Silver Standard Resources Inc. (NASDAQ:SSRI) (TSX:SSO) informed the stock markets through a news release published on May 31 on its Web site about the closing of the joint venture agreement with Golden Arrow Resources Corp.Ă‚ (TSXV:GRG) for the development of the Chinchillas project.
According to the terms of the deal, the new business entity – called Puna Operations Inc. – will be formed thanks to Silver Standard Resources’ contribution of its Pirquitas property and to the Golden Arrow Resources’ contribution of its Chinchillas property.
Silver Standard Resources – the operator of Puna Operations Inc. – will hold a 75% stake in the joint venture, and Golden Arrow will hold 25%.
In addition, Silver Standard Resources “has made an option exercise payment of $13.0 million to Golden Arrow,” as reported by the company.
Golden Arrow has published a pre-feasibility study about the Chinchillas project on its Web site and the National Instrument 43-101 will be available by mid-June.Ă‚ The document also provides investors with estimations about the annual production of silver equivalent, the life of the mine and the daily quantity of ore that can be milled at the mine.
The Argentinian silver project called Chinchillas is situated in the province of Jujuy not so far from the Pirquitas mine. This is very important because processing of ore at Chinchillas can be undertaken using the existing machinery available at Pirquitas. Chinchillas is characterized by a near-surface mineralization, which provides the future operator with the potential to mine the metal at an open pit deposit with favorable silver, zinc and lead recoveries.
Paul Benson, Silver Standard’s president and CEO, said, "Forming the joint venture is another important step toward extending the life of the Pirquitas operation. By leveraging the assets of the two companies, the Chinchillas pre-feasibility study outlines a project with a short pay-back period for a modest capital investment. We have also begun to evaluate the potential for a small tonnage Pirquitas underground operation to provide an additional, high grade ore stream to the Pirquitas plant. Final permitting for Chinchillas is expected shortly, which will enable site development to commence."
The aforementioned data plus the most important figures of the financial analysis section of the pre-feasibility study and the amount of funds expected to be invested in the development of the project can be found in my previous article on this agreement.
Recall the potential of this project in terms of mineral resources in the ground: At Chinchillas, mineral reserves are estimated to be approximately 11.7 million tonnes which contain approximately 58 million ounces of silver grading 154 grams per tonne, approximately 310 million pounds of lead grading 1.20% plus approximately 127 million pounds of zinc grading 0.49%.
Benson added, "The project will benefit the people and governments of Argentina through job creation, increased tax base and export revenues. Silver Standard has a solid foundation with three strong operations generating cash flow and each with growth potential."
Silver Standard Resources is trading at $9.41 per share versus an analysts’ average target price of $13.35 with a price-sales (P/S) ratio of 2.18 and a price-book (P/B) ratio of 1.18. The Enterprise Value/EBITDA ratio is 4.62.
Golden Arrow Resources is trading at 71 cents (Canadian dollars) on the TSX Venture Exchange. The stock has 97.87 million shares outstanding and a market capitalization of $65.51 million.
Disclosure: I have no positions in any stock mentioned in this article.
