(MENAFN- ProactiveInvestors - Australia) Black Mountain Resources (ASX: BMZ) has been reviewed in a research report by UK broker XCAP on the company's potential to mine profitably at its Conjecture and New Departure silver projects.
The following is a copy of the report.
Funds raised, drilling looking good
These are busy times for Black Mountain. The £1.5m fund raising announced in August has completed and the first tranche of drilling results in Idaho have been excellent. Assay results from three of the holes drilled at the Conjecture silver project have been released.
They reported rich veins with grades of 898g to 1106g per tonne. These results are consistent with the previous historic data for mining block 31 identified in the 1981 Reserve Report on the Conjecture Silver Project which estimate the block to contain 50,000 to 60,000 tonnes of silver at an estimated grade of 350-375 grams Ag per tonne.
These results are Those figures implied silver in place of 5,800oz to 8,900oz worth a theoretical $200m to $300m at the current buoyant silver price of $33.6. Thanks to the fundraising the company expects to restart production at Conjecture before Christmas.
The ore will be processed in the company's recently acquired Lakeview Mill, with both the mining and milling carried out by professional contractors.
xcap comment
Those drilling results were seriously encouraging, though we should point out that the veins are narrow, typically one or two feet wide. Mining in the area has been very basic, with Pa-n-Grandpa simply following rich veins from the surface.
For instance New Departure, the second of BMZ's three US projects, has never seen any exploration drilling until the programme now underway.
We do not have formal forecasts for the company as we would like to see production get under way. The Company is confident it can mine profitably at Conjecture and New Departure even with a silver price at $15.
With the silver price more than twice this level, the omens are good. These are small projects and that combined output even in 2014 will probably only be around 400 tonnes per day because the mine is underground and has to follow these narrow but rich veins.
If we assume all-in costs of mining and milling are around $130 per tonne, these mines only need to yield 124g per tonne to make sense at current prices. That figures should be compared to the 898g to 1106g reported in the recent drilling at Conjecture.
There is also potential upside from further drilling of the Revett Formation rocks within the Conjecture concession. These have been rich in copper and silver, though more typically in outcrops further north.
Even allowing for the 30% minority profit-share in the US operations, BMZ purchase of these properties is looking smarter by the day. We remain confident in the prospects for silver. China kept its reserves in silver until the 1930s: we expect it to resume this pattern as it gradually loosens the dollar peg.
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