Discovery Silver Corp. (TSX: DSV, OTCQX: DSVSF)
(“Discovery” or the “Company”) is pleased to announce its financial
results for the fourth quarter (“Q4 2022”) and year ended December
31, 2022, and to provide a summary of key events for the quarter
and subsequent to year-end. All figures are stated in Canadian
dollars (“C$”) unless otherwise noted. Discovery’s flagship project
is the 100%-owned Cordero silver project (“Cordero” or the
“Project”) located in Chihuahua State, Mexico.
Tony Makuch, CEO, states: “The significant
progress we made at Cordero in 2022, culminating in the delivery of
a Pre-Feasibility Study (PFS) in early 2023, has demonstrated that
Cordero is one of the most exciting development projects in the
mining space globally with the potential to become one of the top
three largest silver mines and top ten largest zinc mines
worldwide. The PFS demonstrates excellent economics and is highly
capital efficient through building in phases to minimize the
upfront capital for Phase 1 and have the project finance the final
build by utilizing operating cash flow to fund Phase 2.
Additionally, the PFS incorporates less than 50% of the current
known resource tonnes, creating significant leverage and
optionality with only a modest increase in metal prices. The design
of the reserve pit fitting within the shell of the resource pit
also supports this option. There also remains further significant
exploration upside, with the deposit still open at depth, and a
number of other targets defined elsewhere on the property.
“Work on our Feasibility Study, which is
expected to be delivered in the first half of next year, is already
well underway with recent drilling in and around the pit
highlighting further growth potential beyond what was outlined in
the PFS. Alongside our Feasibility Study work we remain committed
to maintaining our positive working relationships with all local
stakeholders and look forward to initiating the construction
permitting process next quarter and the commencement of
property-wide exploration on our highly prospective land package in
the middle of the year.”
HIGHLIGHTS FROM Q4 2022 & SUBSEQUENT
EVENTS:
- Completion of
our PFS on Cordero that outlined an 18-year mine life with average
annual production of 33 Moz AgEq at an average AISC of $12.80/oz
AgEq in Years 1 to 12. The after-tax NPV5% was US$1.2 B and the IRR
was 28% at base case metal prices of Ag - US$22.00/oz, Au -
US$1,600/oz, Pb - US$1.00/lb and Zn - US$1.20/lb.
- The appointment
of Tony Makuch as the Chief Executive Officer; Mr. Makuch has more
than 35 years of development, operational and leadership
experience. Most recently he was CEO of Kirkland Lake Gold Ltd.
where, under his five-year tenure, annual gold production grew from
315,000 oz to over 1,400,000 oz and Kirkland Lake’s share price
increased over 500%.
- The graduation
to the main board of the Toronto Stock Exchange reflecting the
Company’s maturity and growth with Cordero now having advanced to
the feasibility study stage.
- The announcement
of the filing of a Final Short Form Base Shelf Prospectus allowing
for the sale of Common Shares, Warrants, Subscription Receipts and
Units of the Company in one or more series of issuances for
aggregate gross proceeds of up to $300,000,000 for a period of 25
months following the filing.
- The Company’s
receipt of its official ESR Certification, which is issued by the
Mexican Center for Philanthropy to organizations that have
demonstrated they operate in a socially and environmentally
responsible manner.
- Announcement of
the Company’s work program for 2023 that includes: significant
advancement of FS scope items, the initiation of the construction
permitting process, an initial 9,000 m drill program planned across
multiple targets on the Company’s prospective land package, and
further investment in our well-established ESG programs as part of
our commitment to work with all local
stakeholders.
- As of December
31, 2022, we had a cash and cash equivalents balance of $46.2
million.
LOOKING AHEAD:
The Company has now completed 39,000 m of its
Feasibility Study drill program that consists of engineering
drilling, resource upgrade drilling, and step-out drilling
targeting the expansion of the PFS open pit. The drill results
subsequent to the PFS cut-off date continue to demonstrate the
mineral resource growth potential that could be unlocked and
included in the upcoming Feasibility Study. Resource upgrade infill
and step-out drilling returned a number of higher-grade intercepts
within, and below, the reserves pit, in areas that were previously
modeled as low-grade ore. The Company has the potential to continue
lowering Cordero’s strip ratio by converting the waste to ore
within the pit and expand the pit at depth.
The Company’s drill program in 2023 at the
project is designed to support the FS through condemnation and
geotechnical investigation for locating site infrastructure and for
hydrogeology investigation.
