A gem of a mine

ack in 2003, when geologist Eric Fier met with his future partners of Silvercrest Mining to discuss the state of the mining industry, one thing was perfectly clear: The market, they decided, needed a fresh silver play. If it happened to be a silver play set outside Canada, well so be it; let’s just make sure operations run smoothly, unimpeded by crime or political instability. They’d already run into those problems after acquiring and working projects in Central America.

“We worked there for a couple of years until we found out it was too difficult because of corruption and NGOs. They still have those problems today.”

Scanning the international landscape, better prospects suddenly arose about 150 km northeast of Hermosillo in the Mexican state of Sonora, in a heavily mineralized region that supported existing mining operations. Fier’s previous position as El Dorado’s manager of worldwide projects had already netted him contacts in Mexico; they now helped pave the way for Silvercrest’s move into Mexico in 2005. There the company acquired the Silver Angel and Cruz De Mayo properties, but even more importantly, its eventual flagship property the 100%-owned Santa Elena Mine.

“We went and looked at Santa Elena and we were impressed with what we saw. It was 30 yards wide at the surface for two grams gold and about 30 grams silver. It was right on the slope so it was pretty easy to envision an open pit mine.”

Today, the Santa Elena is a high-grade, epithermal gold and silver producer, with an estimated 6.5 year life-of-mine with cost of approximately US$8.00 per ounce of silver equivalent. The 2,500 tonnes per day open pit heap leach facility produced 27,000 ounces of gold and 377,000 ounces of silver in 2011. It is expected to produce 33,500 ounces of gold and 535,000 ounces of silver by the end of this year. But what makes the mine a real eye catcher, says Fier, are those ore bodies close to the mine’s surface.

“The property shows really well for investors, too. You can see the mineralization, you can touch it. And our grades at Santa Elena are anywhere from five to ten times more than a lot of our competitors.”

Over 2011 and 2012, the average silver ore grade loaded on pad at Santa Elena has ranged between 39.45 and 44.77 gpt with a ratio of silver to gold in the second quarter of this year at 59:1. With a footprint of about 1.5 kms by 15-30m wide, the deposit has been tested to depths of about 500m, all of it mineralized and open. “It’s open currently in two directions so there’s quite a bit more potential and we’re currently delineating some of the expansion resources right now.”

The best waits below…

When the Santa Elena expansion is complete, Fier expects throughput at the mill will be about 3,000 tonnes per day. This will result in a significant increase in metals production, notably a doubling of the mine’s silver value by 2014 or approximately 4.0 – 5.0 million ounce silver equivalent. The reason, says Fier, is simple: “You’re going from a heap leach with about 35 per cent recovery to over 70 per cent recovery with the mill,” with gold production rising from 65 per cent at the leach pad to over 90 per cent at the mill. Silvercrest estimates the life of this open pit heap leach operation will end in 2014 at which point it will transition to an underground operation already under development.

“The underground is about 1,500 tonnes per day and then we’re going to reprocess approximately 4 million tonnes at the heap leach pads and that will go in as the other 1,500 tonnes per day.”

Initial construction during expansion includes earthworks, foundation pours and tank fabrication. The company is in the early stages of sourcing a mill scheduled for installation by January 2014. This will involve a capital expenditure of about $50 million for a ball mill, crusher upgrade, a CCD plant using a Merrill-Crowe recovery process and doré bars poured on site. “We’re also going to do dry stack tailings so we have a filter system for that.” Of equal importance, adds Fier, will be a power upgrade of approximately 7 MW.

Key to the underground work is construction of a 4.5 x 4.0m production decline ramp that will help deliver an anticipated initial production rate of 1,000 tonnes per day. Silvercrest had hoped to develop its decline to approximately 1500m this year, but will likely fall short by about 500m. No problem, says Fier. “We’ve got a lot of time to get our decline down and don’t anticipate we’ll start mining underground until mid-2014.”

More important, perhaps, is what he’s discovering during underground development, i.e. “significant values” far beyond what Silvercrest had anticipated at the beginning of work. “The width of the mineralization is still an average of 15 metres. We’re also drilling in new areas that will have increased resources and that’s exciting, too.” Fier is targetting a 50%-100% increase in underground resources within the next six months.

A reliable hand at the throttle…

The heavy lifting at Santa Elena, meantime, falls to three 773 Haulpak dump trucks, two 998 Cat loaders and five 40 tonne Cat articulating trucks. This is subcontracted equipment where the biggest problem, says Fier, is equipment availability and maintenance. Too often, he chuckles, local contractors “try to get 120 per cent out of their equipment when it will only run 50 per cent of the time.” Fortunately this occurs mostly on the waste haulage side where there’s more sheer volume than on the ore haulage side. “But if you’re not on top of it can really impact your mine plant.”

“We’ve done a lot of training to convince the contractor to put money into his equipment to increase availability. And once he starts getting penalized under the contract as we start discounting invoices he wakes up and decides he’d better pay attention and get his equipment running.”

Training is equally important to the direct hires at Santa Elena who are Mexican. But many have practical, hands on experience working in the region’s agricultural and ranching communities, too, and that, Fier says, has proven to be invaluable. “These are great communities to work in because local guys know how to use machinery, irrigation equipment and pumps. So if you’re running an open pit, heap leach or even a mill, training the local workers is pretty easy.”

Finding the out-of-country technical expertise that mining requires has always been tough, exacerbated in recent years by an aging population and a slow turn out of well-educated, mid-tier staff such as processing superintendents. But Fier says the tide may be reversing as universities slowly begin graduating a new flock of technicians, supported by older, experienced workers. “The industry is stretched to the point where there are a lot of grey haired guys who wanted to retire but are coming back into the industry.” Attracting new and older workers to Mexico is made easier by the close proximity of the state capital Hermosillo and the relative safety of this part of Mexico. Many outside staff live here with their families.

“Mexico is a huge place with lots of hot spots. I have a country manager whose job is to know where those hot spots are so that we don’t work in those areas. We try not to be targets.”

Silvercrest’s short and long term growth objective, Fier adds, is to develop properties that present a minimum of hassle. “We like things that are simple. Santa Elena was our first simple mine and La Joya southeast of the city of Durango looks like it’ll be our second.” That said, the company is also mindful of its obligat
ions to the surrounding communities in the state of Sonora worried about potential threats to their farms and ranches. Making sure mine operations at Santa Elena are sustainable remains high priority, just as it has been elsewhere, says Fier.

“Helping to ensure mining operations are sustainable is something I’ve done all over the world. And that’s something we’re doing here at the Santa Elena mine, too.”