Pan American’s Navidad project has been estimated to contain 632 million ounces of silver with another 119 million ounces possible. The deposit also contains more than 3 billion pounds of lead.
The company estimates that annual production will average about 19.8 million ounces of silver at a cash cost of $6.03/ounce during the first five years of mining. The production life of the mine is estimated to be 17 years, and total estimated production totals 275.5 million ounces at an average cost per ounce of $6.96 over the full live of the mine.
The production figures are considerably better than 2009 estimates before Pan American bought Aquiline Resources, the project’s former owner.
Pan American estimates that pre-production construction costs will total about $760 million, and that sustaining capital costs will total about $161 million over the mine’s 17-year life.
The company also expects to deliver 1 million ounces of silver to Silver Wheaton as the result of an agreement entered into by previous owners. This so-called “silver stream” means that Silver Wheaton buys the silver before it is mined, reducing mining costs — in Silver Wheaton’s case to a negative production cost — and allowing the buyer to move more volume than the actual mining company.
Pan American shares are up a little more than 1% in early trading this morning, as are Silver Wheaton shares. The iShares Silver Trust ETF is up a bit less than 1%.
Paul Ausick
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