TORONTO (miningweekly.com) – Vancouver-based precious metals producer SilverCrest Mines on Tuesday said that it had received a $10-million cash injection from gold streaming firm Sandstorm Resources, after Sandstorm had exercised its underground mine option at SilverCrest’s flagship Santa Elena mine, in Mexico.

Under the terms of the option, Sandstorm would buy 20% of the gold output from underground operations at Santa Elena.

Sandstorm would make an upfront deposit of $10-million to the company by March 17, and would buy gold at $350/oz until 50 000 oz of gold had been delivered to Sandstorm, including the 18 593 oz already received from openpit production. After this threshold had been reached, Sandstorm’s payments would increase to $450/oz of gold.

"The upfront deposit of $10-million will improve our cash balance and further enhance the company’s financial position to achieve its 2014 goals for the mine expansion at Santa Elena. We are pleased with Sandstorm’s expression of confidence in Santa Elena mine, and our continued mutually beneficial relationship,” SilverCrest president and CEO Eric Fier said.

Santa Elena is located about 150 km north-east of Hermosillo, near Banamichi in the state of Sonora, Mexico.

The mine is a high‐grade, epithermal silver and gold producer, with an estimated life-of-mine of eight years and operating cash costs of $11/oz of silver equivalent (55:1 silver:gold) for the openpit heap leach and underground mine. Silver equivalent is calculated on a ratio of 55 oz of silver to one ounce of gold.

SilverCrest expects that the new 3 000 t/d conventional mill facility at the mine should recover an average yearly rate of 1.5-million ounces of silver and 32 800 oz of gold over the current reserve.

Meanwhile, a major expansion and construction of the 3 000 t/d conventional mill facility was nearing completion and was expected to significantly increase metals output at both the openpit and underground sections of the Santa Elena mine from this year.

SilverCrest said it was also advancing it exploration programmes, which continued to make new discoveries at Santa Elena and had rapidly advanced defining a large polymetallic deposit at the La Joya property, in Durango state, with stated resources of almost 200-million ounces of silver equivalent.