VANCOUVER — The silver market has declined since cash-rich explorer Levon Resources (TSX: LVN; US-OTC LVNVF) last released a resource estimate at at its wholly owned Cordero silver–zinc–lead project in Chihuahua, Mexico, but lower metal prices haven’t prevented the company from boosting the project’s global in-situ indicated silver ounces by 57%.
Levon’s exploration has focused on the Cordero porphyry belt in the southern portion of its main claim block. The belt is defined along 15 km of strike with widths ranging from 3 km to 5 km over six mineralized porphyry and diatreme intrusive centres. Grid drilling has confirmed that the Pozo de Plata diatreme, the Josefina mine zone and the Cordero porphyry zone discoveries merge into a single bulk-tonnage, open-pit resource.
In 2012 Levon identified an undrilled gap in the centre of its existing resource that occupies an unconsolidated area of Cordero called the “Aida” claim block.
The company picked up a 100% stake in Aida in July 2013, and started drilling to add tonnage. Levon completed 13,100 metres over 24 holes during its latest program before announcing “better-than-expected” results in late April.
Drilling determined that Aida’s mineralization extends from surface to depths of between 700 metres and 1,000 metres within volcanic feeders beneath the Cordero felsic volcanic dome complex. Results established that the dome is mushroom shaped and mineralized to the surface, while the stem feeders appears to elongate northeast, and extend through Aida’s 600-metre strike length.
The result is an upgraded resource that includes data from new holes on the porphyry zone plus the phase-four results, and constrained within an open pit calculated at US$20 per oz. silver.
Cordero now hosts 848.5 million indicated tonnes grading 17.9 grams silver per tonne, 0.05 gram gold per tonne, 0.48% zinc and 0.254% lead. Contained metals are pegged at 488 million oz. silver, 1.4 million oz. gold, 9 billion lb. zinc and 4.7 billion lb. lead.
“Cordero is a major discovery and a novel porphyry silver–gold– zinc–lead type system from its alteration and metal-zoning patterns. Additional upside potential exists for contact replacement deposits in areas yet to be delineated on the margins of the resource,” vice-president of exploration Victor Chevillon noted in the release. “There is also a younger porphyry-controlled zinc system in the southwest and younger porphyry copper and molybdenite mineralization in the northeast part of the resource that has been intersected in deep holes beneath the presently modelled open pit.”
In early 2012 Levon published a preliminary economic assessment (PEA) on a smaller resource that would have processed material through a 40,000-tonne-per-day flotation mill. The proposal carried development costs of US$500 million.
Potential metal production over a 15-year mine life is pegged at 131 million oz. silver, 190,000 oz. gold, 1.4 million lb. zinc and 1 million lb. lead. The PEA mine plan targets indicated resources of 164.8 million tonnes at 22.55 grams per tonne silver, 0.078 gram per tonne gold, 0.41% zinc and 0.25% lead.
Assuming a US$25 per oz. silver price, Levon’s original PEA features a US$294-million after-tax net present value at a 7% discount rate, along with a 14.8% internal rate of return (IRR) and a 5.1-year payback period. The company is looking to expand its mill design to 80,000 tonnes per day using Cordero’s growing resources, and improve gold recoveries with metallurgical studies.
Levon shares have traded between 17¢ and 49¢ over the past year, and dropped 6% after the resource update en route to a 24¢ close at press time. The company has 200 million shares outstanding for a $48-million market capitalization, and reported US$40 million in working capital at the end of June.