Silver Mines Limited (ASX: SVL) has recently concluded 2024 on a high note, releasing an optimisation study that highlights the robust economics of its Bowdens Silver Project. This study reveals a significant increase in reserves and an improved outlook for silver prices, positioning Bowdens as a key player in the global silver market.
Enhanced Reserves and Resource Estimates
The Bowdens Silver Project now boasts reserves of 32.8 million tonnes with impressive grades of 68 grams per tonne (g/t) silver, 0.38% zinc, and 0.29% lead. This translates to a staggering 71.7 million ounces of silver, alongside 123,000 tonnes of zinc and 95,600 tonnes of lead. Notably, the contained silver has seen a 7.5% increase compared to the 2023 mineral resource estimate, solidifying Bowdens’ status as Australia’s largest undeveloped silver deposit and one of the largest globally.
The optimisation study outlines a projected output of 53 million ounces of silver, 92,000 tonnes of zinc, and 67,000 tonnes of lead over a 16-year mine life, with 14.5 years dedicated to ore processing. This long-term vision underscores the project’s potential to capitalize on the rising demand for silver, particularly in industrial applications like clean energy technologies.
Strong Financial Projections
The financial outlook for Bowdens is equally compelling. The project is now estimated to cost $331 million, reflecting a 35% increase from the 2018 prefeasibility study. However, this increase in costs is more than offset by a 70% improvement in project margins. The financial projections are based on a 10% increase in ore tonnes and an optimistic silver price forecast of US$29 per ounce, alongside a favorable exchange rate of $0.67 for the Australian dollar.
Under these assumptions, Bowdens is expected to achieve a payback period of just 3.9 years, generating a pre-tax operating surplus of $631 million. The project’s net present value (NPV) stands at $359 million, with an internal rate of return (IRR) of 21%. The first decade of operations is projected to recover 4.25 million ounces of silver at an average cost of $22.67 per ounce, yielding approximately $84 million in annual operating cash flow.
Shifting Revenue Dynamics
The recent increase in contained silver has shifted the revenue dynamics of the project, with silver now expected to contribute over 85% of total revenue, up from around 70% in the previous estimates. This change is attributed to improved metallurgical recoveries resulting from a simplified processing flowsheet, enhanced mine design, and reduced environmental disturbance.
The 2024 mineral resource estimate (MRE), which incorporates 24,140 assays and updated geological domains, reflects these advancements. Additionally, the conversion rate of resources to reserves has improved, with 44% of silver now classified in the higher confidence measured and indicated categories.
A Long-Life, Low-Cost Operation
Managing Director Jo Battershill expressed enthusiasm regarding the increased reserves and the outcomes of the optimisation study. He emphasized that with nearly 72 million ounces of silver, Bowdens is well-positioned to benefit from the rising industrial demand for silver, which has been experiencing significant deficits in recent years.
Battershill highlighted the project’s potential to deliver attractive returns, with the optimisation study confirming a long-life, low-cost operation. The initial operating life is projected to exceed 15 years, with significant optionality for future extensions and the potential to access higher-grade materials through underground development.
Future Development and Upgrades
Looking ahead, Silver Mines plans to consider reserves beyond the current mine plan in the definitive feasibility study, which will explore options for mine cutbacks and transitioning to underground mining. The company is also investigating ore-sorting technologies to enhance lower-grade ore and increase plant throughput beyond 2 million tonnes per annum.
As Silver Mines progresses towards front-end engineering design (FEED) over the next year, the focus will remain on regaining project consent from the New South Wales state government. While a definitive timeline for this regulatory process is not yet available, Battershill remains optimistic about the project’s future.
Conclusion
The Bowdens Silver Project stands as a testament to Silver Mines’ commitment to advancing its operations and maximizing shareholder value. With robust financial projections, increased reserves, and a strategic focus on sustainable development, Bowdens is poised to become a significant contributor to the global silver market. As demand for silver continues to rise, particularly in clean energy applications, Silver Mines is well-positioned to capitalize on this trend, making it a compelling opportunity for investors in the mining sector.
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