AbraPlata: The silver (and gold) in Argentina

The name “Argentina” comes from the Latin term “argentum”, which means silver. For AbraPlata (V.ABRA) the silver (and a good deal of gold) is found at the Diablillos property, which contains a Ag-Au epithermal deposit called Oculto, located in the far south of a province called Salta located in the northwestern part of the country.

AbraPlata has a management team based in Buenos Aires, Argentina led by one of Argentina’s leading mining lawyers, Hernán Zaballa. It was this team which, in late 2015, learned that Silver Standard (now SSR Mining Inc.) was selling the Diablillos property as part of an effort to divest itself of assets in South America. While this was near the bottom of the mining market, about half a dozen companies bid on Diablillos.

In early 2016, AbraPlata emerged victorious paying US 15 million with a 1% royalty and Silver Standard took a 19.9% equity interest in the company. While it was a nasty time in the mining market it was an excellent time to be investing in Argentina. A new administration had been elected. The new President was generally pro-business and wanted to attract investment to the mining sector. The administration abolished export taxes on mineral products, liberalized forex markets and capital in-flows/out-flows and simplified the importation of capital goods. It promised fiscal stability for 30 years and offered accelerated depreciation on capital investments. Add to that the fact the province of Salta is typically rated by the Fraser Institute as the number one mining jurisdiction in Argentina and AbraPlata was in an ideal position.

The company ran a drilling program in 2017 which followed up on the work which had been done on the property since the deposit was discovered in the 1980s. Silver Standard had spent $33 million US and drilled 85,000 meters in 450 drill holes. Substantial metallurgy had also been done.

According to Rob Bruggeman who does Investor Relations for the company the deposit is a high sulfidation epithermal deposit with “zonation” in the deposit. “As fluids entered the volcanics, you first get a gold zone, then gold/silver, silver/gold, and then just silver. Overall, the Oculto Deposit is 71% silver, 29% gold,” said Bruggeman. “There is potential to add both gold and silver resources at depth within Oculto and also from satellite deposits on the 80km2 Diablillos property.”

On March 2, AbraPlata released a Preliminary Economic Assessment (PEA) prepared by RPA in Toronto. The headline number is Production of 9.8 Million Silver Equivalent Ounces Per Year with a CAPEX of $293 million US and a mine life of eight years on current reserves.  This offers a pre-tax internal rate of return of 40.7% and a payback period of 2.9 years.

The biggest hurdle facing AbraPlata is the overburden at Oculto. The company plans an open pit mine but to get to the mineralized rock, 30 million tons of rock would have to be stripped. “But once you in the mineralized material you are in an enriched silver zone with silver equivalent grades over 200 grams per tonne ” said Bruggeman. ” That is very impressive grade for an open pit mine.”

Diablilos is an ambitious project for a $15 million market cap company and AbraPlata is looking for a strategic partner to assist with development expertise and capital. However, the company is also looking to the drill to further improve the economics and extend the mine life. “We recently re-interpreted the historic drill core and the structural geology. We have spotted a high-grade gold zone at the northeast end of the resource pit where a historic hole hit 17 grams per tonne of gold over a 10-metre interval,” said Bruggeman. “We have also begun to test one of the satellite deposits, Fantasma. Most of the satellite deposit have minimal overburden, so we may be able to put them into production first.”

Looking forward, Bruggeman sees three areas for the company to focus on. “We want to look within the PEA pit shell. We know there are gaps in the drilling and we want to fill those gaps because they were treated as waste in the PEA despite containing mineralization. Second, we’ll drill deeper to test the extent of the high-grade gold zones. Third, we will be testing and drilling the shallow, satellite deposits,” said Bruggeman. “We are working on an aggressive timeline. We would like to be fully permitted and construction-ready by the end of 2019.”

“AbraPlata has a very strong team in Argentina,” said Bruggeman. “They are strong technically and they are very well connected in the country.”

That team will be working towards a pre-feasibility study which Bruggeman anticipates before the end of 2018. Having a pre-feasibility study in place will de-risk the project substantially and make it all the more attractive for a strategic or joint venture partner.

At time of writing AbraPlata was trading at $0.21 with 58,930,333 shares outstanding for a market cap of $16,398,118.

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