Wildcat Silver’s shares leap on drilling, financing

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 skywards in recent weeks.

The company is working to advance its 80%-owned Hermosa polymetallic project about 80 km southeast of Tucson, Ariz. 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 113, on the northwest corner of the deposit, cut an upper zone of 18.4 metres grading 69.4 grams silver per tonne, 0.78% manganese, 0.03% copper, 0.51% lead and 0.3% zinc from 20 metres depth, then deeper down 100.3 metres carrying 153.4 grams silver, 13.79% manganese, 4.25% zinc, 3.72% lead, and 0.19% copper from 148 metres depth.

Step-out hole 119, drilled to the northeast of the deposit, hit an upper section of 12.2 metres grad-ing 220.5 grams silver from 47 metres depth. Farther down at 166 metres, the hole contained a 24.3-metre section of 140 grams silver, 15.3% manganese, 0.19% copper, 1.43% lead and 5.75% zinc.

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

Step-out hole 121, on the eastern edge of the deposit, cut 13.7 metres grading 332.9 grams silver, 7.43% manganese, 0.14% copper, 4.35% lead and 0.31% zinc from 183 metres depth.

As of April 2010, the indicated resource at Hermosa stands at 6 million oxide tonnes grading 187.8 grams silver, 6.83% manganese, 0.1% copper, 1.03% zinc and 1.06% lead, while the inferred resource stands at 39.3 million oxide tonnes of 61 grams silver, 7.66% manganese, 0.06% copper, 1.55% zinc and 1.13% lead; 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 Silver Wheaton financing was announced and popped up to $1.43 on the day, having already risen from around 50¢ in early February. Then, over four days that saw two sets of drill results released, Wildcat’s share price rose 67¢ or 47.2% to $2.09.

While the company is working on exploration, the Hermosa project is already fairly advanced. In a September 2010 preliminary economic assessment, 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, before incorporating underground work, with throughput at 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 zinc cathode and 960 tonnes copper.

The Hermosa deposit’s major host is an epiclastic sandstone locally interbedded with very fine-grained tuff. Mineralization is described 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 Mammoth Minerals and then spun out several Guyanese 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 La Bodega gold property in Colombia at roughly the same time in 2006. Comcorp was split into Wildcat and Ventana Gold, the latter of which is being 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, AZC-X).

The other 20% of the Hermosa project is controlled by Diamond Hill, a private B.C. company that is 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.