TORONTO (miningweekly.com) – The Navidad silver project in Argentina has the potential to be the cornerstone asset in Pan American Silver's portfolio and could as much as double the company's annual silver output, CEO
Geoff Burns said on Friday.
Vancouver-based Pan American bought the project when it acquired Aquiline Resources in 2009, but is still waiting for the provincial government in Chubut to change a law that bans openpit mining.
Provincial legislature and gubernatorial elections were held in Chubut at the end of March, and the final results, which still need to be verified, will probably dictate how long it takes before the necessary changes are made, Pan American country manager for Argentina
Bret Boster said in a presentation during the company's investor day in Toronto. His remarks were broadcast over the Internet.
Both of the candidates in the close race for governor in the province have expressed support for mining development, and the company is convinced “now more than ever, that the issue of mining law change in the province of Chubut is a question of when and not if,” Boster said.
Pan American has said that the most likely outcome is that the province will define zones where openpit operations are permitted, including the area where Navidad is located, but the timing on the changes remains uncertain.
Depending on which candidate is shown to have been re-elected, there could be progress on the legislation changes in the “short term”, which means three to six months, but the process could also drag out beyond the end of the year, he said.
“But the good news is that Kirchner herself has been very vocally supportive of mining development,” Boster said.
CORNERSTONE
The Navidad project could produce 19,8-million ounces a year of silver in the first five years of operation, according to a December 2010 preliminary economic assessment (PEA). Capital costs were estimated at some $760-million, excluding recoverable value-added tax.
The project is a big part of the company's growth plan, with the potential to double Pan American's annual output, Burns said.
“If you consider the great mining companies...every one of them has had a battleship asset, an asset that – whether it's in copper, or gold or silver or zinc – is going to be able to make money no matter what the price is,” he said.
“It's a cornerstone that a company is able to leverage and grow from. And Navidad is that asset,” Burns said.
“We have never had something of this magnitude in our portfolio.”
The company expects to have a full feasibility study on the project completed by the fourth quarter of this year, which could include some “enhancements” from the PEA, VP for project development
George Greer said.
He also commented that the PEA analysis was based on an $18/oz silver price, which is less than half the current price for the metal.
Silver prices jumped more than 80% in 2010, and the metal has continued rising this year, rising above $40/oz on Friday for the first time in 31 years.
Pan American, which operates eight mines in Mexico, Peru, Argentina and Bolivia, expects to produce between 23-million and 24-million ounces of the precious metal this year.
Shares in the company jumped 8,3% on Friday, to C$40,83 a share by 16:00 in Toronto.
Edited by: Creamer Media Reporter