New Pacific Metals’ (TSX: NUAG; NYSE-AM: NEW) prefeasibility study for the Silver Sand project in Bolivia calculates a robust return on an initial $358 million investment. But the company could face hurdles from artisanal miners and settlements on its concessions.
New Pacific has entered discussions with illegal artisanal miners working its flagship Silver Sand silver project in Bolivia it said in a release of the project’s prefeasibility study (PFS) Wednesday. The company is still uncertain about its tenure of land and says it needs to secure surface rights for the project area through agreements with local communities, finalize a resettlement and compensation plan, and address the presence of artisanal and small-scale miners operating illegally within their mineral rights.
“Our team will continue to collaborate with local communities and authorities to ensure that the mineral wealth at Silver Sand benefits all Bolivians and stakeholders,” president and CEO Andrew Williams said in a news release.
The Vancouver-based developer aims to reach agreements despite disruptions caused by these operators, prompting legal actions in recent months. The illegal miners have been operating within the company’s mineral rights area, creating conflicts and safety concerns since at least mid-2022.
It prompted New Pacific to start legal proceedings in December, resulting in an execution order in May to reinforce its mining rights. It says it is working closely with government authorities to resolve the issue and ensure safe and lawful project operations.
The timeline for achieving the next steps depends on ongoing discussions and the resolution of legal proceedings concerning illegal artisanal and small-scale mining activities, the company said.
The new AMC Mining Consultants-prepared economic study, using a base silver price assumption of $24 per oz., attached to Silver Sand an after-tax net present value (at a 5% discount) of $740 million and an internal rate of return of 37%. The results confirm that Silver Sand has the potential to become a high-grade, low-cost, pure silver producer, according to CEO and president Andrew Williams.
“The next step along our journey will be reaching an agreement with local communities to secure surface rights for the project area,” Williams said in a news release Wednesday.
New Pacific’s shares gained about 3% to C$2.09 on the news. They have touched C$1.17 and C$3.64 over the past 12 months. The company has a market capitalization of C$356 million.
The study outlines a 13-year mine plan, excluding a 2-year pre-production period, with a projected output of about 157 million oz. of silver. Annual silver production is expected to top 15 million oz. in the initial years, averaging over 12 million oz. yearly over the mine life.
The average all-in sustaining cost of silver is projected at $10.69 per ounce over the life of the mine, the report said.
Recent years have seen limited development of large-scale silver projects in Bolivia compared to other global mining areas, despite Bolivia’s historical significance in silver mining, notably with mines like Cerro Rico in Potosi, a major colonial-era silver mine.
New Pacific is engaging local communities to finalize the environmental impact assessment study for submission to Bolivia’s Ministry of Environment and Water.
The company will need to relocate some community members in order to develop the mine.
Under the company’s development plan, a mining contractor will initially manage the open-pit operation, which involves crushing, milling, cyanide leaching, zinc precipitation (Merrill-Crowe process), and final smelting to produce silver doré bars for shipment.
