Discovery Silver expands Cordero project output as costs limit returns 

Discovery Silver’s (TSX-V: DSV, OTC: DSVSF) preliminary feasibility study on its Cordero project in northern Mexico expands output by 40% while increasing construction costs by nearly a quarter compared with an earlier report.  

The project, located about 550 km south of the border city of El Paso, TX, is forecast to produce 33 million tonnes of silver-equivalent over an 18-year mine life for a net present value of US$1.15 billion at a 5% discount rate, Discovery said in a news release on Tuesday. Construction is estimated to cost US$455 million.  

That compares with estimates of 26 million tonnes of silver-equivalent produced over a 16-year mine life for a net present value of US$1.16 billion at a 5% discount rate, according to a preliminary economic assessment from 2021, Discovery said. That study forecast construction at $US368 million.  

“Despite significant industry-wide cost escalation over the last year, cost savings from a streamlined process design and improved metallurgical performance have resulted in a highly capital efficient project with excellent margins,” Discovery chief executive officer Tony Makuch said in the release. Makuch was appointed CEO of the company on Monday.  

The Toronto-based company attributed the 24% higher construction estimates on increasing the plant’s initial size by a quarter, cost inflation and a switch to owner-operated mining from contractor mining because the open pit is now projected to be nearly a third larger. It said a full feasibility study should be completed before April 2024. 

The new study forecasts an internal rate of return of 28% versus 38% in the preliminary economic assessment. Both used base-case mineral prices of US$22 an oz. silver, US$1,600 an oz. gold, US$1 per lb. lead and US$1.20 per lb. zinc. All-in sustaining costs for the mine’s life are forecast at US$13.62 per oz. silver-equivalent versus US$12.35 an oz. in the 2021 study. 

Discovery updated Cordero’s measured and indicated resources to 716 million tonnes grading 20 grams silver per tonne, 0.06 gram gold, 0.3% lead and 0.5% zinc for contained metal of 467 million oz. silver, 1.3 million oz. gold, 4.5 billion lb. lead and 8.5 b lb. zinc (1.1 billion oz. silver equivalent). 

That compares with the 2021 report’s 16 grams silver, 0.04 gram gold, 0.23% lead and 0.45% zinc (39 grams silver-equivalent) for contained metal of 110 million oz. silver, 284,000 oz. gold, 1.1 billion lb. lead and 2.2 billion lb. zinc (278 million oz. silver-equivalent).  

Processing would start at 25,000 tonnes per day of higher-grade sulphide material mostly from the Pozo de Plata zone for the four years in phase one, according to the new study. Throughput would increase to 51,000 tonnes a day from the fifth year onwards. This second phase would start with higher-grade sulphides from the northeast extension of the South Corridor. Then year 13 onwards would process mostly lower-grade material that had been stockpiled. 

The payback period has increased to 4.2 years from two years due to replacing a heap leach process with flotation and work to expand the mill in the third year, according to the prefeasibility study. However, risks are lower in the new plan because most of the initial ore comes from the proven category and increasing capacity is easier with flotation than heap leach, it said.  

The new inferred resource is 145 million tonnes grading 14 grams silver, 0.02 gram gold, 0.23% lead and 0.38% zinc (167 million oz. silver-equivalent at an average grade of 35 grams per tonne) for contained metal of 67 million oz. silver, 122,000 oz. gold, 726 million lb. lead and 1.2 billion lb. zinc (167 million oz. silver-equivalent).  

In 2021, the inferred resource was 106 million tonnes grading 14 grams silver, 0.03 gram gold, 0.2% lead and 0.4% zinc (34 grams silver-equivalent) for contained metal of 48 million oz. silver, 97,000 oz. gold, 445 million lb. lead and 897 million lb. zinc (117 million oz. silver-equivalent).