SilverCrest bulks up Santa Elena

SilverCrest Mines (SVL-V, SVLC-X) has increased probable reserves of silver by 103% and of gold by 50% at its flagship Santa Elena mine, 150 km northeast of Hermosillo in Sonora, Mexico. Indicated resources of silver have grown by 127% and gold by 99%.

The mine’s probable reserves now stand at 8.2 million tonnes grading 74.9 grams silver per tonne and 1.24 grams gold per tonne for 19.7 million oz. contained silver and 327,430 oz. contained gold.

Indicated resources exclusive of probable reserves have been updated to 2.1 million tonnes grading 114.9 grams silver and 1.69 grams gold for 7.9 million oz. contained silver and 116,000 oz. of gold.

Re-optimization of the open pit reclassified about 880,000 tonnes of open-pit reserve to underground resources, which was converted mostly to the new underground reserves.

The company says the increase in reserves means there will be processing feed for an additional eight years for Santa Elena’s new 3,000-tonne-per-day processing facility—which is expected to start commissioning in the first quarter of 2014. Its three-year expansion project involves building a conventional CCD processing mill with throughput capacity of 3,000-3,500 tonnes per day that will enable the company to process mill feed from the open pit; ore from future underground operations; retreatment of material on the heap leach pads estimated to hold 5 million residual equivalent ounces of silver; and process ore from the nearby Cruz de Mayo silver deposit.

Next year the company forecasts production from the high-grade epithermal gold and silver mine will reach 3.5-4.0 million ounces of silver equivalent and management says it has yet to define the limits of Santa Elena’s main mineralized zone or explore the newly discovered high-grade El Cholugo and el Cholugo Dos zones.

The main mineralized zone— a low-sulfidation, calcium-rich epithermal deposit striking nearly east-west for about 1.3 km with an average true width of about 15 metres—has been drilled to a minimum depth of 500 metres from surface and is open in most directions.

The El Cholugo and El Cholugo Dos zones are almost parallel to the main mineralized zone, about 20-50 metres below its footwall, and SilverCrest believes it’s likely that the two zones are splays off the main mineralized zone with similar mineralization.

“Exploration potential remains high at Santa Elena, with mineralization open at depth and along strike, as well as a couple of new discoveries to flesh out,” Kwong-Mun Achong Low of Jennings Capital writes in a research note. “As additional mineralization is converted to reserves, we see the benefit of eventually adding a second portal, perhaps at the bottom of the current open pit, to increase capacity of the underground mine and to sufficiently fill the mill as the open pit and leach material is exhausted.”

Nicholas Campbell of Canaccord Genuity notes that the new reserve and resource numbers represent an important milestone. “The new reserve grade is a blend of open pit, underground and leach pad material,” he writes. “This gives Santa Elena the potential to produce 4+ million ounces of silver-equivalent over a 10+ mine life, up from roughly 6.5 years previously, with upside potential associated with the El Cholugo and El Cholugo Dos discoveries, by exploiting satellite deposits and by high-grading the underground operations to increase near-term production.”

Campbell has a target price of $4.00 per share and Achong Low of Jennings a target price of $3.25 per share.

Over the last year, SilverCrest has traded in a range of $1.57-$2.96 and at presstime was trading at $2.00.

Silvercrest reached commercial production at Santa Elena in July 2011. In the future it hopes to transport ore from its Cruz de Mayo project, 170 km northeast of Hermosillo, to the mill at Santa Elena. Cruz de Mayo has indicated resources of 1.14 million tonnes grading 0.06 gram gold and 64.2 grams silver for 2,300 oz. contained gold and 2.35 million oz. silver. Inferred resources add 6.07 million tonnes grading 0.07 gram gold and 66.5 grams silver for 13,300 oz. contained gold and 12.97 million oz. contained silver.

SilverCrest is also advancing its La Joya silver-gold property in Durango, Mexico.  La Joya has inferred resources of 126.7 million tonnes grading 0.17 gram gold, 23.5 grams silver and 0.19% copper for 95.9 million oz. silver, 716,200 oz. gold and 533.2 million lbs. copper.