At the Silver Summit in Spokane, Washington last month, we had a chance to talk to Tim Barry, CEO of Silver Bull Resources (NYSEAMEX:SVBL, SVB.TO), which owns the Sierra Mojada Silver Project in Mexico.
Sierra Mojada currently hosts an oxide resource of 82.5Mlbs silver and 1.1B lbs of zinc in all categories, and is still expanding the mineralized zones through drilling.
This Silver-Zinc model could be the basis for a two-phased mining plan, whereby in Phase I the silver resource will be mined, and a Second Phase, where the company will primarily be a Zinc-producer. This two-phased mining plan should improve the overall economics of the project. We like this approach, as Silver Bull will profit from the strength in the silver price in the short and medium term, and will offer exposure to zinc in the next decade when the metal is expected to face a supply shortage.
The main problem with Sierra Mojada is the relatively low grade ore. The majority of the resources have a grade of only 1.5oz/t silver and 0.6%Zn, which is very low. But if the cut-off grade for the silver is raised from 15g/t to 30g/t, the average grade increases to almost 2oz/t, with 65M ounces of silver in the resource estimate, which is more robust.
The recent drill results have also revealed some interesting (very) high-grade intercepts such as 202.7g/t silver over 42.65 meters and 1,927g/t (yes, almost 62 ounces per tonne) over 3.66meters.
The next catalysts for the share price are the expected metallurgical results in Q4 2012 and the Preliminary Economic Assessment in H1 2013.
Disclosure: The author holds a long-position in Silver Bull Resources Inc. Please see our disclaimer for current positions.
