Positive prefeasibility for Silvercorp’s Gaocheng property

AMC Mining Consultants has given the thumbs up to Silvercorp Metals‘ (SVM-T, SVM-N)  silver-lead-zinc project in southern China in a prefeasibility study that outlines a net present value of $73.7 million at an 8% discount rate, an internal rate of return of 33% and payback in 2.4 years.

The prefeasibility study also establishes the project’s proven and probable reserves for the first time. The Gaocheng project-dubbed DC-has defined mineral reserves of 4.8 million tonnes in the proven and probable categories grading 121 grams silver per tonne, 1.31% lead, and 2.95% zinc for a total of 18.5 million ounces of contained silver, 62,100 tonnes of lead, and 140,200 tonnes of zinc, supporting a mine life of 12 years.

Construction of the mine and mill is already underway and Silvercorp expects initial production will start in the third quarter of 2012 with full capacity of 1,500 tonnes per day expected in 2013.  

The processing plant is designed for a 1,600 tonne-per-day flotation mill process consisting of a standard sequential flotation of lead, zinc and pyrite with three-stage cleaning of the lead and zinc concentrates and single-stage cleaning for pyrite.

An optional tin gravity recovery circuit potentially can be added to the main circuit to recover tin in the tailings.

Concentrates are dewatered by conventional thickening and filtration. The final products are lead, zinc, and pyrite concentrates, with a possible tin concentrate. Payable silver is in the lead concentrate.

Initial capital costs are pegged at $67.4 million with total operating costs of $40.60 per tonne milled.

Silvercorp picked up Gaocheng, about 200 km west of Guangzhou City, in 2008.

Measured and indicated resources total 7.63 million tonnes grading 122 grams silver, 1.32% lead and 3.08% zinc. Inferred resources add 7.96 million tonnes grading 123 grams silver, 1.41% lead and 2.66% zinc.

Silvercorp has received all of the permits it needs for construction, including environmental and mining permits. Production can start once the company receives the following permits: a review of the health and safety production measures by the Guangdong Provincial Safety Production Bureau; a post-construction safety measure inspection by GPSPB to ensure that the mine, mill and tailing facility have been built to the mine design in terms of safety measures; and an inspection by the Guangdong Environmental Bureau of the tailing facility, mill, and other engineering works.

News of the prefeasibility study sent Silvercorp’s shares in Toronto up 0.86% or 7¢ to close at $8.26 per share within a 52-week trading range of $5.81-$15.60. The company has about 170.6 million shares outstanding. In New York Silvercorp closed 0.98% or 8¢ higher at US$8.24 per share.