Silver Mines[SVL] Looks To Join The Dots At Its Webbs Silver Prospect In New South Wales
By Our Man in Oz | www.minesite.com
Gold has underpinned many investment portfolios over the past years, but it hasn’t been the best performer of all the precious metals. That title belongs to gold’s close precious metal cousin, silver. Since the start of 2009, the gold price has risen an encouraging 10.5 per cent. Silver has risen by 39 per cent. There are reasons for the difference, which has reduced the silver-to-gold ratio from 78.5 ounces of silver to one ounce of gold, to 62.5 ounces of silver to one ounce of gold. But that’s not the purpose of this report, which is rather to examine a rare beast on the Australian stock exchange, an almost pure silver play called, appropriately, Silver Mines Ltd.
Over the past year, as the silver price has been rising, the share price of Silver Mines has been falling. One of the reasons for the decline – from around A14 cents to A3.5 cents – is that the company is yet to start mining at its flagship Webbs project in the north-east corner of New South Wales. Another is that the company has been short of cash, raising its most recent pot of A$200,000 in capital at the current share price of A3.5 cents.
But, once you cut through a cash shortage similar to that which confronts many small explorers what you find here is a business with its foot on a historically rich silver field, and a plan to start early production, while continuing to grow the resource base with targeted exploration. It will not be easy, but the chief executive of Silver Mines, Charles Straw, is determined to plug ahead because the economics of developing a new mine at Webbs are compelling.
“It would be a completely different matter if it was gold we were chasing at Webbs”, Straw told Minesite’s Man in Oz. “We have outlined a 4.5 million ounce inferred silver resource at Webbs from just 5,500 metres of drilling. There’s no doubt that we will find more because of the nature of the geology.” Finding silver at Webbs is not the major challenge. The area has been mined intermittently over the past 100 years, yielding a classic polymetallic ore rich in silver, but with useful grades of zinc, lead and copper. At current prices, about 65 per cent of the metal value is in the silver. The deepest mine dig by the old-timers went to about 200 metres, with the miners only chasing the richest seams. The plan being worked up by Silver Mines is to develop shallower open pits to keep costs down and maximise profits.
Looked at from a bird’s eye view Webbs is a series of separate silver lodes and older workings. In effect, it is a series of dots waiting to be joined and extended along a regional structural shear zone which has brought mineralised fluids to the surface. The most recent resource estimate stands at 670,000 tonnes of material assaying 210 grams a tonne, with an additional 510,000 tonnes at 230 grams a tonne at Webbs South. More ore-grade material is required, but the grade is interesting because it is the equivalent to gold at 3.4 grams a tonne, and all of it is close to the surface.
“The work we’re doing at the moment includes a fresh geophysical survey and detailed metallurgical test work”, Straw said. “We expect those results to be received over the next few weeks.” He said the geophysics was designed to “in-fill” ground between the Webbs Silver South prospect where the highest grades had been obtained from the earlier work, and the main Webbs silver mine. The metallurgy is to confirm what will be required in a process plant which is likely to yield two streams of concentrate, one rich in silver and the other containing the base metals.
The next phase of work at Webbs is likely to include fresh drilling in late August. “That work will look to extend the Webbs South prospect further to the south”, Straw said. “The geophysics we’ve run shows that the target extends for at least another 50 metres south. If we can drill that out, and update the resource then we could be very close to having enough open-pittable material to justify really going forward, on a small scale development.”
Straw said the plan for Webbs was to not develop a big mine, but with material at the surface assaying as high as 230 grams a tonne of silver, the project would be very profitable. “We can’t provide any financial estimates yet, but it is likely to be worth pretty good money”, he said. “What makes it so attractive is that the mineralisation is sticking out of the ground. Any mining would be straight into ore.”
The major difference between what Silver Mines is seeking to achieve and what happened in previous campaigns in the area is the switch from seeking small, high-grade seams, to recognising the value in an open-pit development. “Our view is that Webbs comprises a number of discrete pods”, Straw said. “The Webbs mine was one of those, and the Webbs South structure is another. It is highly likely that we will eventually pinpoint another three or four of those pods. As you start to add that up you might find in the top 150 metres you could easily have in the order of 10 million ounces of silver, which is quite a nice little project. In gold equivalent terms 10 million ounces of silver converts to 160,000 ounces of gold worth around US$150 million – a tantalising prize for a company currently capitalised at less than A$2 million.
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