AbraSilver drilling at Diablillos suggests resource growth

AbraSilver Resource (TSX: ABRA) said new drilling at the Diablillos project in northwestern Argentina shows potential for resource growth beyond the limits of a definitive feasibility study (DFS) released last month. The stock rose.

Standout hole DDH-26-036, drilled into a previously untested gap in the Oculto West zone, cut 109 metres grading 221.2 grams silver per tonne and 0.72 gram gold from 114 metres downhole, Toronto-based AbraSilver said Monday in a statement. This included 14 metres grading 580 grams silver and 0.23 gram gold from 135 metres depth.

Results “highlight continuity of high-grade oxide silver-gold mineralization in a previously untested area at Oculto West and beyond the DFS mine plan,” Scotia Capital mining analyst Eric Winmill said Monday in a note.

Located in northwestern Argentina, about 160 km south of the city of Salta, Diablillos is AbraSilver’s main asset and one of the country’s largest undeveloped precious-metals projects. The property hosts the Oculto silver-gold deposit, a high-sulphidation epithermal system that has been the focus of extensive drilling and resource growth over the past several years. AbraSilver has now drilled more than 170,000 metres at Diablillos.

AbraSilver shares rose 3.4% to C$14.49 Monday morning in Toronto, valuing the company at about C$2.3 billion ($1.6 billion). The stock has traded between C$4.91 and C$19.89 in the past year.

Long-term potential

Monday’s release, which follows several weeks of drilling primarily focused on geotechnical and condemnation work, covers five holes.

Along the JAC-Oculto trend, hole DDH-26-022 cut 63 metres grading 32.8 grams silver per tonne from 60 metres downhole, including 11 metres at 101.4 grams silver from 112 metres, beneath the current conceptual open pit. The intercept could support future resource growth and potential pit optimization at depth, AbraSilver said.

Additional assay results from the ongoing drill program are pending and will be released as they become available, AbraSilver said.

“With our DFS now complete, our exploration efforts have returned to unlocking the longer-term growth potential of the Diablillos district,” CEO John Miniotis said.

“Combined with additional mineralization encountered below the conceptual open pit and encouraging results at Oculto East, these latest results reinforce our confidence in Diablillos’ significant mineral resource growth potential as we advance the project toward development.”

Expanded resource

In May, AbraSilver reported a substantially expanded mineral resource estimate for the project. Diablillos holds about 232 million measured and indicated tonnes grading 33 grams silver and 0.34 gram gold per tonne for contained metal of 248.1 million oz. silver and 2.5 million oz. gold, the company said at the time.

Inferred resources were pegged at 49.3 million tonnes grading 12 grams silver and 0.26 gram gold for contained metal of 18.4 million oz. silver and 420,000 oz. gold.

Diablillos is expected to generate an after-tax net present value of about $3 billion (C$4.3 billion) and a 42% internal rate of return with a 1.7-year payback period, AbraSilver said in last month’s DFS.

2029 target

Early works are expected to start in the third quarter, including engineering and infrastructure upgrades, with financing targeted by year-end, AbraSilver said. First production is targeted by the end of 2029, subject to a final investment decision expected in the second quarter of 2027 and the receipt of required permits.

Diablillos was approved for inclusion under Argentina’s Large Investment Incentive Regime (RIGI) in May. Key features, which are good for 30 years, include a reduction of the federal corporate income tax rate to 25% from 35%; the elimination of export duties on gold and silver sales; and an accelerated tax depreciation of plant and equipment.

Initial capital expenditures for the project are pegged at $722 million, including a $98 million contingency, with subsequent sustaining capital of $520 million that will be funded through operating cash flow.

Diablillos would produce an average of 20 million silver-equivalent oz. annually during its first five years, consisting of 14 million oz. silver and 89,000 oz. gold per year. Over the mine’s projected 25-year life, annual output is expected to average 10 million silver-equivalent ounces.