Pan American acquiring silver project in Mexico

An agreement to acquire the Pedernalillo tailings project in Zacatecas, Mexico, gives Pan American Minerals (TSE) another potential silver producer.

The purchase price was not released, although President John Wright said it includes a small option fee and a net smelter royalty.

Reserves at Pedernalillo are estimated at 10 million tons grading 2.97 oz. silver per ton. Preliminary estimates project that a 2-million-oz.-per-year facility could be established for a capital cost of US$8.7 million, with operating costs in the US$2.45-per-oz. range.

Acquisition of the project is contingent on the results of a 6-month feasibility study which Pan American plans to undertake.

The company reports that substantial additional tailings resources exist in the region. Historic production in the Zacatecas camp is estimated at 750 million oz. silver.

The Pedernalillo acquisition is consistent with the company’s plans to grow as a producer solely of silver.

It recently acquired the 47-million-oz. Hog Heaven silver property in Montana from Hecla Mining (NYSE) for an undisclosed price. The project contains 11 million tons grading 4.23 oz. silver and 0.022 oz. gold.

Wright said operating costs for the Hog Heaven project would likely be in the US$4.50 range; as a result, the company is waiting for higher silver prices before considering activating the project. “I would like to see them (silver prices) in the US$6 range at least,” Wright said.

In addition to Hog Heaven and Pedernalillo, Pan American is negotiating to acquire two other silver properties.