Kristie Batten: Silver surge a positive for pure-play developer Investigator
Record silver prices and a rebuilt DFS have Investigator Silver positioning its Paris project for development.
One of Australia’s top mining journalists, Kristie Batten, writes for Stockhead every week in her regular column keeping a watchful eye on the movers and shakers of the small cap resources scene.
The rise in the silver price to a record of more than US$60 an ounce bodes well for Australia’s most advanced pure-play developer.
Investigator Silver (ASX:IVR) has a new look and is marching towards delivering the definitive feasibility study for its Paris silver project in South Australia in the first half of next year.
This time last year, the stock was heavily sold off when the company delayed the release of the study.
Managing director Lachlan Wallace, who took the helm in March, said the delay was an opportunity for Investigator.
“The market reacted because they thought there was a problem with the DFS and we're very keen to get the DFS out there such that we can demonstrate that that is not the case,” he told Stockhead.
“And in fact, it was really an opportunity to bring the increased silver price into the mine design.”
Silver soaring
Silver has really broken out in recent weeks, smashing through its 2011 record high of just over US$50/oz.
Often dubbed the poor cousin of gold, silver often outperforms gold in precious metals bull markets.
“The pattern seen across multiple cycles is that silver lags early, allowing gold to move first, but once momentum builds and gold becomes relatively expensive, silver follows with far greater velocity,” Wallace said.
“This ‘second-wave’ dynamic has been a defining feature of every major metals boom of the last half-century.”
If previous bull markets are any indication, silver could have further to run.
The global silver market is expected to be in deficit for the fifth consecutive year this year and demand is increasing due to silver’s use in solar panels.
Wallace pointed out that three quarters of the world’s silver production came as a by-product of gold, copper and lead and zinc mines, meaning a rise in price didn’t necessarily lead to a rise in production.
“With industrial consumption rising and investment demand strengthening, that deficit is expected to persist,” he said.
“Persistent shortages in any commodity market are historically a powerful driver of long-term price appreciation.”
Paris in poll
Wallace said Paris was one of the few projects that provide pure exposure to silver.
“We’re not a lead-zinc project in disguise and we don’t rely on silver-equivalent reporting – Paris is a primary silver project,” he said.
“That gives investors something very rare on the ASX: direct leverage to the silver price.”
The 2021 prefeasibility study for Paris used a silver price of US$22/oz or A$34/oz.
“Today we’re closer to A$90. If you run today’s price through that original study, it increases the free cash generation by more than A$1.5 billion – before any optimisation, larger pit design or increased silver production,” Wallace said.
The PFS returned an NPV of $202 million and an internal rate of return of 54%.
Capital costs were forecast at $131 million for an operation that would produce 26.7 million ounces of silver at all-in sustaining costs of $17.45/oz.
“Yes, input costs have risen, but nowhere near to the same degree as silver,” Wallace said.
“As a result, margins have improved materially, and that’s why we’ve rebuilt our definitive feasibility study rather than simply updating an old model.”
The company isn’t just relying on the improved silver price. The DFS has also been re-engineered.
One of the main changes is a shift from dry-stack tailings to a conventional wet tailings facility, which will lower capital intensity, simplify execution and improve operating margins.
“In practical terms, it makes Paris cheaper to build and easier to operate, which is exactly what financiers want to see,” Wallace said.
The open pit and mining sequence have also been re-optimised to include more material and extend mine life.
Wallace said the changes had been made with financing considerations in mind.
“The mine plan is being designed to meet lender benchmarks – including debt-service coverage ratios, reserve-tail tests and downside stress scenarios,” he said.
“We’ve deliberately structured the early years around higher-confidence material so cashflow is strongest during the debt-repayment window.
“We’re deliberately developing a finance-ready project – not just producing a technical document that chases the highest theoretical NPV – and that’s what makes the difference between a feasibility study and a project that is genuinely development-ready.”
Path to production
The permitting process is expected to take around 18 months.
The company has been working with traditional owners since 2010 and has built strong relationships.
“The mine layout reflects heritage survey work over the past 15 years, and formal Native Title discussions are underway with positive engagement across all parties,” Wallace said.
Investigator is aiming to have the permitting and financing process wrapped up by the end of 2027 and make a final investment decision.
In the meantime, the company will step up its institutional engagement in North America.
The construction timeline for Paris is just nine months.
“This is a pretty basic plant, and the actual ore is only sitting at 20m down, so it is pretty quick and easy,” Wallace said.
“We should be pouring silver in the back half of 2028.”
At Stockhead, we tell it like it is. While Investigator Silver Exploration is a Stockhead advertiser, it did not sponsor this article.
Originally published as Kristie Batten: Silver surge a positive for pure-play developer Investigator
