Sponsored: AbraSilver weighs options to enhance Diablillos economics

Key Concepts

• Measured and Indicated (M&I) Resource: A classification of mineral resources with sufficient geological confidence to support mine planning and economic evaluation.
• Silver Equivalent (AgEq): A metric used to express the total value of various metals (gold and silver) in a deposit in terms of silver ounces.
• Heap Leach: A process used to extract precious metals from low-grade ore by spraying a chemical solution over crushed rock piles.
• Tank Leach: A more intensive processing method for high-grade ore, typically involving agitation in tanks to maximize recovery.
• Strip Ratio: The ratio of waste rock that must be removed to extract a given amount of ore.
• All-In Sustaining Costs (AISC): A comprehensive metric representing the total cost of producing an ounce of metal, including mining, processing, and sustaining capital.
• DIA (Declaración de Impacto Ambiental): The environmental impact statement/permit required for mining projects in Argentina.

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1. Resource Growth and Scale

Abra Silver has significantly expanded its Diablillos project in Argentina, surpassing 450 million ounces of silver equivalent in the Measured and Indicated category.

• Growth Rate: The company added over 100 million ounces to the M&I resource in approximately 10 months (since July 2023).
• Composition: Gold resources increased by nearly 50%, while silver resources grew by 25%.
• Methodology: The growth was driven by a combination of successful drilling and a strategic adjustment of the cutoff grade from 41 g/t to 39 g/t AgEq, reflecting higher commodity prices and allowing lower-grade material to become economically viable.

2. Development Strategy: The Heap Leach Opportunity

A major shift in the project’s development strategy is the inclusion of a heap leach component.

• Economic Impact: Previously, lower-grade mineralization was classified as waste. By processing this material through a secondary heap leach circuit, the company can improve overall project economics and reduce the strip ratio.
• Parallel Studies: While the core feasibility study focuses on high-grade tank leach material, the company is launching a Preliminary Economic Assessment (PEA) specifically for the heap leach opportunity to quantify its potential.

3. Permitting and Construction Timeline

The project is moving toward a construction decision with the following status:

• Environmental Approval: The company has secured the DIA (environmental permit) from the Salta provincial authorities.
• Pending Milestones: A corresponding permit from the Catamarca province is expected imminently.
• Feasibility Study (DFS): The final Definitive Feasibility Study is scheduled for release by the end of June.
• Investment Decision: Following the DFS and final permitting, the company aims to secure financing and reach a Final Investment Decision (FID) before the end of the year.

4. Financial Outlook and Leverage

CEO John Mignot highlighted the project's robust economics:

• Production Profile: The project is expected to produce approximately 20 million ounces of silver per year in its initial stages.
• Cost Profile: The estimated AISC is approximately $15 per ounce.
• Cash Flow: At current commodity prices, the project is projected to generate over $1 billion USD in free cash flow annually. Mignot emphasized that the project remains highly profitable even at conservative silver prices (e.g., $30/oz).

5. Future Exploration Potential

Despite the current scale, significant growth potential remains:

• Geographic Focus: While previous years focused on the "Jack Zone" (south/southwest), current exploration has shifted to the east and northeast of the Oculto deposit.
• Gold Upside: Recent drilling in these underexplored areas has yielded high-grade gold intercepts, suggesting that the next resource update could be significantly larger than the current one.

Synthesis

The Diablillos project has transitioned from a large-scale exploration asset to a near-construction development story. By integrating a heap leach circuit to monetize previously discarded low-grade ore and leveraging high-grade gold discoveries in the northeast, Abra Silver has significantly de-risked the project. With environmental permits largely secured and a DFS due by the end of June, the company is positioned to capitalize on strong silver and gold prices, with the potential to become a major, high-margin cash flow producer.