Santacruz eyeing lower cost operation at Rosario

Tuesday, January 31, 2017

Santacruz Silver CEO Arturo Préstamo plans to raise production and reduce costs at the company's Rosario operation in Mexico.

The CEO plans to fill the plant's 600t/d milling capacity from ore from Cinco Estrellas, which recently began commercial production, and possibly add a third mine, while reducing the contribution from the higher cost Rosario mine, he tells BNamericas.

All-in sustaining costs (AISCs) are expected to fall below US$14/oz silver equivalent at the San Luis Potosí state operation, which produces silver, gold, lead and zinc.

Coupled with output from the new Veta Grande mine, discussed in the first of this two-part interview, Santacruz will produce around 4.0Moz/y silver equivalent from 2018.

The company produced 164,924oz silver equivalent at AISCs of US$15.88/oz in 3Q16.

BNamericas: What are your plans for the Rosario mine?

Préstamo: The idea is to have the 600t/d mill at full capacity. The mill is that size because we bought it used, and it was configured to that tonnage.

The Rosario mine was meant to supply 400t/d at the most. Rosario's veins are narrow, 1.0-1.5m, which requires a lot of development and makes it a more expensive mine to run. So the strategy is to start having 150t/d from Rosario instead of 380t/d. 

The rest will come from the Cinco Estrellas mine and another mine, details of which we hope to announce shortly. That will take us to a more efficient way of producing silver.

BNamericas: What are the strengths of Cinco Estrellas?

Préstamo: Vein widths of 3-4m allow us to have a more automated process. It's a mine with historical operations and development which allowed us to have immediate ore to feed Rosario. The cost to ship ore the 40km to Rosario is US$1.2-1.3/t, so it makes a lot of sense.

BNamericas: How long can you keep mining at Cinco Estrellas and Rosario?

Préstamo: We don't have National Instrument 43-101-compliant resources at Cinco Estrellas, but we are in the process of starting a drill campaign which will enable us to comply with that.

Based on the blocks we have in development today, which go down to about 75m, we have around 380,000t of ore. That gives us around 24 months at the rate we're planning to mine.

But due to its geology we believe it'll go down to at least 300m, in which case we'll comfortably have a mine life of more than six years.

At Rosario, we should have at least another five years, but we need to do more infill drilling to have a better mine plan.

BNamericas: What are the production costs?

Préstamo: The average mining cost is about US$76/t ore, based on US$84/t at the Rosario mine and US$73/t at Cinco Estrellas. All-in sustaining costs should be below US$14/oz.

BNamericas: Can you tell us any more about the additional mine you're planning?

Préstamo: For the time being it would be saying too much. But it should take the mill to full capacity.

BNamericas: What are your plans for the Gavilanes project?

Préstamo: We're doing small-scale exploration activities like mapping and outcrop recognition. It's a project we want to keep in our portfolio because it's a very strong asset, with about 36Moz silver equivalent resources in less than 20% of the area we've delineated for exploration.

Further drill campaigns should take us close to 100Moz.

BNamericas: What are your exploration plans for 2017?

Préstamo: We'll spend US$1.5mn on drilling at Cinco Estrellas, Veta Grande and the new mine.

BNamericas: What is your view on M&A activity?

Préstamo: We don't have egos. If it's something that adds value to our shareholders we're always open, particularly if it brings synergies or allows us to accelerate development.

About Arturo Préstamo

Prior to his role as CEO of Santacruz Silver, Arturo Prestámo held various planning, finance and investor relations roles in the mining industry.

He was formerly country manager for Starcore International Mines in Mexico.

About the company

Vancouver-based Santacruz Silver has the Rosario and Veta Grande mines and the San Felipe and Gavilanes projects, all in Mexico.