May 03, 2011Alcyone Resources Is Within An Ace Of Production At...

May 03, 2011

Alcyone Resources Is Within An Ace Of Production At One Of Australia?s Only Pure-Play Silver Mines
By Our Man in Oz



In most parts of the world, silver is not a metal normally associated with Texas. But it is in Australia, because the small town of Texas, close to the Queensland side of the border with New South Wales, is home to one of the country?s rare pure silver mines, Twin Hills. Three years ago, as the world stumbled into the game-changing financial crisis of 2008 the mine and its owner, Macmin Silver, hit the headlines for all the wrong reasons. The silver price collapsed from around US$20 an ounce in March of that year to less than US$10, forcing Macmin into receivership and Twin Hills into mothballs. Times change. The silver price is approaching an eye-popping US$50 per ounce, Macmin has re-emerged as Alcyone Resources, and Twin Hills will resume pouring silver ingots in a matter of weeks.
For investors, especially the seed capital providers who breathed fresh life into the failed Macmin, the revival exercise has been better than owning a gold mine. Not that it always looked so good. After re-listing and taking the name Alcyone in a nod to the lesser Greek god who gave us the word halcyon, or prosperous, the company?s shares briefly traded above their 2008 suspension price of A4.2 cents, before sliding to an all-time low of A1.9 cents in the middle of last year. But today Alcyone is up to A14 cents, a price which capitalises the one-time failure at a much more satisfying A$183 million, which is about 150 times more than the A$1.2 million accepted by the receivers for the project in late 2009.

What?s really got investors interested in Alcyone is the silver that?s currently being liberated from a 400,000 tonne stockpile of ore conveniently left on a leach pad by Macmin?s receivers. All that Alcyone, under the new management team led by Andrew King, has had to do is clean up the site, install a new stormwater management system and a few other features to satisfy environmental regulations, and start sprinkling a cyanide solution to free the silver from the residual stockpile. Nice work if you can get it. But of course, there?s much more to the operation than that. The stockpile was simply the most convenient place to start the rejuvenation of a project that needs new equipment, including a rolls crusher, as well as essential repairs and maintenance to a Merrill Crowe metal recovery circuit.

?There?s no doubt that we got off to a flying start?, Andrew told Minesite?s Man in Oz in his Perth office. ?The previous owners left behind some A$20 million worth of plant and equipment, plus partially leached ore on the pad. ?Everything was fully functional, though not very efficient, which is one reason why the project got into trouble back in 2008. The collapse in the silver price was the event which finished things off.?

The resurrection plan for Twin Hills started with the stockpile, which grades around 45 grams of silver a tonne. Because it has been partially treated, the silver recovery from the stockpile is likely to be around 45 per cent which boils down to the potential recovery of around 260,000 ounces of silver, valued at around US$11.7 million at the current silver price ? a handsome increase on the US$2.6 million theoretical value of the recoverable silver in the stockpile that was current at the time the receivers sold Twin Hills.

?We started irrigating the stockpile in early April, and expect to produce our first silver bars in early May?, King said. ?Having the stockpile ready to process means we can get a better understanding of the process before moving to full-scale silver production later in the year.? When it hits full production the project is expected to yield between 1.5 million and two million ounces of silver a year at a cash cost of around A$14 per ounce. At the upper production estimate of two million ounces the project could spin off as much as US$92 million in revenue a year, with US$64 million sticking as gross profit.

Andrew and his team first have to prove that the heap leach works, and that the new ore handling circuit does a better job of cracking open run-of-mine ore. This is an essential step in enhancing recoveries at Twin Hills because the wider and more plentiful the cracks the easier it is for the cyanide to leach out the silver. Growing the resource base at Twin Hills will be the third priority.

The current resource at the Twin Hills project is estimated to be 15.1 million ounces of silver in 5.9 million tonnes of material assaying an average of 79 grams per tonne silver. The bulk of the ore is in the Twin Hills deposit, with additional material contained in Mt Gunyan about 4.5 kilometres from Twin Hills. Mt Gunyan is also where encouraging zinc and lead assays have been reported in association with silver, and might represent a future production option.

As it currently stands Alcyone is a recovery situation, repairing the mistakes made when Twin Hills was under different management. ?We?ve made rapid progress in getting to our first target of generating cash?, Andrew said. ?We are also moving ahead in stages to boost silver output while stepping up exploration in the 275 square kilometres of tenement we control?, he continued. A programme of reconnaissance drilling is underway on Alcyone?s tenements to test a series of anomalies to boost the project?s resource base. A fresh resource estimate is expected soon, incorporating the effect of the higher silver price on ore in Twin Hills and Mt Gunyan.

http://www.minesite.com/nc/aus/minews/singlenews/article/alcyone-resources-is-within-an-ace-of-production-at-one-of-australias-only-pure-play-silver-mines/1.html