Sabina likes Hackett River preliminary economics (March 19, 2007)

Vancouver — Aspiring Nunavut silver-zinc producer Sabina Silver (SBB-V, SBBFF-O) moved another step forward with a positive preliminary economic assessment (PEA) on its Hackett River project, located about 70 km southwest of Bathurst Inlet.

The PEA looked at a mine plan with average annual production of 147,300 tonnes (324.7 million lbs.) zinc, 12.4 million oz. silver, 9,400 tonnes (20.7 million lbs.) copper, 16,800 tonnes (37 million lbs.) lead and 17,200 oz. gold over an estimated mine life of 13.6 years.

The study paints a rosy economic picture for Hackett River, estimating a $345-million net present value at an 8% discount rate and a 20.6% pretax internal rate of return. A 3-year payback is projected from the beginning of concentrate production.

Capital costs for the first three years of operation are estimated at $527 million. The study also forecasts cash costs of US$4.44 per oz. of silver equivalent or US22 per lb. of zinc equivalent.

Sabina’s mining plan foresees open-pit operations on the Main zone and East Cleaver deposits and underground development on the Boot Lake deposit feeding a 10,000-tonne-per-day milling circuit.

An open-pit indicated resource of 25.6 million tonnes grading 126.4 grams silver per tonne, 4.07% zinc, 0.38% copper, 0.58% lead and 0.33 gram gold was used in the study, along with an inferred open-pit resource of 3.4 million tonnes grading 99.7 grams silver, 2.57% zinc, 0.37% copper, 0.37% lead and 0.25 gram gold.

Indicated underground resources of 14.5 million tonnes averaging 185.7 grams silver, 5.87% zinc, 0.26% copper, 0.89% lead and 0.25 gram gold were also factored into the PEA, with another 5.4 million tonnes of inferred underground resource grading 186.3 grams silver, 4.71% zinc, 0.23% copper, 0.67% lead and 0.34 gram gold.

Resource estimates assigned a $19.40-per-tonne value (NSR) cutoff grade for open-pit material, $59.94 per tonne for Boot Lake underground material and $49.94 per tonne for Main zone and East Cleaver underground material.

Proposed concentrate production would be hauled by truck on an all-season road to a deep-port load-out facility in Bathurst Inlet for shipment to smelters and refineries in Europe or Asia.

Sabina recently landed Silver Wheaton (SLW-T, SLW-N) as a major shareholder (14.2%) after it invested $12.9 million in the company. Silver Wheaton holds right of first refusal on the sale of silver production from any of Sabina’s projects.

This year’s work program at Hackett River will include the start of a formal environmental impact assessment, further definition and exploration drilling, plus geotechnical and metallurgical testing. Data from the 2007 program will be incorporated into a prefeasibility study.

Sabina acquired Hackett River in early 2004 from Teck Cominco (TCK.B-T, TCK-N) predecessor Cominco and from Etruscan Resources (EET-T, ETRUF-O), which holds a 10% net profits interest capped at $2 million.

Shares of Sabina traded even on the news to close at $3.10 apiece with the company posting a $170-million market capitalization based on its 55 million shares outstanding. The stock has a 52-week trading range of 84-$3.66.