on Penasco, which could be exploited once a flotation mill was complete in mid-2008. The sulphide reserve contains 169 million tonnes grading 0.61% zinc, 0.29% lead, 27 grams silver and 0.6 gram gold per tonne.
Mining on Chile Colorado would start around 2015, starting with an oxide cap containing 18.9 million tonnes grading 18 grams silver and 0.21 gram gold per tonne. Sulphide production could start a year later from a reserve of 89 million tonnes that averages 0.84% zinc, 0.36% lead, 36 grams silver and 0.33 gram gold per tonne.
The capital cost of the project is estimated at US$334 million. Based on prices of US$6.74 per oz. for silver, US$434 per oz. for gold, US$1,140 per tonne (US52 per lb.) for zinc and US$810 per tonne (US37 per lb.) for lead, the operation would produce silver at a negative cash cost of US$1.91 per oz. Life-of-mine costs per tonne run to US$6.33.
After tax, the project has a 16.2% internal rate of return and an undiscounted net present value of US$877 million. It would pay back in 77 months.
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