Golden Arrow Resources (GRG.V) has announced a three phase plan to advance the Chinchillas silver project in Argentina’s Jujuy province. At this moment, the company’s geologists are incorporating the results of the most recent 9,000 meter drill program into the geological model which should lead to an updated NI43 compliant resource estimate which will be the starting point for an updated Preliminary Economic Assessment as well. As the resource will very likely be increased considerably and as we feel the cost estimates in the first PEA are very conservative, the updated PEA should show superior economics and a much higher Net Present Value as we are expecting a much longer mine life.
If you look at the image on top of this post, the red area is where the currently known official resources are, and the green area is the zone where the next resource growth will come from. As you can see, this is quite a sizeable area and will very likely lead to a substantial resource increase. Additionally, there’s a low-grade zone to the south of this area which could contain up to 200 million silver-equivalent ounces. However, as the expected grade is just 32-40g/t AgEq, it wouldn’t make a lot of sense to add this zone in the current mine plan, but you could definitely see it as a huge call option on the silver price, as this zone offers tremendous leverage to the price of silver.
Chinchillas has surpassed our most optimistic expectations and we expect the new PEA of the north side of the project to show an NPV of in excess of $150M. Additionally, there’s between 100M and 200M silver-equivalent ounces to be discovered on the low-grade zone, providing you with a free option on the silver price.
Disclosure: The author holds a long position in Golden Arrow Resources. Golden Arrow is a sponsor of the website. Please see our disclaimer for current positions.