juniors pin hopes on 'poor cousin'

just found this in todays smh

Juniors pin hopes on 'poor cousin'
Barry FitzGerald
December 8, 2010 - 9:03AM

BHP Billiton barely rates as a gold producer. What production of the yellow stuff it does have is a by-product at its copper mines. But when it comes to silver, gold's so-called "poor cousin," it is a different matter.

BHP is the world's number one silver producer (42 million ounces in 2009) thanks to its ownership of the Cannington mine in Queensland. And while there has been talk over the years that Cannington does not really fit BHP's "Tier One" mantra and could be sold, there won't be any rush on that front while silver prices remain nice and strong.

The metal cracked $US30 an ounce earlier in the week ? its highest level since the attempt by the Hunt brothers to corner the market pushed silver to all time highs of $US50 an ounce in 1979/1980. Given silver averaged only $US14.60 an ounce in 2009, BHP is now looking at an annual $US650 million earnings boost ? assuming prices hold at the higher levels. Even for BHP, that's a handy collect.
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But if an investor wants leverage to silver they best look elsewhere. The problem is that unlike the North American markets where there is plenty of choice if you want a silver-only producer, the local market does not have any, not yet anyway.

Two juniors are out to change that ? Alcyone Resources (ASX:AYN) and Cobar Consolidated Resources.

That interest is stirring in their production plans was reflected in Alcyone getting a share price speeding ticket from the ASX. Alcyone's response was simple enough ? the silver price has moved through $US30 an ounce (back to $US28.60 an ounce overnight).

Alcyone last traded at 4.6 cents for a market cap of $35 million and is currently raising $5 million from a one-for-five underwritten rights issue at 3.5 cents a share to return the Twin Hills silver mine near Texas in south-east Queensland to production. They do a good trade up that way selling T-shirts saying "Texas, Queensland. Not Paris, Texas".

As mentioned by Garimpeiro back in May, Alcyone is last year's recapitalisation and re-listing of Macmin, which went into administration during the global economic crisis.

Since then, new management led by Andrew King have completed a wide-scale re-evaluation of the project which is to be returned to production in the first half of next year as a 1.5-2 million ounce-a-year silver producer, with forecast cash operating costs of $A13 an ounce.

Cobar Consolidated is a $65 million company (47 cent a share) that is developing the Wonanwinta silver project near Cobar in western New South Wales. It is the biggest "pure" silver project in the country (BHP's Cannington also producers lead and zinc).

The initial plan is to produce 12.8 million ounces of silver over a 5 year mine life, starting from the fourth quarter of next year. Given the indicated/inferred resource stands at more than 50 million ounces of silver, there is a good chance it will be around for a lot longer than 5 years.

Capital cost is not particularly challenging at $29.5 million and cash operating costs have been forecast at $10.20 an ounce (assuming the company does not bother producing lead as well). With lead recovery, operating costs would be about $6.50 an ounce.



http://www.smh.com.au/business/juniors-pin-hopes-on-poor-cousin-20101208-18orh.html


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