Arian Silver (LON:AGQ) has poured the first batch of sliver concentrate from its San Jose mine, as the explorer transitions to emerging producer. Arian has produced 120 tonnes of silver bearing concentrate and has sold approximate 68 tonnes, since production commenced at San Jose in October 2010. The plant is currently undergoing optimisation testing, with normal production of silver concentrate expected to be around 125 tonnes per month containing a minimum 400 ounces of silver per tonne.
Ore for production is currently mined from two mining blocks which have the potential to supply 500 tonnes of ore per day and the company is already planning to increase this daily figure to 1,500 tonnes per day with additional milling capacity that is currently under assessment. This is a significant step-up from the current plant configuration which would when implemented boost cash flow to the company in a major way.
To aid in quality and assay control the company is now using its own onsite semi-mobile laboratory. Use of an onsite laboratory will improve the turnaround time for assay results from the current two plus weeks to around 48 hours.
To support the proposed upgrade in the plant capacity the company is partway through an approved 10,000 metre drill programme at the San Jose vein. Grades along the San Jose vein have been exceptionally high and suggest that vein will be a major silver producer.
It is our opinion the current investment environment driving the silver price should continue to support a robust price going forward. With silver remaining at elevated prices, we expect Arian’s operating margin and free cashflow from operations will only improve over the coming months.
San Jose has an indicated mineral resource of 2.2 million tonnes of ore showing 127.7g/t silver, 0.51% lead and 0.88% zinc for approximately 9 million ounces of silver. The inferred resource stands at 11.2 million tonnes of ore showing 93.4g/t silver, 0.39% lead and 0.83% zinc for approximately 33.8 million ounces of silver.
These resource numbers are based on 10% of the Sane Jose resource having been resource definition drilled. We are of the opinion the current round of drilling will significantly boost these numbers when the company next upgrades its San Jose resource.
Not to be outdone the Calicanto project is showing its potential, with four silver veins discovered in a vein system that is largely un-explored. The first phase of drilling of some 3,200 metres has returned very encouraging results. Average grades intercepted from drilling have also been very high And the company has indicated Calicanto has the potential for a silver resource in the range 25 to 50 million ounces of silver.
On the corporate front Arian has completed the sale of its Tepal gold and copper project in the state of Michoacan, Mexico. The Tepal sale was made to enable Arian to focus on the development of its silver assets at San Jose and Calicanto. Arian will retain an equity exposure to Tepal and the cash will improve the liquidity of the company. However, cashflow from silver sales will provide the cash to support future development and exploration.
This article was produced by Senior Research Analyst, David Lennox.
Filed Under: Silver,
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