AbraPlata Resource Corp (ABRA.V) has now successfully completed its listing and is now cashed up to hit the ground running in Argentina, where it has acquired the Diablillos silver-gold project from Silver Standard Resources (SSRI, SSO.TO).
The Diablillos asset is actually quite advanced as it has been subject to almost 100,000 meters of drilling by Silver Standard and now contains a total of 81 million ounces of silver and 755,000 ounces gold in the indicated category at an acceptable average grade of almost 3 ounces of silver per tonne of rock, as well as 0.85 g/t gold. That’s a very reasonable grade for an open pit deposit, but AbraPlata will have to deal with a high strip ratio and a substantial pre-strip expense should it decide to move forward with the development of Diablillos. As you can see on the next image, the deposit is definitely ‘open pittable’ but the resource is located fairly deep.
No need to be alarmed. First of all, a pit slope of 42% is very conservative, and pre-stripping is a very effective way to deal with this and will be fairly cheap on a per-tonne basis (after all, it’s just scooping the rock and dust out of the ground and truck it a few kilometers further). But the total cost in million dollars could be quite high (as a lot of tonnage will have to be moved), and fortunately there’s a potential solution for this.
Just one kilometer of the Oculto zone (which hosts the current resource estimate), Silver Standard had discovered Fantasma which seems to be a near-surface pure silver system. Historical drilling discovered 18.8 meters at 3 ounces of silver starting at 8 meters down-hole, 21 meters at almost 4 ounces of silver starting at 14 meters and almost 12 meters containing almost 6 ounces of silver per tonne starting at 58 meters down-hole.
Indeed, this Fantasma-zone could be the key to cover the pre-stripping expenses on the Oculto open pit. Fantasma will never be huge, but a mineable resource of 2 million tonnes at an average grade of 3.5 ounces of silver per tonne of rock would result in a recoverable resource of almost 6 million ounces. Considering the near-surface location of the mineralized zone and the high average grade, these 6 million ounces should be high-margin ounces despite the lack of high-grade gold. To end up with a production cost of $10/oz, AbraPlata would have to keep the production cost per tonne below US$30, and that’s not an unreasonable assumption. Producing those 6 million ounces could easily provide $40-50M in cash flow which could then be used to fund the pre-stripping activities.
Needless to say these two million tonnes are small in absolute numbers but could have a huge impact on the economics of Diablillos, and we’re very keen to see how successful AbraPlata’s drill program will be.
Go to Abraplata’s website
The author has a long position in Abraplata Resource Corp. Please read the disclaimer
