Wildcat Silver’s share price leaps on drilling, financing

Vancouver – Promising drill results, a healthy financing and an underlying rise in the price of silver have helped Wildcat Silver‘s (WS-V) share price climb upwards in recent weeks.

The company is working to advance its 80%-owned polymetallic Hermosa project that sits about 80 km southeast of Tucson, Arizona.  Wildcat has four rigs on site working through a 3,800-metre drill program focused on expanding the established resource, with the first results recently released.  

Step-out hole 119, drilled to the northeast of the deposit, hit an upper section of 12.2 metres grading 220.5 grams silver from 47 metres depth. Further down at 166 metres, the hole contained a 24.3-metre section grading 139.9 grams silver, 0.19% copper, 1.43% lead, 5.75% zinc and 15.3% manganese.

Step-out hole 111B, drilled on the western edge of the current resource, hit 32 metres carrying 186.2 grams silver, 0.11% Cu, 1.5% Pb, 1.29% Zn and 6.29% Mn from 13.7 metres. Infill hole 122, drilled on the southern section of the resource, cut 18.4 metres grading 218.4 grams silver, 0.05% Cu, 0.7% Pb, 1.21% Zn and 8.64% Mn.

As of April 2010, the indicated resource at Hermosa stands at 6 million oxide tonnes grading 187.8 grams silver per tonne, 6.83% Mn, 0.1% Cu, 1.03% Zn and 1.06% Pb, while the inferred resource stands at 39.3 million oxide tonnes grading 61 grams silver, 7.66% Mn, 0.06% Cu, 1.55% Zn and 1.13% Pb; plus 7 million tonnes of sulphide resource.

To help fund further development, Wildcat announced a $13 million private placement with Silver Wheaton (SLW-T, SLW-N) in early March at $1.30 per share. While the deal did not include a silver streaming agreement, it did give Silver Wheaton first right of refusal on any stream or royalty financing in the future.

Wildcat was trading at $1.18 just before the $1.30 financing was announced and popped up to $1.43 on the day, having already risen from around 50¢ in early February. Then, in two days of trading on the latest drill results, Wildcat’s share price rose 44¢ or 31% to $1.86.

While the company is working away at exploration, the Hermosa project is already fairly advanced. As of a September 2010 preliminary economic assessment update, which used US$16.78 per oz. silver,  the net present value of the project was US$357 million with a 7.5% discount, and the internal rate of return was 19% on an after-tax basis.

The study called for open-pit mining in the first four years then incorporation of underground work after that, with processing at roughly 3,600 tonnes per day. Over the 18-year mine life, the study estimated average annual production of 4.1 million oz. silver, 233,000 tonnes manganese carbonate, 20,200 tonnes of zinc cathode and 960 tonnes of copper.

The Hermosa deposit’s major host is an epiclastic sandstone locally interbedded with very fine-grained tuff. Mineralization is described in the study as being high-temperature epithermal with quartz-adularia and a suite of clays with outlying minor chlorite-epidote-montmorillonite propylitic zones in the mafic rocks and breccia clasts.

Hermosa is Wildcat’s only asset after the company bought then spun out a number of Guyana properties into Riva Gold (RIV-V) in mid-2010.

Wildcat was itself the result of a spinout after Comcorp Ventures acquired both the Hermosa project (then known as the Hardshell project) and the Bodega property in Colombia at roughly the same time in 2006. Comcorp was split into Wildcat and Ventana Gold, the latter of which was recently bought out in a $1.2 billion deal.

Along with Ventana and Riva, Wildcat directors are also associated with Arizona-focused Augusta Resource (AZC-T).

The other 20% of the Hermosa project is controlled by Diamond Hill, a private B.C. company that is itself 75% owned by R. Stuart Angus, a director of Wildcat Silver. Of Diamond Hill’s 20%, 10% is carried interest while the company also has a 2% net smelter return royalty on the property.

Following completion of the Silver Wheaton financing, Wildcat will have 118 million shares outstanding or 139.3 million fully diluted with 29% management and insider ownership.