The Conversation (0)
Kootenay Silver has expanded its polymetallic resource at its flagship Promontorio project by successfully addressing metallurgical challenges and adding 506,000 ounces of gold to its Measured and Indicated resources plus 155,000 oz. gold to its Inferred resources. The project has attracted the attention of Agnico-Eagle who has recently added an equity stake in Kootenay of 9.9% through a $4.7 million financing.
The potential of Kootenay’s flagship asset has not gone unnoticed as the company recently closed a $4,750,000 private placement with Agnico-Eagle Mines (NYSE:AEM,TSX:AEM) at a purchase price of $0.76 per Unit. Each Unit consists of one common share and half a warrant. Each full warrant entitles Agnico-Eagle to acquire one Common Share at an exercise price of $1.08 until April 26, 2015.
Agnico-Eagle now owns 9.96% of Kootenay’s issued and outstanding common shares on a non-diluted basis (14.23% if Agnico-Eagle exercises all of the warrants).
This is a healthy endorsement from Agnico-Eagle. This aggressive company is looking to produce 1 million oz. gold this year and has set its sights on expanding production to 1.2 million oz. per year over the next three years. To keep feeding this aggressive growth strategy, Agnico-Eagle will need to find or acquire more ounces in the ground. With this recent investment in Kootenay Silver, it looks like the Promontorio project is firmly on Agnico-Eagle’s radar screen.
The total silver equivalent (AgEq) open pittable measured and indicated resource at Promontorio now weighs in at an estimated 92 million oz. AgEq averaging 64.32 g/t AgEq, with another 24.3 million oz. AgEq averaging 51.95 g/t AgEq categorized as Inferred.
The breakdown of the potentially open pittable silver equivalent resource into the constituent metals is shown in Table A:
Table A: Potential Open Pit Resource
| Category | Tonnes (million) | Ag (g/t) | Au (g/t) | Pb (%) | Zn (%) | Ounces Silver (000’s) | Ounces Gold (000’s) | Pounds Lead (million) | Pounds Zinc (million) |
|---|---|---|---|---|---|---|---|---|---|
| M&I | 44.5 | 27.77 | 0.35 | 0.4 | 0.47 | 39,740 | 506 | 392.9 | 459.6 |
Kootenay Silver also tabled an updated potential underground resource which is highlighted in the following table:
Table B: Underground Resource
| Category | Tonnes (000’s) | Ag (g/t) | Au (g/t) | Pb (%) | Zn (%) | Ounces Silver (000’s) | Ounces Gold (000’s) | Pounds Lead (million) | Pounds Zinc (million) |
|---|---|---|---|---|---|---|---|---|---|
| M&I | 215 | 22.89 | 0.28 | 0.4 | 0.55 | 158 | 2 | 1.9 | 2.5 |
| Inferred | 1,265 | 26.57 | 0.37 | 0.36 | 0.38 | 1,081 | 15 | 10 | 10.7 |
There are a few caveats that need to be noted after stating these resources. These resources are not yet classified as Reserves and cannot be considered economic at this stage. The majority of the resources are contained within a potentially economically minable pit shell that was designed with the following parameters:
- Silver, gold, lead, and zinc prices of $31/oz., $1650/oz., $0.96/lb., and $0.89/lb. respectively,
- mill recoveries of 74%, 70%, 81% and 88% respectively,
- a 1.5% NSR,
- Estimated mining costs of $1.20/t, and estimated processing and G&A cost of $12.00/t; and an estimated POX cost of $2/tonne ($30/tonne of pyrite concentrate).
- Break-even cut-off grades used were 20 g/t AgEq for open pit mill material and 45 g/t AgEq for underground material;
- Silver equivalency is based on unit values calculated from the above metal prices, and assumes 100% recovery of all metals;
The main difference between this new resource and the one published in August 2012 is the fact that gold was included. New metallurgical results have enabled Kootenay Silver to significantly increase its silver equivalent resource by including gold.
The previous resource did not include gold since it was unclear at that time if gold could be recovered due to its refractory nature.
Refractory ore is generally defined as ore containing gold which cannot be satisfactorily recovered by conventional methods used to treat non-refractory gold ores, like gravity concentration or cyanidation.
In Kootenay Silver’s case the gold is encapsulated in sulphide minerals, such as pyrite and arsenopyrite. G&T Metallurgical Services Ltd, Kamloops, BC, Canada has evaluated the Pressure Oxidation (POX) process for the company and came up with very promising results. The POX process is an aqueous process for sulfur removal that is carried out in a continuous autoclave, operating at high pressures and somewhat elevated temperatures. Basically, the sulphides are heated and oxidized to release the gold so it can be treated by conventional cyanidation processes.
The newly estimated M&I gold resource adds 506,000 ounces of gold hosted within the diatreme portion of the system to the already defined silver, lead, zinc resource. There is an additional 155,000 ounces of gold in the Inferred category that can also be added.
The gold has the potential to add significant value to the overall economics of the Promontorio project.
According to the metallurgical test work performed by G&T Metallurgical Services, the overall gold recovery is estimated at 70%.
SRK envisions three production concentrates, lead, zinc and pyrite. They estimate that 74% of the silver and 81% of the lead in the resource will report to the lead concentrate. A total of 88% of the zinc in the resource is expected to report to the zinc concentrate.
Preliminary results suggest that a total of 65% gold reports to the pyrite flotation concentrate. After this concentrate is put through the POX procedure and then subjected to a cyanide extraction process, 94% of the gold was recovered. Another 9% of gold reports to the lead concentrate which does not require the POX process.
Bottom Line
Kootenay Silver has expanded its polymetallic resource at its flagship Promontorio project by successfully addressing metallurgical challenges and adding 506,000 ounces of gold to its Measured and Indicated resources plus 155,000 oz. gold to its Inferred resources. Economic viability still needs to be confirmed but this is a big step forward for Kootenay Silver.
The project has attracted the attention of Agnico-Eagle who has recently added an their equity stake in Kootenay of 9.9% through a $4.7 million financing.
Thomas Schuster – Analyst Bio
With a degree in Geological Sciences from the University of Toronto, Thomas started his career in the 1990s as an exploration geologist in the famous Timmins mining camp in Northern Ontario. He then moved to Vancouver and took a position as staff Journalist at the well-known mining publication, The Northern Miner, reporting the merits and shortcomings of Canadian exploration and mining projects worldwide. This built a foundation for his later work as a Mining Analyst for the Toronto-based institutional investment firm, Fraser Mackenzie. Thomas is currently based in Vancouver working as an independent mining analyst.
Disclosure: No positions at time of writing.
Kootenay Silver is a client of Dig Media. Dig Media was paid a fee for the creation and dissemination of this commentary.