The FS is expected to be completed in the first
half of 2024, with the construction permitting work being performed
in parallel. The submission of the Environmental Impact Statement
(“Manifesto de Impacto Ambiental” or “MIA”) is expected to be made
to the Mexican Federal Environmental Department (“SEMARNAT”) in the
first half of 2023. Assuming a 12 to 24 month permitting timeline,
this would position the Company to make a construction decision
during the second half of 2024.
In parallel with these work plans our ESG
program continues to be an important area of focus, with our 2022
ESG report scheduled for issuance in 2Q 2023, and key government
and international accreditation certifications planned for
completion in the second half of 2023. We also remain committed to
the growth potential of Cordero almost 9,000 m of drilling planned
this year on resource expansion targets and our first ever drilling
of five highly prospective property targets within 10 km of
Cordero.
Our balance sheet remains exceptionally strong
with a current cash balance of approximately $38 million and no
debt, sufficient to finance the 2023 work program at Cordero. The
Company recently filed a final base shelf prospectus allowing for
the sale of Common Shares, Warrants, Subscription Receipts and
Units of the Company in one or more series of issuance for
aggregate gross proceeds of up to $300 million for a period of 25
months following the filing. The Company expects to complete a
Definitive Feasibility Study for the first half of 2024, and
advance Cordero through to a construction decision following the
release of the FS and completion of the necessary financings.
SUMMARY OF Q4 2022
& SUBSEQUENT EVENTS:
Environment, Social,
Governance:
The Company continues to make excellent progress
on its Environmental, Social and Governance (“ESG”) initiatives.
Recent highlights include:
-
Community Programs – ongoing sponsorship of the
supply of equipment and medicine to the mobile medical unit that
was donated to the Parral municipality in 2022. The also provided
assistance with the construction of local medical clinic in 2022.
Both the medical unit and clinic have the capacity to serve
approximately 70,000 people per annum within the Parral
municipality.
- Socially
Responsible Enterprise (Empresa Socialmente Responsable)
Certification: the Company has received its official ESR
certification from the Mexican Center for Philanthropy (Centro
Mexicano para la Filantropia) in Q4 2022. The certification
requires the Company’s commitment to five pillars: business ethics,
community engagement, protection and preservation of the
environment, quality of life for employees and corporate social
responsibility.
- Great
Place to Work Certification - this certification was
awarded to the Company in Q4 2022 and recognizes companies that
create an outstanding employee experience through building a
workplace culture of trust, credibility, respect, pride and
collaboration.
Further details can be found in the news
releases dated November 11, 2022, and January 12, 2023, and in the
Company’s 2021 ESG report available on the Company’s website. The
2022 ESG report is progressing well and is expected to be published
Q2 2023.
Projects:
Preliminary Feasibility Study (PFS)
On January 24, 2023, we announced the results
from the PFS on Cordero. Highlights from the study include:
-
Excellent project economics: Base Case after-tax
NPV5% of US$1.2 Billion (C$1.5 Billion) and IRR of 28% (Ag -
US$22.00/oz, Au - US$1,600/oz, Pb - US$1.00/lb and Zn -
US$1.20/lb).
-
Extended mine life & higher production:
18-year mine life with average annual production of 33 Moz
AgEq.
-
High margins & low capital intensity
maintained: average AISC of US$12.80/oz AgEq in Years 1 to
12 with an initial development capex of US$455 M resulting in an
attractive NPV-to-capex ratio of 2.5x.
-
Significantly de-risked Reserve base: new Reserves
declared of Ag - 266 Moz, Au - 790 koz, Pb - 2,970 Mlb and Zn –
4,650 Mlb; more than 70% of mill feed in Years 1 to 5 classified as
Proven.
-
Exceptional silver price leverage: PFS mine plan
assumes only 42% of Measured & Indicated Resource tonnes are
processed; clear potential to significantly extend mine life at
higher silver prices.
-
ESG/economic contribution: total estimated taxes
payable of US$1.2 Billion, a peak estimated local workforce of over
1,000 employees and over $4 Billion of expected goods and services
purchased locally within Mexico over the life of the mine.
The PFS was released in conjunction with an
updated Mineral Resource Estimate (“MRE”). Further details on the
PFS and MRE results can be found in our news release dated January
24, 2023, and in the supporting technical report filed on SEDAR and
on the Company’s website.
