Positive PEA for Maya’s Zgounder

The historic Zgounder silver mine in Morocco. Credit: Maya Gold & SilverThe historic Zgounder silver mine in Morocco. Credit: Maya Gold & Silver

VANCOUVER — A preliminary economic assessment (PEA) says Maya Gold & Silver (TSXV: MYA; US-OTC: MYAGF) should be able to restart at minimal cost the Zgounder silver mine in Morocco, which has been shuttered for 24 years.

Zgounder operated from 1982 to 1990, processing 500,000 tonnes of ore grading 330 grams silver per tonne before failing silver prices forced the mine to shut down. The mine and concentrator were well maintained until 2013, when Maya rehabilitated the processing plant and secured the underground mine.

Those efforts have already cost the company $6 million. Now a PEA says Maya could restart the mine with another US$3.8-million investment.

And the company has a line on the needed funds. Two lines, in fact: a US$6-million credit facility and a $10-million debenture financing. The credit facility is a conventional, two-tranche, short-term loan bearing a 12% interest.

The debenture raise is not so conventional. The Maya debentures will carry an 8% rate and mature in 36 months, at which point debentureholders will have three options: to receive cash, Maya shares or silver ingots produced at Zgounder. The silver ingots will be valued at either 12.5% below the prevailing spot price or US$18 per oz.

This is not the first time Maya has issued silver-backed debentures. A $1.8-million debenture offering in 2011 was similarly structured. Those debentures matured in late 2013, and most holders chose Maya shares.

By the time the new debentures mature in mid-2015, Maya plans to be producing silver at Zgounder. In fact, the company is working to complete a prefeasibility study by the end of March and aims to restart the operation a few months later.

The deposit dips steeply and is surrounded by competent rock, which means long-hole stoping will work well. A new main ramp will be driven to connect all existing levels below 2,100 metres, to make the operation more efficient. All the levels above 2,100 metres are accessible by adit.

In its first year the mine would produce 647,000 oz. silver by churning through 200 tonnes per day carrying an average head grade of 360 grams silver. Throughput is limited by the grinding circuit, where ore has to be ground such that 80% of the rock is smaller than 75 microns. To ensure this fine grind the ball mill can only handle 200 tonnes per day.

Shortly after start-up Maya plans to change the ball mills out for larger autonomous units. That will boost throughput to 300 tonnes per day. Concurrently the company will add two large tanks to the cyanide leach circuit, to provide capacity for the additional tonnage.

Once the expansion is complete annual production would climb to 1.03 million oz. silver.

Using a silver price of US$22 per oz. and a 6.5% discount rate, the mine at Zgounder carries an after-tax net present value (NPV) of US$65.9 million and should generate a 174% internal rate of return.

“We are excited to see such a high NPV,” said Noureddine Mokaddem, president of Maya, in a statement. “The financial results outlined in the PEA are highly encouraging, indicating the economic viability of the known resources. These results support our belief that Zgounder has the potential to develop into a major silver producer.”

After an 85-hole drill program last year, Maya completed an updated resource estimate for Zgounder. The mine hosts 538,000 measured and indicated tonnes grading 343 gram silver for 5.9 million oz., plus 352,800 inferred tonnes averaging 463 grams silver for another 5.3 million oz.

The resources support a 10-year mine life, but Maya’s management believe the site has more to offer. Maya’s CEO, Guy Goulet, pointed out the deposit at Zgounder remains open at depth and laterally. The consultancy that calculated the recent Zgounder resource estimate noted that areas within recognized structures and depth extensions offer mineral potential beyond the stated resource to the tune of 1.5 to 2 million tonnes grading 300 to 400 grams silver.

Zgounder is in central Morocco, 260 km east of the port city of Agadir. It is road accessible. Maya inked a deal for Zgounder with Morocco’s National Office of Hydrocarbons and Mines in January 2012, buying 85% ownership by making payments totalling $5.6 million. Another payment will be due six months after a production decision is made, the amount of which depends on the number of reserve silver ounces.

Maya’s share price gained 2.5¢ on news of the Zgounder PEA to close at 37¢, a new 52-week high. Throughout 2013 Maya shares were stuck in the 22¢ to 28¢ range. Maya has 116 million shares outstanding.


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