Quaterra Resources Inc. (TSXV:QTA) and joint-venture partner Blackberry Ventures I, LLC, announced that a preliminary economic assessment of the Nieves property in Mexico concluded the potential for an open pit silver mine with an average yearly potential of 5 million ounces production per year.
As quoted in the press release:
The preliminary economic assessment (PEA), undertaken by M3 Engineering & Technology Corp. (M3) of Tucson, Arizona, sets out the following key project parameters:
- An open pit centered on the Concordia vein that contains a total of 35.4 million tonnes. The pit is based on an indicated resource of 33.0 million tonnes at 50.1g/t silver and an inferred resource of 39.3 million tonnes at 32.0 g/t silver, using a cutoff of 15 grams.
- Recovery of 55.5 million ounces of silver and 41,000 ounces of gold over the 10-year mine life at an average mining rate of 3.5 million tonnes per year. Silver recoveries of 86% were based on testwork completed to date.
- Initial capital expenditure of US$231.6 million (U.S. dollars are used in this press release unless otherwise stated).
- Average life-of-mine operating costs of $14.98 per ounce of payable silver.
- An after tax net present value (NPV) of $77.1 million at an 8% discount rate and a base case silver price of $27 per ounce. The before tax NPV is $142.32 million. At a silver price of $32.40 the after tax NPV is $204 million. The project breaks even at a silver price of about $21.37 per ounce (about $15.25 after payback).
- An after tax internal rate of return (IRR) of 15.7% with a 4.4-year pay back. The before tax IRR is 21.9% with a 3.4-year pay back.
Quaterra President and CEO Thomas Patton, commented:
The PEA confirms our expectation that Nieves is an attractive open pit silver project based on a conservative silver price. And it is highly leveraged to any upward movement in the silver price, with an after tax increase in net present value of about $23 million for every one dollar increase in silver above the base case. Also, exploration and drilling provide good potential not only to expand the current pit but also to upgrade the San Gregorio inferred resource which was not included in this study.