Feasibility Study drilling
Feasibility Study drilling commenced in Q3 2022
and work is expected to be ongoing throughout 2023. The program is
anticipated to consist of approximately 50,000 m of drilling
related to engineering drilling, reserve expansion drilling and
resource upgrade drilling. To date, the Company has released 45
drill holes consisting of 20,000 m of drilling. These initial drill
holes were focused on two key areas: 1) expansion of reserves
within and beneath the Pre-Feasibility Study open pit and 2)
upgrading and expansion of the resource in the far northeast of the
deposit.
Reserve Expansion Drilling –
highlight intercepts from this drilling include:
-
77 m averaging 126 g/t AgEq1 (46
g/t Ag, 0.08 g/t Au, 0.7% Pb and 1.4% Zn) from 218 m and 22
m averaging 265 g/t AgEq1 (83 g/t Ag, 0.10 g/t Au, 1.8% Pb
and 3.2% Zn) from 374 m within the PFS pit in areas modelled as low
to medium grade in hole C22-656.
-
96 m averaging 124 g/t AgEq1 (33 g/t Ag, 0.03 g/t
Au, 0.7% Pb and 1.8% Zn) from 464 m on the margins of the PFS pit
in hole C22-654.
-
32 m averaging 158 g/t AgEq1 (77
g/t Ag, 0.16 g/t Au, 0.7% Pb and 1.3% Zn) from 108 m and 39
m averaging 241 g/t AgEq1 (124 g/t Ag, 0.09 g/t Au, 1.2%
Pb and 1.9% Zn) from 185 m within the reserves pit in the South
Corridor in hole C22-677.
-
36 m averaging 126 g/t AgEq1 (35 g/t Ag, 0.06 g/t
Au, 0.7% Pb and 1.7% Zn) from 481 m and 27 m averaging 133
g/t AgEq1 (25 g/t Ag, 0.06 g/t Au, 0.6% Pb and 2.2% Zn)
from 555 m in hole C22-687; these intervals were toward the bottom
and beneath the reserves pit in an area previously modelled as
waste.
These positive drill results demonstrate the
potential to expand reserves through the conversion of waste to ore
within the reserves pit and through the expansion at depth of the
reserves pit.
Far Northeast Drilling –
Drilling in 2022 outlined low grade mineralization with a number of
discrete high-grade zones in the far northeast of the deposit, more
than 1 km beyond the limits of the reserves pit. Most of this
mineralization is within 100 m of surface and is included within
the resource pit constraint as part of the January 2023 resource
update. 15 follow up drill holes have been completed testing the
lateral depth and strike extent of mineralization within this zone.
This drilling confirms the presence of a broad mineralized fracture
system in the area. The orientation of mineralization does not
appear to be consistent with the dominant northeast orientation
evident in the main part of the Cordero deposit. A more detailed
review of fracture orientation along with further drilling is
required to develop a better understanding of the main controls of
mineralization in this part of the deposit.
For further details on the drill results noted
above refer to our news releases dated November 17, 2022 and March
22, 2023. Supporting Technical Disclosure for drill results can be
found at the end of this release.
SELECTED FINANCIAL DATA:
The following selected financial data is
summarized from the Company’s consolidated financial statements and
related notes thereto (the “Financial Statements”) for the year
ended December 31, 2022, and the Management’s Discussion and
Analysis (“MD&A”) for the year ended December 31, 2022.
A copy of the Financial Statements and MD&A
is available at www.discoverysilver.com or on SEDAR
at www.sedar.com.
Net loss |
Q4 2022 |
Q4 2021 |
(a) Total |
$ |
(10,411,846 |
) |
$ |
(7,098,928 |
) |
(b) basic and diluted per share |
$ |
(0.02 |
) |
$ |
(0.02 |
) |
Net loss & total comprehensive loss |
$ |
(10,206,433 |
) |
$ |
(7,030,220 |
) |
Total weighted average shares outstanding |
|
351,012,880 |
|
|
329,898,229 |
|
|
December 31, 2022 |
December 31, 2021 |
Cash, cash equivalents & short-term investments |
$ |
46,220,938 |
$ |
54,748,652 |
Total assets |
$ |
91,583,326 |
$ |
107,790,755 |
Total current liabilities |
$ |
1,964,868 |
$ |
1,704,530 |
Total liabilities |
$ |
2,425,256 |
$ |
1,704,530 |
Working capital(1) |
$ |
53,081,932 |
$ |
69,611,661 |
Total Shareholders’ equity |
$ |
89,158,070 |
$ |
106,086,225 |
(1) Non-GAAP measure
defined as current assets less current liabilities from the
Company’s consolidated financial statements.
