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The Western Australia-based resource exploration company, Pacifico Minerals Ltd (ASX:PMY) appears to be advancing well towards developing the near-surface Lead-Silver-Zinc deposits in Western Australia. Ever since the acquisition of the Sorby Hills Project in 2018, the company’s consistent focus has been targeted at exploring the large near-surface and flat-lying Lead-Silver-Zinc deposits in the region.
Project’s Significance Amidst Market Opportunity – The Case for Lead
Sorby Hills Project, which involves a joint venture between Pacifico Minerals (75%) and China-based Henan Yuguang (25%) is centred at exploring Lead along with Silver and Zinc. Henan Yuguang, contributing 25% of all project expenditure, is largely encouraged to observe lead-silver concentrates produced at the project.
When analysing the current demand-supply situation, lead explorations appear to be lucrative amidst the ongoing market opportunity.
In addition to the market forces that could contribute positively towards the project, location and infrastructure in relation to the Sorby Hills Project provide an additional advantage.
The project, located ~50 km north-east from the regional centre of Kununurra, is equipped with the established infrastructure that facilitates fast-tracked production. The presence of Wyndham Port at the distance of 150 km along with the existing sealed road ensures easy transportation.
Progress So Far
The company treads on the road to continuous progress ever since it acquired the project through a joint venture in 2018. The project has been granted the mining and the pre-native title tenements. Furthermore, it has also gained WA EPA (Environmental Protection Authority) approval for an open pit mine and infrastructure.
The completion of the three drilling phases of the project comes as a positive sign for the resource explorer, with the resource size and confidence interval found to be increasing substantially with each drilling program.
Robust Financials Demonstrated by Pre-Feasibility
The company confirmed that the Pre-Feasibility Study carried out during March 2019 continue to apply to the existing project. The PFS stated the initial Life of Mine (LoM) for the project to be eight years at the mining rate of 1 Mtpa. LOM Lead metal production of 249kt and Silver Metal Production of 9.35 Moz shown by PFS.
A modest CAPEX of A$95.4M and the Average Cashflow NET of A$60M P/A showcased the fast capital payback in 16 months. NPV8 of A$243M and 62% IRR was calculated for the project. The operating cost estimate for the project, along with the pre-production capital expenditure, was also ascertained for the project.
Mineral Resource and Geology
In October 2019, the company confirmed that the site has the Global Resource of 36 Mt @ 4.9% Pb equivalent along with 0.5% Zn from 20 metres below the surface. A range of mineralisation deposits has been found on the Sorby Hills along Schematic North-South Longitudinal Section.
Sorby Hills Project is typically located in the world-class Mississippi Valley Type that typically consists of the carbonate-replacement style mineralisation. In most of the cases, a lead dominant system is present along with the high silver tenor within the galena.
The company plans to utilise the open-pit mining at three pits as the flat topography, shallow depth and easy free dig in first 30 metres overall enables low-cost recovery. The processing includes the rougher flotation that is expected to enhance the cost-benefits of the process.
Drilling Results
Pacifico’s drilling campaign has confirmed the Omega deposit with the strike length of 1.7km that is formed through continuity across the many minor deposits. Pacifico’s drilling has obtained the following significant intercepts:
Omega Deposit
- 20.0m at 7.3% Pb, 56 g/t Ag 0.4% Zn from 11m (ACD046)
- 11.7m at 10.8% Pb, 105 g/t Ag 0.4% Zn from 75.7m (AF005)
- 14.0m at 13.0% Pb 89g/t Ag 1.0% Zn from 24m (ACD080)
- 23.om at 9.0% Pb, 88g/t Ag 1.2% Zn from 59m (ACD071)
- 21.0m at 5.0% Pb, 21g/t Ag 0.5% Zn from 23m (ACD0562)
- 22.0mm at 8.8% Pb 52g/t Ag 0.3% Zn from 68m (ACD082)
- 10.0m at 7.16% Pb, 383 g/t Ag and 0.43% Zn from 110m (SHPDA31)
B Deposit
- 11.0m at 6.9% Pb, 26g/t Ag 0.1% Zn from 29m
What’s Next
The company has planned to take up the Phase IV Expansion and Infill Drilling program for Q2 2020. In addition to the drilling campaign, the following activities have been planned for the near future:
- Optimised PFS and Ore Reserve Estimate that would be undertaken in Q2 2020;
- Strategic Financing and Offtake Update in Q2 2020;
- Definitive Feasibility Study to be conducted in Q1 2021
Stock Performance
By the end of the trading session on 19 February 2020, PMY traded flat at $0.005 with a market cap of $14.44 million.
