AbraSilver study quadruples Argentina project value

A definitive feasibility study for AbraSilver Resource’s (TSX: ABRA; US-OTC: ABBRF) Diablillos silver-gold project in Argentina quadruples the open-pit mine’s projected value and cuts the payback period to less than two years.

Diablillos is expected to generate an after-tax net present value (NPV) of about $3 billion (C$4.2 billion) and a 42% internal rate of return (IRR) with a 1.7-year payback period, AbraSilver said late Monday in a statement. This assumes a 5% discount rate, a silver price of $50 per oz. and a gold price of $3,650 per ounce.

A December 2024 study had assigned Diablillos an after-tax NPV of $747 million, an IRR of 28% and a two-year payback period. The new document reflects higher metal prices, expanded reserves and resources and continued engineering optimization.

AbraSilver’s latest study “showcases an elevated net present value on tailwinds from a step change in reserves, accentuated front-end profile and higher metal prices offsetting expected uptick capex and costs,” National Bank Financial mining analyst Don DeMarco said Tuesday in a note. It delivers “both an accentuated front-end mine profile and a longer mine life offsetting higher costs, which are still among the lowest in the sector.”

Resource growth

Located in northwestern Argentina, about 160 km south of the city of Salta, Diablillos is AbraSilver’s flagship asset and one of the country’s largest undeveloped precious-metals projects. The property hosts the Oculto silver-gold deposit, a high-sulphidation epithermal system that has been the focus of extensive drilling and resource growth over the past several years.

Early works are expected to start in the third quarter, including engineering and infrastructure upgrades, with financing targeted by year-end, AbraSilver said. First production is targeted by the end of 2029, subject to a final investment decision expected in the second quarter of 2027 and the receipt of required permits.

Diablillos was approved for inclusion under Argentina’s Large Investment Incentive Regime (RIGI) in May. Key features, which are good for 30 years, include a reduction of the federal corporate income tax rate to 25% from 35%; the elimination of export duties on gold and silver sales; and an accelerated tax depreciation of plant and equipment.

Initial capital expenditures for the project are pegged at $722 million, including a $98 million contingency, with subsequent sustaining capital of $520 million that will be funded through operating cash flow. Pre-production capital costs are about one-third higher than the $544 million envisaged by the 2024 study.

25-year mine

At spot metal prices, project economics improve significantly. AbraSilver estimates the after-tax NPV would increase to $4.8 billion, with an IRR of about 57% and a payback period of 1.4 years. Life-of-mine all-in sustaining costs are projected to be $20 per silver-equivalent oz., placing Diablillos among the lowest-cost primary silver projects currently under development.

Diablillos would produce an average of 20 million silver-equivalent oz. annually during its first five years, consisting of 14 million oz. silver and 89,000 oz. gold per year. Over the mine’s projected 25-year life, annual output is expected to average 10 million silver-equivalent ounces.

Earlier this year, AbraSilver reported a substantially expanded mineral resource estimate for the project. Diablillos holds about 232 million measured and indicated tonnes grading 33 grams silver and 0.34 gram gold per tonne for contained metal of 248.1 million oz. silver and 2.5 million oz. gold, according to a May resource.

Inferred resources were pegged at 49.3 million tonnes grading 12 grams silver and 0.26 gram gold for contained metal of 18.4 million oz. silver and 420,000 oz. gold.

Exploration upside

AbraSilver says it has more than tripled Diablillos’ measured and indicated resources since 2020 at an average discovery cost of 10¢ per silver-equivalent ounce.

Ongoing exploration drilling continues to target extensions of mineralization around Oculto and other nearby zones, offering upside beyond the current mine plan.

Several opportunities exist to further enhance project value, AbraSilver says. They include a potential heap-leach expansion, processing plant throughput increases and an expanded tailings storage facility capable of supporting future mine growth.

AbraSilver shares dropped 3% to C$13.48 Tuesday morning in Toronto, valuing the company at about C$2.2 billion ($1.5 billion). The stock has traded between C$4.51 and C$19.89 in the past year.