AbraSilver Resource (TSXV: ABRA; OTCQX: ABBRF) said on Monday it has received investments from both Kinross Gold (NYSE: KGC; TSX: K) and Central Puerto, Argentina’s leading electricity provider, to fund the development of its flagship Diablillos project in Salta province.
Each of Kinross and Central Puerto have subscribed for 25 million shares of the company at $0.40 each, for total proceeds of $20 million, the precious metals explorer said. The offering price was a 3% premium on the stock’s closing price as of April 19, the last trading day.
As of 9:45 a.m. EDT Monday, AbraSilver’s shares fell by 5.1% to $0.37, still close to a 52-week high of $0.42. The company has a market capitalization of $209.3 million.
Upon closing, Kinross and Central Puerto will each own approximately 4% of AbraSilver’s equity capital, and will have standard anti-dilution rights to maintain their respective interests. Also, AbraSilver will consolidate its shares on a one-to-five basis following completion of the financing.
Through this transaction, the company is now well funded for a dual strategy to aggressively advance the Diablillos project towards a production decision, AbraSilver CEO John Miniotis said, adding that the company will gain access to the deep technical expertise in mineral exploration, mine development and power generation.
The project recently advanced to the pre-feasibility stage, with the technical report outlining a 13-year open pit operation with average annual production of 7.7 million oz. silver and 71,000 oz. gold. During the first five years, its silver production could reach 14.5 million oz. annually.
The projected production figures, on a silver-equivalent basis, would make Diablillos one of the top 10 primary silver mines in the world, AbraSilver noted in a March 25 news release. “Unlike many other silver projects, the PFS highlights that Diablillos is a true primary silver project, with a substantial amount of gold and no base metals,” Miniotis said.
At base-case metal prices of US$1,850/oz. gold and US$23.50/oz. silver, its after-tax net present value is calculated at US$494 million (discounted at 5% per annum), with an internal rate of return of 25.6% and payback of 2.4 years.
AbraSilver is also evaluating several opportunities to further enhance and optimize the prefeasibility study (PFS) economics ahead of delivering a feasibility study for Diablillos. These include mining the mineralized material below cut-off grade, which is treated as waste in the PFS, through low-cost processing technologies (i.e. heap leaching), and expanding the mineral reserves through additional drilling at the existing deposits.
The property currently hosts multiple near-surface deposits: Oculto, JAC, Fantasma and Laderas. Together, these deposits hold proven and probable mineral reserves totalling 210 million oz. of silver equivalent metal (42.3 million tonnes at 91 g/t silver and 0.81 g/t gold).
To date, more than 130,000 metres of drilling have been completed within the 79 km2 area of the property, accumulating expenditures of over US$55 million.
AbraSilver’s investor rights agreement with Kinross will also lead to a regional partnership to jointly explore for and acquire new mining projects in Argentina, focusing on silver, gold and copper. Earlier this year, the company farmed out its other major project in Argentina, La Coipita, to Teck Resources, granting it the option to buy 80% of the copper-gold project.
