VANCOUVER — The full picture is coming into focus for Wildcat Silver (TSXV: WS; US-OTC: WLDVF) at its flagship Hermosa polymetallic project, 80 km southeast of Tucson, Ariz. Though the company has released two preliminary economic assessments on Hermosa over the past four years, a prefeasibility study (PFS) released on Dec. 10 is the first model that takes into account the project’s full slate of mineral endowments, which include silver, electrolytic manganese metal (EMM), gold, zinc and copper.
Wildcat has tallied a maiden reserve estimate at Hermosa of 54 million proven and probable tonnes grading 69 grams silver per tonne, 0.09 gram gold per tonne, 8.3% manganese, 1.79% zinc and 0.07% copper. Measured and indicated resources tack on 172 million tonnes at 37 grams silver, 0.06 gram gold, 5.67% manganese, 1.59% zinc and 0.06% copper.
The Manto-type deposit at Hermosa features replacement-skarn mineralization formed at a contact point between carbonate limestones and rhyolitic volcanic rocks. Structural episodes and fracturing hydrothermal fluids have emplaced high concentrations of metals into four mineralization types, namely: vein-controlled sooty manganese, disseminated silver and iron in rhyolites, replacement-style Manto oxides in carbonates and volcanics, and strongly silicified zones.
Hermosa’s development costs are pegged at US$835 million, with US$189 million earmarked for a specialized processing facility that would allow Wildcat to produce EMM domestically.
The company notes that 97% of the world’s EMM is produced in China, with North America importing 100% of the EMM it consumes.
Manganese is the world’s fourth most heavily consumed metal, with a global output of 16 million tonnes per year, of which more than 90% is used in steel manufacturing.
Much of Wildcat’s PFS work focused on producing a 35% manganese concentrate that could be used as feed stock at a 55,000-tonne-per-year EMM plant. The company says that the EMM facility would be independent of the main mill, which would allow it greater flexibility, since that part of the project could be financed separately or funded through cash flows.
Hermosa’s mill would hum along at 13,700 tonnes per day, or 5 million tonnes per year. The mine would annually produce a life-of-mine average of 5.7 million oz. silver, 110 million lb. EMM, 10,000 oz. gold, 10 million lb. zinc and 3 million lb. copper. Average cash costs are expected to be US$4.45 per oz. silver and US74¢ per lb. EMM, with silver cash costs falling, net of by-product credits.
Wildcat’s base-case assumes metal prices of US$23.50 per oz. silver, US$1,250 per oz. gold, US92¢ per lb. zinc and US$3.25 per lb. copper. The company forecast an average-realized price of US$1.19 per lb. EMM flake, with the three-year trailing price across target markets pegged at US$1.40 per lb.
Hermosa’s base case would carry a US$61-million, after-tax net present value at a 7.5% discount rate, along with a 21.3% internal rate of return and a 2.8-year payback period. It should be noted that results are based on full ownership, while Wildcat owns 80% of the project alongside private outfit Diamond Hill Investment.
Wildcat’s next steps at Hermosa include a 48-hole geotechnical and infill drill program, as well as environmental baseline studies over the next year. The company will also fine-tune its metallurgy to improve recoveries, which stand at 79% silver, 28% manganese, 90% gold, 61% copper and 8% zinc.
Wildcat reported US$1.2 million in cash and equivalents at the end of September, and has traded within a 52-week window of 28¢ and $1.02. Following its PFS announcement the company reached a 41¢ high during intraday trading before closing down 11% at 33.5¢ per share, on 164,000 shares traded. Wildcat had 143 million shares outstanding at press time for a $51-million market capitalization.
© 1915 - 2014 The Northern Miner. All Rights Reserved.