UPDATE: Arian Silver agrees terms for own mill at San Jose
Arian Silver (LON:AGQ CVE:AGQ) has agreed terms to buy a processing plant for its San Jose mine in Zacatecas, Mexico, a move that that could treble its output.
The new processing plant, the El Bote Mill, is currently located close to Zacatecas City and has capacity to treat up to 1,500 tonnes per day of silver-lead-zinc ore.
Arian's current capacity is 500 tonnes per day through its toll mill agreement with the Juan Reyes Mill.
The El Bote Mill has a past history of treating run of mine ore from San Jose and Arian will carry out 120 days of due diligence to confirm it is still suitable.
The initial consideration is US$100,000 with a final purchase price of US$3.12mln, a sum Arian said its well within its current financing capabilities. The vendor is British Virgin Isles incorporated Sandy Hill Ltd.
Upon completion of the purchase, the plant would be disassembled and relocated to an already permitted 24 hectare site on the eastern side of the San Jose property.
A contiguous six hectare plot is designated for the associated tailings dam and permitting for this is advancing and expected to be granted shortly, said Arian.
Jim Williams, Arian's chief executive, described the agreement as an important step forward for the company.
"We have already demonstrated that we have the silver, lead and zinc resources to support an expanded operation at San Jose and acquisition of this larger processing plant can only accelerate this aim.
"On acquisition, the El Bote Mill would be reassembled in modular fashion on-site at San Jose which will allow us to synchronise plant construction with increased mine capacity."
Williams said there were obvious operating efficiencies and increased revenue potential from operating a company-owned processing plant on site at San Jose and he was confident that its due diligence on the El Bote Mill will confirm this.
"Our cash cost at the toll mill right now is roughly sixteen, seventeen dollars; total true costs will, of course, be much higher than that," Williams said in a recent interview with Proactive Investors as he outlined the "significant economic advantage" offered by the company owning its own mill.
"We'll have a custom mill at 1,500 tonnes a day; our cash costs are seven, seven-and-a-half dollars, [and] our true costs will be more like sixteen dollars, and off that we can shave about six dollars by credits for lead and zinc," Williams said.
Arian added it has commenced production at the Juan Reyes toll mill in Zacatecas and initial operating performance will be highlighted in the first quarter results.
The shares rose 12.8% to 12.125p in the morning session.
