Wildcat finds more silver in Arizona (May 02, 2011)

Highlights from step-out and infill drilling at Wildcat Silver‘s (WS-V) Hermosa silver 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 117. 

Currently, there are four drill rigs focused on the north and east of the project, about 80 km southeast of Tucson and 13 km north of the U.S.-Mexico border. 

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 contained oz. silver in the indicated category and an additional 46.3 million tonnes averaging 58.6 grams silver for 85 million oz. silver in the inferred category.

Of the 11 holes Wildcat reported on April 18, seven were step-out holes, including hole 117, which was drilled in the northwest-southeast trending American fault, where mineralization appears to demonstrate more robust silver and manganese grades.  

Hole 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 130, a larger step-out to the north of hole 118, cut a horizon of strong manganese.

In hole 124, an infill hole, the upper zone hosted low manganese but silver of 113.8 grams 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 metres averaging 7.86% manganese and 440.8 grams silver and 23.2% manganese and 397.5 grams silver, respectively.

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

Last October an updated preliminary economic assessment (PEA) 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 oz. silver. 

Average annual production over the full mine life is estimated at 4.1 million oz. silver at cash costs of negative US$5.84 per oz. net of byproduct credits. The project would 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 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 manganese or US41¢ per lb. contained manganese, US91¢ 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 per day. The processing facility will use a sulphur dioxide leach followed by copper precipitation, zinc solvent extraction-electrowinning, 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 totaling 46 million tonnes. 

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 US43¢  per lb. manganese.

Wildcat was trading at $2.62 per share and over the last year has traded in a range of 32¢ (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 (SLW-T, SLW-N) of 10 million shares at $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.