re: silver - miningnews.net For MMN holders
Monday, June 06, 2005
A BULLISH outlook for silver has brought to life the Texas project in Queensland. By Royce Bourke* - RESOURCESTOCKS
It's four years since Macmin Silver first lined up all its ducks at Texas in Queensland. All, that is, except for the silver price.
But with stockpiles of the precious metal now at their lowest level in decades, silver has taken on a decidedly attractive glow and Macmin has pressed the development button at its Texas silver project.
"We received a mining lease for the Twin Hills deposit in 2001, and since then we've been waiting for the silver price to move ahead from $9 to $10 an ounce," said Macmin managing director Denis O'Neill.
"We've always said that once it gets into that area the project's worth putting into production. It's an opportune time – we have strong faith in silver and we think the timing is right to build."
The Texas project, 240km south-west of Brisbane, is the result of years of hard work and persistence that Macmin was not about to waste by rushing into production while silver prices languished at historic lows.
"We've been holding this back to wait for the right part of the cycle to bring it on. Obviously that's a judgement call, but life's about making judgement calls," said O'Neill, who was an executive director at Macmin for eight years before becoming managing director a year ago to ensure a smooth transition to production.
Prior to Macmin, O'Neill spent seven years directing exploration projects in Italy, Ireland and the United Arab Emirates with Canadian base metals giant Noranda, four years as chief geologist for Delta Gold in Australia, and was involved in the discovery of the Reward and Highway orebodies at Charters Towers while working with City Resources and Barrack Mines.
Silver's image has been tarnished in recent years by predictions that photographic film – traditionally the major industrial use for silver - will soon go the way of LP records as digital cameras become increasingly popular.
But new uses of the silver powder that Macmin will produce at Texas are being found virtually daily.
Most centre on the metal's biocidal properties. It's already used in filtration systems for swimming pools and hospitals thanks to these anti-bacterial characteristics, and operating theatres are being painted with silver-bearing paints for the same reason.
Silver is also being put into clothing - US forces in Iraq use it in underwear and socks - and in the US, silver-impregnated band-aids are available to speed up healing times.
New generation refrigerators are being sealed with ultra-fine coatings containing silver to make food last longer.
But the biggest factor underpinning silver has been a decline in bullion inventories over the past 15 years from around 2.2 billion ounces to about 300 million ounces.
"Furthermore, there has been a shift in the ownership of the remaining silver from 'weak hands' that were willing to sell their silver below $US5.50 to stronger hands that were willing to hold this silver while waiting for higher prices," the CPM Group (New York) said in a report.
Massive inventories masked the increase in fabrication demand for silver, but prices have moved to reflect these market imbalances, albeit with a lag.
Investor interest in silver has also been rekindled, reflected not so much in new buying but in current investors holding silver inventories pulling back from selling, according to CPM.
"As prices began rising over the past 18 months, some of the remaining stock holders have seen that silver prices can rise, significantly, and have decided to wait to sell later, hopefully at a higher price," it said.
"This has reduced the flow of silver from bullion inventories into the market, adding upward pressure to the prices."
It is a phenomenon last seen in 1979 and 1980, when silver prices shot to $US50 an ounce.
Those sorts of numbers have alerted canny investors to the fact that Texas is a high-grade pot of silver sitting on freehold Queensland farmland. It should be cheap to dig up and treat, and the potential for extending the life of the project is regarded as good.
The Twin Hills deposit is the first cab off the rank for Macmin. Mearns Environmental Contracting began excavating the sites for the three proposed leach ponds and started construction of the base for the heap leach pad in late-March. The work is expected to be complete by mid-May.
A mobile crushing plant comprising jaw crusher, screens and cone crusher has been delivered to site to crush the ore prior to its agglomeration and placement on heaps.
The early arrival of the mobile plant will allow Macmin to provide screened product to sheet the mine access road and provide foundation layers for the heap leach ponds.
A powder metal electro-winning plant on order from Electrometals Technologies is expected to be delivered to site in July. The three modules of 60 cells each will have sufficient excess capacity to boost production to 3.5 million ounces of powder grading 98.5% silver a year if ongoing exploration justifies expansion.
While the Twin Hills operation would throw off around $40 million in revenue during the first three years at the current silver price of around $10 an ounce, the company is unhedged and fully leveraged to a rising price.
Every dollar increase in the silver price will add between $2.5 million and $3 million to Macmin's bottom line, and it predicts the silver price could easily spike to $15-$25, or higher, in the near future.
First production is expected late in the third or fourth quarter of 2005, ramping up to an annualised rate of 2.5Moz of silver.
The resource of 55Moz of silver equivalent contains sufficient reserves for an initial three-year mine life. But with a ground position in the area of 300 square kilometres, Macmin believes the district potential exceeds 100Moz of silver equivalent.
Drilling at the nearby Tuliambi copper-silver prospect has produced intersections such as 5m grading 6% copper, 328 grams per tonne silver and 3.4% zinc. The prospect has the potential to develop with further drilling into a silver-copper resource that could be developed at a later date.
At Mt Gunyan, drilling has also given intersections to 33m at 339gpt silver with a resource of 4Moz of silver equivalent already outlined.
"It's uneconomic at current silver prices, but should silver prices move up as we anticipated over the next few years it should become profitable, particularly given its proximity to Twin Hills," O'Neill said.
Macmin is totally focused on the huge opportunities offered by the rising silver market, but it does have exposure to gold through its stake of around 30% in Canadian-listed explorer New Guinea Gold (NGG).
NGG has four key projects with reserves or resources – Sinivit, Normanby, Sehulea and Mt Penck.
Production of 40,000oz of gold is planned from early-2006 and is forecast to generate net cash flow of around $10 million per annum for four to five years.
NGG has interests in a further nine advanced exploration projects, most of which have returned gold intercepts from drilling.
An 800% increase in the price of molybdenum – a specialty metal used in production of high-grade steel – has seen the value of the Simuku copper-molybdenum project surge since early-2004.
Macmin remains unashamedly focused on capitalising on the bullish outlook for silver. The shares are liquid and attract a range of retail, institutional and overseas buyers.
At 12c a share, it of
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Bob McNeil
© Aspermont Limited 6/5/2005 11:28:40 AM
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