Proactive Investors USA & Canada
While exploring ways to finance its tailings processing facility in Mexico to production, El Tigre Silver (CVE:ELS) is working steadfast to deliver value for shareholders, developing its nearby flagship resource where sampling results so far are promising.
The junior precious metals developer recently received all the assays from an extensive underground and surface sampling program at its El Tigre property in northern Mexico, extending the vein system to 5.3 km of strike, and potentially more than doubling the size of the current resource.
The sampling was conducted over three areas on the project: the existing resource, the northern extension of the resource, and in the northern section of the property where a resource has not yet been defined, according to president and chief executive Stuart Ross.
A total of 173 underground and 393 surface samples were collected during the program as channel samples, which Ross says are similar to horizontal drill holes, and give the company a good indication of whats there. Some highlights from the program include 2 metres of 702 grams per tonne (g/t) silver and 0.8 metres of 1,148 g/t silver equivalent.
Weve got the assay results in. Information is being put into our database and once analyzed, we will determine if we will do a resource update, says the chief executive.
The existing resource at the property covers only 1.2 km of strike. Ross says that while the additional strike length uncovered has similar anomalous silver and gold as the existing resource, it is still too early to know for certain whether the resource can actually be increased.
But there is definite potential and all signs are positive. We havent seen an end to [the mineralized system] either, as the vein system is still open at both ends, to the north and south, affirms Ross.
The analysis underway is being completed with a view to increase the existing size of the resource, and to upgrade the current inferred resource to the higher indicated category.
The El Tigre property, which stretches across 215 square km in the Sierra El Tigre of northeastern Sonora, Mexico, will be advanced with the help of cash flow from the companys planned processing facility, which will recover silver and gold from El Tigres historical tailings pile. The tailings pile is the result of an estimated 70 to 75 million ounces of silver production and 325,000 to 350,000 ounces of gold.
The companys eventual goal is to produce enough cash from its tailings facility to bring its in-situ resource to production, with the aim of increasing share value, according to Ross.
The groundwork and permitting for the processing facility is already complete, with El Tigre now exploring funding opportunities to take it to production. The tailings pile contains almost 1.4 million tonnes of material, hailing from 35 years of prior production.
The prefeasibility study on the tailings operations, based on a 400-tonne per day mill, estimated a net present value of about $10.9 million using a gold and silver price of US$1,289 an ounce and US$25 per ounce, respectively. The after-tax IRR was pegged at 53%, with El Tigre requiring about $4 million in cash for capex and sustaining capital. All-in costs were estimated at just $14.44 an ounce of silver.
Once funded, Ross estimates the company will need about one year to take the facility to production, comprised of 8 to 10 months for construction, with the remainder needed for the ramp up stage.
Were in discussions with several groups at the moment regarding financing, says the CEO, adding that the financing, which is his primary focus, will likely be a blend of equity and debt.
While the financing of the facility is occupying the chief executives time, El Tigres geological team is intent on getting the sampling data at the El Tigre property analyzed, with underground sampling still ongoing at the site.
The company had $1.2 million of working capital at the end of March.
Our intention is to take [the in-situ resource] to production. It might take three to five years, but that is our intent, says Ross, when asked whether the companys end goal is to fully develop the project itself or sell/joint venture the property.
Existing shareholders would be much better off [having us develop]. The better alternative is to spend the next $5 to $10 million on the project and increase our market cap substantially more than this capital.
Indeed, the Canadian juniors track record certainly speaks for itself. In only four years, the company has raised just over $10 million, and spent it on exploration and engineering, moving from absolutely no resource to an NI 43-101 compliant estimate showing 24.7 million indicated silver equivalent ounces and over 16 million inferred ounces.
With an operating life of 10 years estimated from the tailings operation and a continuous revenue tap flowing, the in-situ resource associated with the El Tigre vein system has ample time to grow given that the system is still open for expansion.
The vein system in Sonora State, Mexico lies in the prolific Sierra Madre gold-silver belt, which hosts several precious metals producers, including Pan American Silvers 27,700-hectare Dolores Mine that hosts some 87.8 million tonnes of proven and probable reserves.
The tailings facility also has upside, with material available that can almost double head grades, according to the companys CEO. There is dump material that was discarded from the original mine that has not been included in the 43-101 estimate or the prefeasibility study, with the cutoff grade then being 15 ounces per ton. This compares to average silver grades of 259 g/t within a range of 124 to 465 g/t, or 7.5 ounces per ton, from results of an auger sampling program released by the company in April 2012. Its close to where the production facility will be built, about 1.5 to 2 km away, says Ross.
Though not included in the technical reports thus far, El Tigres intention is to use this dump material, which totals about 40,000 to 50,000 tonnes, in conjunction with the tailings once the facility is up and running. The economics will essentially double because costs wont increase significantly, with the only requirement being an additional crusher.
With the companys long-term plans, Ross sees no need to worry about gold and silver dynamics at the moment, as he predicts that only short-term changes may be a consideration. I dont see anything in international news or economics that gives me any indication that gold and silver prices wont be increasing on a long term basis and Im not alone in that belief.
El Tigre has a market cap of $9.25 million, and is currently trading at about 16.5 cents, rallying some 38% since the beginning of January.
