By Ted Niles
Levon Resources' (TSX:LVN) preliminary economic estimate of its Cordero project was originally intended for internal use only. President and CEO Ron Tremblay admits that normal procedure is to drill off the resource before working on the economics, but Cordero is unusually large. He explains, “We’ve just started our Phase 4, 130,000-metre drill program, so there’s an awful lot more drilling to do before we’re ever going to be in a position to actually figure out how big this thing is going to be. But we needed to put something together to show the market, investors and institutions that, yes, the economics are there, and this is what they look like for the first four stages.”
The 20,000-hectare Cordero project is located on the Chihuahua side of the Chihuahua-Zacatecas Silver-Gold Belt in Mexico. The Belt hosts, among others, Goldcorp's (TSX:G) Peñasquito Mine and Camino Rojo projects, as well as
Silver Standard's (TSX:SSO) Pitarilla and San Agustin projects. Cordero has indicated resources of 310.87 million ounces silver, 908,000 ounces gold, 5.4 billion pounds zinc and 2.87 billion pounds lead and inferred resources of 139.9 million ounces silver, 229,000 ounces gold, 2.15 billion pounds zinc and 1.21 billion pounds lead.Levon's January 30 PEA — which focuses only on the near-surface 30% of the resource — estimates a pretax net present value of $652.6 million at a 5% discount rate and an internal rate of return of 19.5%. Capital costs are projected to be $646.8 million, operating costs $13.82 per tonne, with a 5.5-year base-case payback. Potential metal production over Cordero’s 15-year mine life is estimated at 131.16 million ounces silver, 190,000 ounces gold, 1.37 billion pounds zinc and 1.03 billion pounds lead. Tremblay comments, “We ended up working on a smaller pit design for the time being to give us an idea of where we’re at in the first stages. Ultimately, we’ll be looking at a much larger pit and a much larger mill, but we’re very happy with the way it’s come together.”
Levon is in “good shape” financially, Tremblay reports. “We’ve got just over $60 million in the bank. The Phase 4 program [is] a $25-million budgeted program that will probably take us sometime into 2013.” The company intends to update the Cordero resource “in the not too distant future” based on results received January 7 and again at the conclusion of the Phase 4 drill campaign. Two rigs are turning at the project, and a third has been mobilized.
Results of the Phase 3 drill campaign released March 31 include:
89.6 grams-per-tonne silver equivalent over 42 metres 306.1 g/t AgEq over 8 metres 68.8 g/t AgEq over 132 metres 95.6 g/t AgEq over 42 metres 57.9 g/t AgEq over 62 metres 37.4 g/t AgEq over 136 metres 57.8 g/t AgEq over 82 metres 120.9 g/t AgEq over 108 metres 74.5 g/t AgEq over 54 metres 137.9 g/t AgEq over 74 metres 353.2 g/t AgEq over 8 metresTremblay told ResourceClips.com in April 2011, “We’ve had over an 80%-success ratio on our drilling. You just don’t see that. And some of that is drilling where we’re trying to delineate the zones. We think we’ve delineated in one area, then we step-out another 100 metres, and all of a sudden you’re into it again.” The comparison has been made between Cordero and Goldcorp's aforementioned Peñasquito Mine but, Tremblay declares, “Peñasquito had two mineralized intrusives. We’ve got six.”
The infrastructure is good. “We have power; we have water; we have a good area for the tailings,” Tremblay reports. “We’re close to a good-sized city, Parral, which is only 35 kilometres away, and we’re only 10 kilometres off the main north-south highway. All the necessary ingredients to build a project without any extraordinary expenses.”
Levon will build the project, but it probably won’t take it to production. “We’re not a mining company; we’re an exploration company,” Tremblay declares. “We’ve signed a number of confidentiality agreements, [so] all we can say is that we have quite a number of large companies that have a keen interest in our project.”
One such company might be Goldcorp, which acquired Canplats Resources and its Camino Rojo project — located on the same trend — in April 2010.
With the company’s graduation to the TSX February 9, Tremblay is confident the market will react favourably to the PEA. “If you look at the NPV for the base case, after taxes you’re looking at about $5-per-share value, so obviously we’re undervalued,” he concludes. “We’ve just put out the news, and it takes the market and analysts time to digest this. They’ll start giving their opinion to the public, and we should start to grow.”
At press time, Levon Resources had 198.8 million shares trading at $0.90 for a market cap of $179 million. The company’s other properties include the Norma Sass property, as well as the Ruf and Eagle claims in Nevada and the Congress property and BRX/Wayside claims in BC.
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