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By issuing 50,000 shares to Kinross, Silver Standard secured a 6-month option to complete a due-diligence review. This work will include drilling to test silver grades in the Deep Diablo zone (an extension of the current open pit) and an environmental audit on current and planned reclamation work.
To exercise its option, Silver Standard must make staged cash payments totalling $500,000 over one year and issue 600,000 units to Kinross (one share and a share purchase warrant excercisable at $3.50 per share). It must also pay Kinross US$1 million at the start of commercial production. The transaction is valued at about $3 million, or $3.3 million if Silver Standard opts to buy the existing Merrill-Crowe processing plant.
Kinross has studied higher-grade mineralization that could potentially be mined by underground methods at Candelaria. The Deep Diablo zone hosts a resource of 4.6 million tons grading 6.1 oz. gold per ton, while Northern Belle zone hosts 2 million tons grading 8.39 oz. silver. Combined, they represent a total underground resource of 44.75 million contained ounces silver.
Silver Standard retained Snowden Consultants to estimate a resource block that could be mined by low-cost, open-pit methods. This estimate puts the combined resource for Deep Diablo and Northern Belle at 27.3 million tons grading 3.4 oz. silver per ton at an 0.5-oz. cyanide-soluble cutoff grade. This represents a contained resource of 94 million oz. silver that could be mined by extending the existing open pits.
The Candelaria mine site also has two low-grade stockpiles, as well as some crushed and stacked material that has been only partially leached for silver.
If it exercises the option, Silver Standard will keep the mine closed until further engineering studies are completed, including work to define target silver prices for the resumption of production.
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