SilverCrest Mines takes two steps forward at Santa Elena

SilverCrest Mines (SVL-V, STVZF-O) has checked off two more boxes on its “to-do” list before it can move its Santa Elena gold and silver project into production.

Mexican authorities have just approved the project’s environmental impact assessment and the Vancouver-based junior has also recently filed a National Instrument 43-101 technical report with reserve estimates.

SilverCrest has now committed itself to equipment and plant purchases for longer lead time equipment in order to start building later this year and to be in full production by the middle of 2009.

The Santa Elena deposit, in northern Mexico, 150 km northeast of Hermosilla in the state of Sonora, has probable reserves of 6.54 million metric tonnes grading 1.61 grams gold per tonne and 56.7 grams silver per tonne. At a cut-off grade of 0.5 grams per tonne gold equivalent, the deposit contains an estimated 339,600 oz. gold and 11.92 million oz. silver.

According to base case economics, the project would yield a pre-tax internal rate of return (IRR) of 100% and a pre-tax cash flow of US$103.7 million, SilverCrest lays out in a press release.

The proposed open-pit, heap leach operation would process ore at a rate of 2,500 tonnes per day and expectations are that it will produce an average of 30,000 oz. gold and 500,000 oz. silver per year for about eight years.

The payback period for the initial capital investment of US$20 million will be about 12 months, the company estimates. Once the initial capital has been paid off, the company expects pre-tax average net cash flow to exceed US$20 million in each of years two and three, with an average net cash flow of US$10 million per year over the course of the mine’s life.

The economic analysis was based on results from 40 drill holes and did not incorporate a potential underground operation.

SilverCrest is currently trading at about 70 a share and has a 52-week trading range of 62 -$1.52 a share.

The company has about 45.49 million shares outstanding for a market capitalization of C$30.94 million.