Honey Badger nearly triples Prairie Creek value to $1.2B

An updated preliminary economic assessment for Honey Badger Silver’s (TSXV: TUF) Prairie Creek silver-zinc mine in the Northwest Territories almost triples the project’s net present value to $1.2 billion from $419.7 million in 2021. Shares surged.

The update, which comes only five months after the Eric Sprott-backed junior miner bought the site for $12 million, nearly doubles pre-production costs to $667. That gives the mine – which is about 550 km southwest of Yellowknife, near the remote Nahanni National Park Reserve – an internal rate of return (IRR) of 29.3%.

“PC Silver has the potential to become a significant North American silver and critical-minerals producer, generating substantial cash flow and long-term economic benefits, including meaningful employment for our Indigenous partners and in the Northwest Territories,” Honey Badger Executive Chair Chad Williams said in a release on Thursday.

NWT mining momentum

The update advances a potential new mine as the territory seeks to rebuild a mining economy hit by diamond mine closures. Once in production, PC could help meet rising demand for critical metals required for the green energy transition.

The project’s economics also benefit from its brownfield status, with underground workings, a mill, airstrip and other infrastructure already in place after they were mostly built in the 1980s.

Shares of the company gained more than 12% to 71¢ apiece on Thursday morning in Toronto, for a market capitalization of $174.8 million. The stock has traded in a 12-month range of 13¢ to $1.19.

Mine life rises

The update increases PC’s mine life to 22 years from 20 and forecasts roughly the same annual silver output as the 2021 PEA, at 2.55 million oz., while zinc and lead production fall slightly to 117.2 million lb. and 94.5 million lb., respectively. It also identifies 1.34 million lb. of annual copper output.

Life-of-mine free cash flow is pegged at $3.2 billion and the payback period at 3.1 years.

The outlined economics assume a long-term consensus price of US$50 per oz. silver, US$1.50 per lb. zinc, US90¢ per lb. lead and US$5 per lb. copper.

20% tonnage bump

Measured and indicated tonnage increased almost 20% in the update to 11.6 million tonnes, though grades declined by more than 15% to 115 grams silver per tonne, 8.16% zinc, 7.1% lead and 0.23% copper. Inferred tonnage rose by 32% to 8.4 million tonnes at 130 grams silver, 11.03% zinc, 6.13% lead and 0.33% copper.

The updated resource, which uses different metal-price assumptions and cutoff methodology than in the 2021 estimate, is based on historical, rather than new, drilling.

2027 initial production

Though the PEA update doesn’t offer a timeline for production, Williams told The Northern Miner during an August site visit that output could start next summer to demonstrate that zinc and lead concentrate can be produced by the on-site mill.

Year-round mine production would require an all-season road to be built, which Honey Badger estimates would cost $205 million.

The company targets releasing a feasibility study for PC in the second quarter of next year, Williams said.

The deposit at PC was originally discovered in the 1920s. The main mine infrastructure was built in the early 1980s by Cadillac Explorations, financed by the billionaire silver bull brothers Nelson Bunker Hunt and Herbert William Hunt. 

When silver prices dropped, the Hunts’ activities faced a U.S. government probe. They suspended PC in 1982, just three weeks before it was set to enter production.

The site changed hands a few times before Denver-based Resource Capital Funds (RCF) took former owner NorZinc private in 2022 for $13.5 million. Honey Badger purchased PC for $12 million (US$8.64 million) in April from RCF.

Eric Sprott holds a 7.8% stake in Honey Badger.