Silver Mines upgrades and optimises Bowdens, highlighting strong economics

Silver Mines releases optimisation study outlining robust economics for the Bowdens Silver Project based on a larger reserves base and improved silver price
Reserves are now 32.8 million tonnes at 68 grams per tonne (g/t) silver, 0.38% zinc and 0.29% lead, for 71.7 million ounces of silver, 123,000t zinc and 95,600t lead
The optimisation study outlines high-margin output of 53Moz silver, 92kt zinc and 67kt lead over a 16-year mine life

Special Report: Silver Mines has ended 2024 on a high note, with significantly increased reserves and an optimisation study demonstrating robust, high-margin economics for its Bowdens Silver Project.

The study outlines output of 53Moz silver, 92kt zinc and 67kt lead to concentrate over a 16-year mine life, with 14 and a half years of ore processing.

Reserves now stand at 32.8 million tonnes grading 68 grams per tonne (g/t) silver, 0.38% zinc and 0.29% lead, for 71.7 million ounces of silver plus 123,000t zinc and 95,600t lead.

The contained silver of 71.7Moz is an uplift of 7.5% on Silver Mines’ (ASX:SVL) 2023 mineral resource estimate (MRE).

This solidifies Bowdens’ status as Australia’s largest undeveloped silver deposit and one of the largest in the world and makes it one of the most leveraged projects to the silver commodity price globally.

Strong financials

Bowdens has now been scoped to cost $331 million, an increase of 35% on the 2018 prefeasibility study. But the higher costs have been more than compensated for by the project’s margins improving by 70%.

The improved financials are based on a 10% increase to the ore tonnes on the 2018 estimate, as well as an improved silver price forecast of US$29/oz and a US to Australian dollar exchange rate of $0.67.

Under those assumptions Bowdens has a payback of only 3.9 years and generates a pre-tax operating surplus of $631 million, with a pre-tax net present value of $359 million and an internal rate of return of 21%.

The first 10 years of the project is expected to recover 4.25Moz silver at $22.67/oz, generating around $84 million of operating cash flow per annum.

Spot silver is trading around $29/oz at the time of writing, but is forecast to rise due to increasing industrial demand, especially clean energy applications such as solar panels.

Reserves and resources improve

With the increase to contained silver, the precious metal is now forecast to contribute more than 85% of the revenue, up from approximately 70% in the 2018 ore reserves estimate.

Changes to the reserves have come from improved metallurgical recoveries from a simplified processing flowsheet, enhanced mine design with a smaller development footprint and reduced overall disturbance.

The 2024 MRE, cut at 30g/t silver equivalent, reflects additional drilling (including a massive total of 24,140 assays), updated geological domains and the changes to metal pricing assumptions.

In addition to those uplifts, the overall resource to reserve conversion of silver from the higher confidence measured and indicated categories has increased to 44% (up from 39%).

A gold dominant portion at a 0.2 g/t gold forms a subset to the overall Bowdens MRE, containing 19.4 million tonnes at 0.32 g/t Au for 201,570oz. Silver Mines plans to do more work to better refine Bowdens’ gold domains for future MREs.

Long life, low cost operation

Managing director Jo Battershill said he was delighted to see the increase to the Bowdens ore reserve and the outcomes of the optimisation work given the company’s focus on improving its understanding of the deposit and increasing shareholders’ exposure to silver.

“With a reserve estimate of almost 72Moz of silver, which is estimated to drive more than 85% of the project’s forecast revenue, Silver Mines is well positioned to benefit from the strong uplift in industrial silver demand that has seen very large deficits build over the last several years.

“In addition, the historical linkage to the gold price continues to provide ongoing support to silver.

“The release of the mineral resource and ore reserve estimates and the results from the optimisation study demonstrate that the Bowdens Silver Project is one of the most advanced silver development projects on the ASX.

“When combined with the project’s tier one jurisdiction, we believe Silver Mines represents a compelling opportunity within the global silver sector.”

Battershill said that now the company had the pathway to regaining the project’s consent firmly in hand, it was important to focus on the economic benefits Bowdens could bring to the community and investors.

“The project is expected to deliver attractive returns with the optimisation confirming the potential for a long-life, low-cost operation, with an initial operating life of more than 15 years and an internal rate of return of over 20%.

“Given the large ore reserves and mineral resources in place, the project also has significant optionality for future extensions of the open pit and the potential to access higher grades from an underground development.

“We very much look forward to continuing to advance Bowdens through to front-end engineering design (FEED), which could occur over the next 12 months depending on timing around regaining the Bowdens Consent.”

Battershill said that while the company could not provide a definitive timeline on the regulatory process, he remained very confident that the development consent would be returned in due course by the NSW state government.

More upgrade potential

The reserves beyond the current mine plan will be considered in the definitive feasibility study to be released as the project moves towards advanced development.

Options for accessing these reserves include mine cutbacks and a transition from open pit to underground mining to access the deeper, higher-grade material.

Silver Mines will also look at ore-sorting technologies to upgrade lower-grade ore and lifting plant throughput to beyond 2Mtpa.

This article was developed in collaboration with Silver Mines, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.