SART and Silver Bull
Jul 25, 2013
I first wrote about Silver Bull Resources (SVB-T) in May. The company has a giant silver/zinc project in the State of Coahuila, Mexico, called Sierra Mojada. Using a cutoff grade of 25-g/t silver, the latest 43-101 shows an amazing 163 million ounces of silver and 2.4 billion pounds of zinc in an indicated resource. That’s over an ounce of silver and 30 pounds of zinc per share. In dollar terms, that’s $21 worth of silver and $24 worth of zinc in the ground for every $.38 share.
In my piece, I predicted that SVB would be the next silver takeover target. We all understand that at market tops, majors are in a rush to see how much they can spend to pick up assets at the most expensive price they can. And at bottoms they gnash their teeth and write off all the overpriced deposits they were so anxious to pick up at the top.
As you come off the bottom the majors start to nibble again, seeking to replace their young they have been consuming for years. SVB is at the sweet spot, if you ignore the value of the zinc totally, the silver resource is the cheapest I know of in a reasonable country to operate in. Silver in the ground was worth twice as much 12 years ago.
While I was on the visit, SVB President Tim Barry advised us to watch their news releases in the near future for some good news about a process they were examining called SART for use in the recovery of silver and zinc given their oxide deposit.
SART stands for Sulphidization, Acidification, Recycling and Thickening. It’s a new process for reprocessing cyanide developed by Lakefield Research in 1998.
Let me get into a little chemistry first so you can understand it. Some metals react more than others do. The reason boat owners put a zinc anode on their boats and engines is that all metals react in a water environment. You install a sacrificial zinc bar so the zinc will react before the copper or bronze
or more valuable metals.
When you use a cyanide process to recover gold or silver, the cyanide will interact first with zinc, then with copper, then with silver, then with gold. It should be easy to see that the cyanide actually prefers the least valuable metals. Cyanide is expensive and many times the profitability of a particular project depends mostly on cyanide consumption. If you have a lot of copper or zinc in a project, you may not be able to make money using a leach process unless you get rid of the copper or zinc first.
On July 2, 2013 SVB announced the results of metallurgical tests on their mineralization. SVB has a pretty unusual type of rock. It’s an oxide silver and zinc. Because of their reactivity, you rarely find oxide silver. It literally washes away except in the acrid climate of Northern Mexico where there is little rain. In any case, the majors want to see every project derisked before they will consider an offer. 163 million ounces of silver that you can’t recover doesn’t have much value to anyone.
But SVB got excellent recovery numbers for silver with an average recovery of 73% and high recoveries up to 89%. That’s very important to someone considering making an offer for the company. Better yet by installing a $13 million SART plant they can save $54 million a year in cyanide costs and recover up to 99% of the zinc.
Here’s how the math works. The SART plant costs $13 million to install. It costs $39 million a year to operate but saves $54 million in cyanide and produces $16 million a year in previously unrecoverable zinc. By spending $39 million a year, SVB can add $70 million in revenue or savings.
The big unknown with Silver Bull has always been metallurgy. The oxide mineralization is pretty unusual. The latest announcement reduces the risk to anyone thinking of taking them over. Given that Coeur D’Alene Mines already owns 9.9% of SVB, someone is going to make an offer soon. The company has about $10 million in the bank so there is no real risk of them diluting themselves into never-never land. The management is excellent and a PEA will be released soon.
I believe we have had a major, major bottom in gold, silver and all resource stocks. SVB is going to be one of the first to recover and probably will be the silver stock to own over the next year or two. With the latest results from the labs, they would have been worth 500% more than they are today when silver was at $8. There is a lot of upside no matter what the markets do.
Silver Bull is an advertiser and we are biased. Please do your own due diligence.
Silver Bull Resources
SVB-T $.365 (Jul 24, 2013)
SVBL Amex 159 million shares
Silver Bull website