Project with post-tax NPV of $740M and IRR of 37%
By Francois Kalos
New Pacific Metals Corp. (TSX:NUAG; NYSE-A:NEWP) has delivered a strong pre-feasibility study (PFS) for its Silver Sand silver project in Potosi, Bolivia. The PFS is consistent with the results of the 2023 preliminary economic assessment (PEA) and underscores Silver Sand’s potential to become a high grade, low cost, pure silver producer.
PFS highlights (US$)
Silver Sand is expected to produce over 12 Moz of silver annually at an all-in sustaining cost (AISC) of $10.69/oz over a 13-year mine life for a total of 157 Moz of silver (see Table 1), potentially generating $3.8 billion in gross revenue and $1.2 billion in cumulative post-tax net cash flow over the life of the mine.
Under the base case scenario, Silver Sand could yield a post-tax net present value(NPV) (5%) of $740 million and an internal rate of return (IRR) of 37% with a payback period of 1.9 years at a silver price of $24/oz. The project would have modest initial capital costs of $358 million for a project of this scale and sustaining capital costs of $85 million over the life of the mine. At the 2023 PEA base case silver price of $22.50/oz, the project would generate a post-tax NPV (5%) of $638 million and an IRR of 33%. Recent silver prices of $30/oz, if sustained, would increase the NPV (5%) and IRR to $1,124 million and 48%, respectively (see Table 2).
Low-cost silver producer
As outlined in the PFS, Silver Sand’s low capital and operating costs are aided by several factors, including:
- Contractor mining: the mine will likely be operated by a contractor with current operations in Bolivia, eliminating the need to procure a mining fleet and reserve capital for ongoing fleet replacement.
- Low-cost power: the mine will likely be connected to the national power grid, providing low-cost power to the processing plant and other on-site infrastructure.
- Convenient access: the site is easily accessible via government highways and high-quality local roads. The main entry road is also currently undergoing government-funded upgrades.
High-grade silver mine
The PFS has confirmed Silver Sand’s status as a high-grade silver mine with a total of 52 Mt of Proven & Probable reserves at an average grade of 105 g/t for a total of 175.4 Moz of silver. Most of the Measured & Indicated Resources have been converted to Proven & Probable Reserves, except for ore from smaller satellite pits to simplify the mine plan. The majority of the reserves are located within 200 m of the surface.
Peer analysis
The following table underscores Silver Sand’s strong financial metrics when compared to other quality advanced silver and gold projects globally.
The results of the Silver Sand PFS study clearly indicate that the project has the potential to become one of the largest silver mines on the global stage, offering long-term viability and robust economic returns. “Average annual silver production of 12 Moz positions Silver Sand as one of the top undeveloped silver projects in the world,” said Felix Shafigullin, Analyst at Eight Capital, in his latest update following the release of the PFS results.
Roth Capital Partners analyst Joe Reagor also said in his recent update that the PFS confirms that Silver Sand is a robust project: “The PFS demonstrated an after-tax NPV of $740 million and an IRR of 37% at a silver price of $24.00 per ounce. We note that this represented a small increase in NPV compared to the project PEA. We attribute the increase to a higher silver price assumption, which was partially offset by higher costs. Overall, we believe the PFS confirmed our prior views of Silver Sand.”
Looking ahead
New Pacific Metals’ management team has continually demonstrated its commitment to developing high quality mining assets in Bolivia while creating a positive impact for local communities, stakeholders, and shareholders. The company’s impressive results to date are a reflection of these efforts.
The company has expressed its intent to continue advancing Silver Sand by systematically mitigating the risks associated with moving towards production. With the completion of the PFS, the project is now focused on the permitting process, which includes the completion of the Environmental Impact Study and ratification of the signed Mining Production Contract.
Silver Sand is New Pacific Metals’ flagship project. In addition, the company owns the Carangas and Silver Strike projects in Bolivia. Results from the Preliminary Economic Assessment at Carangas are expected in the third quarter of this year and will likely provide a second viable silver development project in New Pacific Metals’ portfolio. With $23.5 million in cash and cash equivalents as of March 31, 2024, the company is well funded and positioned to advance its key projects.
For more information about New Pacific Metals’ projects, please visit newpacificmetals.com/welcome.
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