Huge undeveloped silver deposit waits for price rise
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Barry FitzGerald writes his legendary Garimpeiro resources column weekly for Stockhead:
Silver Mines (ASX:SVL) has added an exciting exploration leg to its story while it waits for an inevitable upturn in silver prices to underpin the development of its Bowdens project near Mudgee in NSW.
Bowdens is the biggest undeveloped silver deposit in Australia with a mineral resource of 163 million ounces, or 275 million oz if the zinc and lead in the deposit is given a silver value.
A feasibility study in to its development was completed in June and indicated all-in sustaining costs of production of $US12.94 an oz.
With silver at $US20/oz or $USUS30/oz that would be great.
But silver has slid from last year’s average of $US17.05/oz to $USUS14.77/oz last week, prompting Silver Mines to “park’’ the project for the time being.
While it is parked, Silver Mines will continue to move the project through the environmental and planning approval process so that when silver does turn, Bowdens will be ready to go.
Silver was widely tipped earlier this year to be a star performer on the basis that growth in its use in electronics and solar panels would increase the supply deficit, estimated at 27 million oz in 2017 by the Silver Institute.
But the “poor man’s gold” has been dragged lower in unison with gold’s sharp retreat in response to trade wars fears driving the US dollar higher.
Here’s a graph showing the price of silver over the past five years:
Silver Mines managing director Tony McClure told Stockhead that while Bowdens is parked up, it remains an asset that is “going to be worth a lot of money one day when we have got a positive silver environment.
“And when silver does come back it always comes back very strongly. I think we are close to the bottom the silver cycle now,’’ McClure said.
Silver Mines last traded at 2.9c for a market cap of $18.5m after including shares in the recent $3.84 million entitlements issue at 3c a share.
It could be argued that Bowdens more than covers the market cap, with nothing in the share price yet for the regional exploration program Silver Mines kicks off next month.
The exploration focus is the Barabolar copper-gold (and other metals) prospect, about 10km north-west of Bowdens. It stretches from the historic Bara silver mine in the south to the Botobolar molybdenum workings to the north.
Barabolar sits in older rocks than Bowdens on the lightly explored eastern limb of the Macquarie Arc/Lachlan Fold Belt, the host of world-class deposits like Cadia/Ridgeway (gold-copper), Cowal (gold) and Northparkes (gold-copper).
Proceeds from the entitlements issue are earmarked for the exploration push which has McClure, a veteran geologist with more than 30 years’ experience, as excited as they come.
“It’s the main play for the company right now. It is a super exciting exploration project. It has certainly surpassed our expectations from when we first we went up there,’’ McClure said.
Anglo American sniffed around the area in the 1970s but there have been no previous drill holes in to the three priority copper-gold targets worked up by Silver Mines with the latest exploration techniques.
Kia Ora is a porphyry target sitting below extensive skarn mineralisation. Kia Ora West is a buried copper target and Cupola is an intrusive copper target.
“We are not saying we have got another Cadia/Ridgeway, it’s way too early for that. But what we are saying is this is a very substantial system with copper anomalism,’’ McClure said.
Initially at least, Barabolar is to be put to the test with 7500m of drilling which is likely to start in mid-September.