Base Metals

Silver Bull Resources released an updated NI 43-101 resource report for its Sierra Mojada project on Monday. There were two aims in creating the updated report: “bring[ing] all of the known zinc mineralization into the story for the first time, and updat[ing] the silver resource using prices applicable to the current market conditions.”

Silver Bull Heightens Focus on Zinc with New Sierra Mojada Resource Report

Silver Bull Resources (TSX:SVB,NYSEMKT:SVBL) has been quiet for most of 2015, but that changed Monday when the company released an updated NI 43-101 resource report for its Mexico-based Sierra Mojada project. 

Tim Barry, the company’s president, CEO and director, highlights in a press release that there were two aims in creating the updated report: “bring[ing] all of the known zinc mineralization into the story for the first time, and updat[ing] the silver resource using prices applicable to the current market conditions.”

Looking at the numbers put forward in the new report, it seems like Silver Bull was successful on both fronts. The report uses a zinc price of US$1 per pound and a silver price of US$18 per ounce, different from a 2013 report that used a zinc price of $0.95 per pound and a silver price of $29.20 per ounce. Meanwhile, it shows that Sierra Mojada’s measured and indicated global resource now sits at 58.7 million tonnes grading 3.6 percent zinc and 50 g/t silver for 4.67 billion pounds of zinc and 90.8 million ounces of silver.

Breaking it down further, the report notes that the global resource has two components: an open-pittable resource that accounts for 96 percent of the total deposit, and an underground resource representing mineralization not included in the open pit due to its depth.

The former includes a high-grade zinc zone of 10.03 million tonnes at an average grade of 11 percent zinc at a 6-percent cut off for 2.426 billion pounds of zinc. According to the company, that zinc zone was not included in the previous resource. The open-pittable resource also holds a high-grade silver zone of 19 million tonnes at an average grade of 102.5 g/t at a cut off of 50 g/t for 62.6 million ounces of silver.

Underground there is a measured and indicated resource of 1.9 million tonnes at an average grade of 9.4 percent zinc at a 6-percent cut off for 388.5 million pounds of zinc.

No word yet on what the company’s next steps at the project may be, but Monday’s release does state that the updated resource report for Sierra Mojada supersedes both the 2013 resource report mentioned above and a 2013 preliminary economic assessment (PEA) for the project. It’s thus possible that an updated PEA may be next on the block.

Switching to zinc

For those following the zinc market, it’s likely no surprise that Silver Bull has opted to increase its focus on zinc at Sierra Mojada. After all, analysts and market participants alike have long been lauding the potential for a zinc price rise. That thesis is largely based on the fact that several big zinc mines have closed or are set to close, and in doing so will create a gap in supply that existing mines won’t be able to fill.

Indeed, in its release, Silver Bull mentions that situation, also pointing out that stockpiles of the metal are down due to “record metal imports into China during 2014.” Furthermore, the company states, zinc is actually already in deficit.

That all sounds pretty promising, but it’s important for investors to keep in mind that it can be tough for junior miners to bring projects online. Indeed, as Wood Mackenzie’s Jonathan Leng said at PDAC, juniors not only often lack the experience to move their projects into production, but also “have limited ability to finance, especially now with subdued zinc prices.”

All that said, Barry seems confident that Silver Bull is in it for the long haul, and in closing mentioned Sierra Mojada’s other positive qualities, such as its “excellent infrastructure.” He added, “[t]he resource provides exposure to both the precious and base metals markets and has the potential to be scaled in size depending on metal prices. In short, we believe there are not many projects like this in the world.”

At close of day Monday, Silver Bull’s share price was down 7.14 percent on the TSX, at $0.13. However, it was up 9.09 percent, at $0.12 on the NYSE MKT.

 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

Stefan Ioannou: Watch China for Zinc Price Outlook Clues

Jonathan Leng: Zinc Space Unbalanced by Timing, Not Lack of Projects

The Common Man: The Case for Copper and Zinc

The Common Man: It’s Time to Think Zinc

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