Chief executive of mining major Silver Standard Resources Inc (TSE:SSO) says exercising the option on Golden Arrow Resources' (CVE:GRG) Chinchillas project provides it with good by-products like lead and zinc and extends the life of its Pirquitas mine in Argentina by eight years.
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Speaking at the European Gold Forum, Paul Benson, said had the tie-up not happened, the Pirquitas operation would have closed in the first quarter of 2018.
Low capex required..
Small scale construction at low cost at Chinchillas around 40 km away will then enable ore to be trucked back to the Pirquitas processing plant, he explained.
As well as an average of 6.1mln ounces of silver a year, 35mln pounds of lead could be recovered and 12 mln pounds of zinc, which is "particularly scarce" at the moment, he said.
Benson highlighted that this was at all in sustaining costs (ASIC) of less than $10 per ounce, which showed "very good margins" considering silver is hovering around $18.50 at the moment.
First production earmarked for next year...
The Silver Standard boss said the project is now going through permitting, and he hoped to be in construction in the third quarter of this year, with first production around a year later.
The combination will create the eighth largest silver mine in the world with an 8-year mine life and output of 8.4 million silver equivalent ounces per year.
"In one transaction, Golden Arrow has leapfrogged into producer status overnight and secured itself a substantial part of the residual production value (and immediate share of the revenues) at Pirquitas and brought much closer the pipeline value of Chinchillas, which would otherwise have been a long and expensive slog to production," chief Joseph Grosso said in a letter to shareholders.
A pre-feasibility-study (PFS) put the post-tax net present value, using a 5% discount rate and metal prices of US$19.50 an ounce silver, 95 cents per pound of lead and US$1 per pound of zinc, at US$178mln.
Shares in Golden Arrow eased 4% on the day to $0.71. Silver Standard shares lost 3.72% at $14.24.