Wildcat finds more silver in Arizona (April 19, 2011)

Highlights from step-out and infill drilling at Wildcat Silver‘s (WS-V) Hermosa project in Arizona include 26 metres of 346.52 grams silver per tonne, 12.24% manganese, 3.16% zinc, 4.22% lead and 0.30% copper in hole HDS-117, the company reports.

Currently there are four drill rigs focused on the north and east of the silver-manganese project, about 80 km southeast of Tucson and about 13 km north of the U.S. border with Mexico. The property is 100% owned by Arizona Minerals, which is 80% owned by Wildcat Silver.  Arizona Minerals acquired the property from Asarco in 1996.

The resource stands at 6 million tonnes averaging 187.8 grams silver per tonne for a total of 36 million ounces of contained silver in the indicated category and an additional 46.3 million tonnes averaging 58.6 grams silver for 85 million ounces of silver in the inferred category.

Of the 11 holes Wildcat reported today, seven were step-out holes, including HDS-117, which was drilled in the northwest-southeast trending American Fault, where mineralization appears to demonstrate more robust silver and manganese grades. 

HDS-118, a step-out of about 150 metres to the north of the existing resource, intersected significant thicknesses of manganese, lead and zinc mineralization with moderate silver grades, the company says, while hole HDS-130, a larger step out to the north of HDS-118, intersected a horizon of strong manganese.

In hole HDS-124, an infill hole, the upper zone hosted low manganese but silver of 113.8 grams per tonne over 18.3 metres. The lower horizon was 22.9 metres thick with 8.74% manganese and 178.4 grams silver. Within the lower zone there were two higher grade zones of 4.6 metres and 3.0 metres averaging 7.86% manganese and 440.8 grams silver and 23.2% manganese and 397.5 grams silver, respectively.

Another infill hole, HDS-134, cut 12.2 metres of 9.35% manganese with silver grades of 318.4 grams per tonne.

In October 2010 an updated preliminary economic assessment of the project – formerly called Hardshell – outlined a mine life of 18 years with annual production in the first full six years of more than 6 million ounces of silver.

Average annual production over the full mine life is estimated at 4.1 million ounces of silver at cash costs of negative US$5.84 per oz. net of by-product credits. The project will also produce an average of 233,000 tonnes of manganese carbonate, 20,187 tonnes of zinc cathode, and 960 tonnes of copper annually over the course of the mine life.

The PEA demonstrated a net present value of US$357 million (7.5%), with an internal rate of return of 19% on an after-tax basis.

Initial capital costs are estimated to be US$337 million and the study assumed metal prices of US$16.78 per oz, silver, US$8.13 per dry metric ton (DMTU) manganese or US$0.41 per lb. contained manganese, US$0.91 per lb. zinc, and US$3.07 per lb. copper.

The mining process will initially be an open pit, with underground operations beginning four years after start-up. Current plans call for producing 3,630 tonnes of ore per day. The processing facility will use an SO2 leach followed by copper precipitation, zinc SXEW, as well as manganese and silver recovery circuits.

According to figures from Wildcat, manganese is the fourth-largest metal market in terms of tonnage after iron, aluminum and copper, with 2008 production totalling 46 million tonnes of ore.

In addition to many other uses, manganese plays a key role in the smelting of iron ore into steel, as well as an alloy for various high-wear and other steels. Demand in the U.S. alone for manganese is 4 million tonnes a year, according to Wildcat.

Prices for manganese ores have averaged over US$9.50 per dry metric tonne unit (three year trailing average), or about US$0.43 per lb. manganese.

Wildcat was trading at $2.62 per share and over the last year has traded in a range of 32¢ per share (Aug. 10, 2010) and $3.16 per share (Apr. 11, 2011).

The company has about 110.2 million shares fully diluted.   

In early March, Wildcat announced a $13 million private placement with Silver Wheaton of 10 million shares at a price of $1.30 per share.

The agreement gives Silver Wheaton right of first refusal over any silver stream or royalty financing that Wildcat may choose to sell from the project.

At presstime the silver base price was US$42.78 per oz., while the silver fabricated price was US$51.34 per oz., while sterling stood at US$39.67 per oz.