Silver Mines Ltd (ASX:SVL, OTC:SLVMF) has completed an optimisation study that outlines a robust, high-margin silver operation at its Bowdens Silver Project in central New South Wales — one of the largest undeveloped silver deposits in Australia with substantial resources.
“The project is expected to deliver attractive returns with the optimisation confirming the potential for a long-life, low-cost operation, with an initial operating life of more than 15 years, average C1 margins of over 45% and an internal rate of return of over 20%,” Silver Mines managing director Jo Battershill said.
The optimisation demonstrated strong economics from output of 53 million ounces of silver, 92,000 tonnes of zinc and 67,000 tonnes of lead recovered to concentrate over a 16-year mine life and 14.5 years of ore processing.
Over the life of the mine, silver contributes 86% of revenue – placing the Bowdens Silver Project as one of the projects most leveraged to the silver price in the world.
Optimised design
The optimised design is for a single open pit using drill and blast for primary rock fragmentation with load and haul transportation to the run of mine (ROM) ore pad adjacent to the primary crusher.
The 15 years of scheduled mining (including pre-production), would produce 28.1 million tonnes of ore and 41.8 million tonnes of waste at a strip ratio of 1.49:1.
Over the 15 years of scheduled mining, including pre-production, the project producing 28.1 million tonnes of ore at 71 g/t silver and 41.8 million tonnes of waste at a strip ratio of 1.49:1. This is just a part of the 32.8 million tonnes at 68 g/t silver ore reserve.
Earlier today, prior to announcing the optimisation study, SVL released an updated mineral resource estimate (MRE) and ore reserve estimate for Bowdens.
Read more: Silver Mines lifts Bowdens silver project ore reserves to 71.7 million ounces silver
Based on a silver price of US$29 per ounce and a USD:AUD exchange rate of 0.67, the Bowdens Silver Project generates the following financial metrics:
- Profitability index of 1.76x. This jumps to 2.12x at the spot silver price of A$48.43 per ounce.
- Payback of 3.9-years from start of production, or 3.4-years at silver spot price.
- Life of mine operating margin of A$948 million, A$1.19 billion at spot.
- Undiscounted, pre-tax operating surplus of A$631 million, or A$877 million at spot.
- Pre-tax NPV5% of A$359 million and IRR of 21%, or A$528 million and 27% at spot.
Under the optimised design, initial capital costs are estimated at A$331 million and all-in-sustaining-costs (AISC) estimated at A$24.80 per ounce (US$16.60 per ounce).
Key metrics over the first 10-years include:
- Average production of 4.25 million ounces of silver.
- AISC of A$22.67 per ounce (US$15.19 per ounce).
- Pre-tax operating cash flow of A$84 million per annum (A$103 million at spot price).
The mine optimisation, design and scheduling were conducted by Resolve Mining Solutions.
Pre-tax cash flow – annual and cumulative (2024 Optimisation versus 2018 FS)
Mine expansion options
SVL says that there are options available to further extend mine life and optimise output.
“Given the large ore reserves and mineral resources in place, the project also has significant optionality for future extensions of the open pit and the potential to access higher grades from an underground development,” Battershill said.
Options include the potential for mine cutbacks to the south and west; underground mine development to access high-grade depth extensions; upgrading medium and low-grade ores through ore-sorting; and plant expansion to increase processing of low-grade material over later years.
Project approvals and permits
The priority for the Bowdens team remains securing development consent from the NSW state government. While it can’t provide a definitive timeline, the company is “very confident” that the consent will be returned in due course.
Once obtained, SVL can update timelines on finalising project approvals, including the federal environmental permit and subsequent mining license approval from the state government.
Silver Mines managing director Jo Battershill said: “The Board of Silver Mines is delighted with the outcome of the optimisation work completed by our site team, particularly given the significant distractions resulting from the NSW Court of Appeal’s decision to set aside the Bowdens development consent.
“With the pathway to regaining the project’s consent now firmly in-hand, it is important to focus on the economic benefits the Bowdens Silver Project can bring to the community and investors alike.
“We very much look forward to continuing to advance the BSP through to FEED, which could occur over the next 12-months depending on timing around regaining the Bowdens consent.”
DFS and financial investment decision (FID)
Now that the optimisation study is complete, the company can commence more detailed project funding discussions with potential financial partners.
These discussions will be conducted alongside the remaining work needed to convert the optimisation to definitive feasibility study (DFS) level and into the front-end engineering and design (FEED) process.
Post-optimisation, 70% of engineering has been completed to definitive feasibility study level, with the remaining 30% at feasibility study level.
Optimised Pit footprint compared to reserve footprint in blue