Endeavour Silver a step closer to developing fifth mine based on positive reserve estimates, PFS

VANCOUVER (miningweekly.com) – The TSX-listed stock of primary silver producer Endeavour Silver rose as much as 7% on Monday after the company released an updated National Instrument (NI) 43-101-compliant reserve estimate and positive preliminary feasibility study (PFS) for its Terronera silver/gold project, located 40 km northeast of Puerto Vallarta, in Mexico’s Jalisco state.

The Vancouver-based miner reported that the main mineralised zone comprises a shallow, steeply dipping, thick, high-grade part of the Terronera vein.

Endeavour reported significant gains in resources and reserves when compared with the May 2015 preliminary economic assessment (PEA). The indicated resource is now 3.96-million tonnes grading 332 g/t silver and 2.18 g/t gold (or 385 g/t silver equivalent) and containing 29.53-million oz of silver and 277 000 oz of gold. Resources in the inferred category total 720 000 t grading 309 g/t silver and 1.48 g/t gold (or 413 g/t silver equivalent) and containing 7.15-million oz of silver and 34 000 oz of gold.

The probable reserve stands at 4.06-million tonnes grading 207 g/t silver and 1.95 g/t gold (or 344 g/t silver equivalent) and containing 27.03-million oz of silver and 255 000 oz of gold.

“We look forward to getting the green light to develop Terronera into our fifth mine. We consider the exploration potential to make new discoveries and expand the resources at Terronera to be very good.

“In 2016, drilling on the Terronera vein expanded the main high-grade, mineralised zone to depth. Surface sampling also located high-grade, silver-gold mineralisation in nine other veins on the property. Recently released, very high-grade drill results from the La Luz vein confirm the potential for new discoveries. The deep Terronera and shallow La Luz drill results were not included in either the updated mineral resource estimate or the PFS, and they represent one of several opportunities for extending the mine life and optimising the PFS,” Endeavour CEO Bradford Cooke stated.

The PFS has calculated a net present value (NPV), at a 5% discount rate, of $78.1-million, and an internal rate of return (IRR) of 21%, with a period of 4.3 years to pay back the $69.2-million initial capital expenditures that include $43.1-million for the plant and site infrastructure; $8.7-million for mine development and equipment; and $9.4-million for owners’ costs, construction camp and engineering, procurement and construction management.

Endeavour calculated the resource estimate based on a silver price of $18/oz and a gold price of $1 260/oz for the base case scenario.

Contingencies are estimated at $8-million. The operation is rated to produce 1 000 t/d for the first two years and double to 2 000 t/d in the third year. A seven-year mine life is planned.

Endeavour said it plans to make a production decision based on the information provided by the PFS rather than conduct a full feasibility study.

EL COMPAS DEVELOPMENT
Meanwhile, Endeavour last week completed an initial NI 43-101-compliant mineral resource estimate and a PEA for its El Compas project, also in Mexico, pointing to an economically robust project, prompting management to proceed with mine development.

Management stressed this decision was not made purely off the results of the assessments. Rather, the company based its decision on the fact it has successfully developed similar mines in Mexico, the total capital required is low and it has enough experience to build and operate a mine of this size.

El Compass will be Endeavour Silver’s fourth mine. Endeavour has a 100% interest in the El Compas mine, a gold and silver deposit located in Zacatecas state.

The initial indicated resource estimate calculated 148 400 t grading 104 g/t silver and 7.31 g/t gold (or 616 g/t silver equivalent), for 495 000 oz silver and 34 900 oz gold, or 2.9-million silver equivalent ounces. The inferred resource holds 216 800 t grading 76 g/t silver and 5.38 g/t gold (or 527 g/t silver equivalent), for 527 000 oz silver and 37 500 oz gold (or 3.16-million silver equivalent ounces).

The company plans to process 200 t/d at the mine or will process 300 000 t/y over the 4.3-year mine life at a head grade of 86.4 g/t silver and 6.3 g/t gold. The total life-of-mine output will be 583 000 oz of silver and 49 400 oz of gold.

The base case scenario was built on an average silver price of $18/oz and an average gold price of $1 260/oz. The project is estimated to have an IRR of 42%, an NPV of $12.6-million and a payback period of 2.1 years.

“The mine should generate robust economic returns at current metal prices because the two known mineralized zones (El Compas and El Orito) are relatively shallow and high grade. The operation is very scalable if we discover or buy additional mineral resources in the Zacatecas district and refurbish the second ball mill to double the plant capacity to 500 t/d.

“With the low capital investment of $10-million funded from existing cash, and the short timeline of only six months to initial production once we receive the explosives permit and tax clarity, the El Compas mine has the near-term potential to become a healthy contributor to our consolidated cash flow,” Cooke stated.