VANCOUVER (miningweekly.com) – The TSX-listed stock of Vancouver-based base metals explorer Arizona Mining has gained more than 25% since the start of the year, boosted by the release of an updated preliminary economic assessment (PEA) and the latest exploration results from the flagship Hermosa deposit, in Arizona, which point to a high-grade extension of the deposit.
Last week, Arizona Mining announced high-grade results for four drill holes from the current programme focused on expanding the Taylor Sulphide Zone (TS) and Taylor Deeps Zone (TDS), located on its 100%-owned Hermosa project, in Santa Cruz County.
The drill holes focused on step-out exploration and infill drill holes highlighting the continued potential for resource growth and increased grades.
"Our exploration drilling continues to expand both the TS and TDS, while the infill drilling is demonstrating excellent continuity between areas. As we continue to grow the resource it is amazing how many new areas of high-grade mineralisation have been added, especially in the TDS. These results are part of an additional 55 000 m of infill and step-out drilling that will be included in the feasibility study, which follow the September 2017 drilling cut-off date for the just-released PEA update," commented COO Don Taylor in a statement.
Critically, hole HDS-497, which was collared on the north-east part of Hardshell, is an angled step-out drill hole targeting the northwest extension of the previously reported TDS intersected in HDS-477. The drill hole encountered two TS intervals hosted in the Epitaph Formation and a very strongly mineralised interval in the TDS. The TDS intercept extends the mineralisation 88.4 m north-west of HDS-477, the company said.
Significant mineralisation in the Taylor Deeps includes an intercept of 9.44 m assaying 40.9% combined zinc/lead; and 11.7 oz/t silver, within a 25-m-thick interval assaying 27.1% combined zinc/lead; and 6.8 oz/t silver.
The team also intersected 25 m assaying 30% combined zinc/lead, and 8.3 oz/t silver; and 42 m assaying 14.5% combined zinc/lead and 3 oz/t silver.
Arizona Mining released the results of a significantly enhanced PEA earlier this month, building on the initial PEA that was released in April last year.
The new study calculated an after-tax net present value (NPV), using an 8% discount rate, of $2-billion, which reflected a 57% increase relative to the 2017 PEA. Similarly, the calculated internal rate of return improved to 48% from 42% previously.
Based on average zinc-equivalent (ZnEq) output of 946-million pounds in the first five years of production, Taylor is shaping up to become one of the world's top five ZnEq producers. It is expected to have impressive after-tax cash flow of more than $2.0-billion over the first five years.
Further, the project is expected to produce about 9.5-million ounces of silver in concentrate over the first five years of the operation - a 51% increase.
Pre-production capital expenditure of $519-million - a 14% increase from the previous PEA - is mainly owing to accelerated spending related to shaft development and the requirement for further mining equipment to access the higher-grade Taylor Deeps mineralisation in the early years of the 29-year mine life. This adds to the expected rapid 1.6-year after-tax payback on higher grades early on in the mine plan.
Based on a lead price assumption of $1/lb and zinc trading at $1.10/lb, the project remains well positioned to benefit from the current strong and rising metal price environment, with a 20% increase in base metal pricing relative to the base case scenario translating to a $2.7-billion NPV.
The Taylor project has a compliant measured and indicated resource estimate of 101-million tons grading 10.4% ZnEq, which is up 39% from the 2017 PEA, with inferred resources totalling 44-million tons grading 11.9% ZnEq - a gain of 13%.
Up to nine drill rigs are currently dedicated to expanding Taylor, which remains open in multiple directions, the company advised.