About Discovery
Discovery’s flagship project is its 100%-owned
Cordero project, one of the world’s largest silver deposits. The
PFS completed in January 2023 demonstrates that Cordero has the
potential to be developed into a highly capital efficient mine that
offers the combination of margin, size and scaleability. Cordero is
located close to infrastructure in a prolific mining belt in
Chihuahua State, Mexico. Continued exploration and project
development at Cordero is supported by a strong balance sheet with
cash of approximately C$38 million.
On Behalf of the Board of Directors,Tony
Makuch, P.EngCEO & Director
For further information contact:
Forbes Gemmell, CFAVP Corporate
DevelopmentPhone: 416-613-9410Email:
forbes.gemmell@discoverysilver.comWebsite:
www.discoverysilver.com
TECHNICAL NOTES & REFERENCES:
Drill results: all drill
results in this news release are rounded. Assays are uncut and
undiluted. Widths are drilled widths, not true widths, as a full
interpretation of the actual orientation of mineralization is not
complete. As a guideline, intervals with disseminated
mineralization were chosen based on a 25 g/t AgEq cutoff with no
more than 10 m of dilution. AgEq calculations are used as the basis
for total metal content calculations given Ag is the dominant metal
constituent as a percentage of AgEq value in approximately 70% of
the Company’s mineralized intercepts. AgEq calculations for
reported drill results are based on USD $22.00/oz Ag, $1,600/oz Au,
$1.00/lb Pb, $1.20/lb Zn. The calculations assume 100%
metallurgical recovery and are indicative of gross in-situ metal
value at the indicated metal prices.
Sample analysis and QA/QC Program
The true width of the veins is estimated to be
approximately 70% of the drilled width. Assays are uncut except
where indicated. All core assays are from HQ drill core unless
stated otherwise. Drill core is logged and sampled in a secure core
storage facility located at the project site 40km north of the city
of Parral. Core samples from the program are cut in half, using a
diamond cutting saw, and are sent to ALS Geochemistry-Mexico for
preparation in Chihuahua City, Mexico, and subsequently pulps are
sent to ALS Vancouver, Canada, which is an accredited mineral
analysis laboratory, for analysis. All samples are prepared using a
method whereby the entire sample is crushed to 70% passing -2mm, a
split of 250g is taken and pulverized to better than 85% passing 75
microns. Samples are analyzed for gold using standard Fire
Assay-AAS techniques (Au-AA24) from a 50g pulp. Over limits are
analyzed by fire assay and gravimetric finish. Samples are also
analyzed using thirty three-element inductively coupled plasma
method (“ME-ICP61”). Over limit sample values are re-assayed for:
(1) values of zinc > 1%; (2) values of lead > 1%; and (3)
values of silver > 100 g/t. Samples are re-assayed using the
ME-OG62 (high-grade material ICP-AES) analytical package. For
values of silver greater than 1,500 g/t, samples are re-assayed
using the Ag-CON01 analytical method, a standard 30 g fire assay
with gravimetric finish. Certified standards and blanks are
routinely inserted into all sample shipments to ensure integrity of
the assay process. Selected samples are chosen for duplicate assay
from the coarse reject and pulps of the original sample. No QAQC
issues were noted with the results reported herein.
Qualified
Person
Gernot Wober, P.Geo, VP Exploration, Discovery
Silver Corp., is the Company's designated Qualified Person for this
news release within the meaning of National Instrument 43-101
Standards of Disclosure for Mineral Projects (“NI 43-101”) and has
reviewed and validated that the information contained in this news
release is accurate.
The most recent technical report for the Cordero
Project is the 2023 Preliminary Feasibility Study for the Company’s
Cordero project. The report was completed by Ausenco with support
from by AGP, Knight Piésold and Hard Rock and is available on
Discovery’s website and on SEDAR under Discovery Silver Corp. The
PFS assumed average life-of-mine recovery assumptions for of 87%
for Ag, 22% for Au, 86% for Pb and 85% for Zn.
FORWARD-LOOKING STATEMENTS:
Neither TSX Exchange nor its Regulation Services Provider (as
that term is defined in policies of the TSX Exchange) accepts
responsibility for the adequacy or accuracy of this release.
This news release is not for distribution to United States
newswire services or for dissemination in the United States.
This news release does not constitute an offer
to sell or a solicitation of an offer to buy nor shall there be any
sale of any of the securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful, including any of the
securities in the United States of America. The securities have not
been and will not be registered under the United States Securities
Act of 1933, as amended (the “1933 Act”) or any state securities
laws and may not be offered or sold within the United States or to,
or for account or benefit of, U.S. Persons (as defined in
Regulation S under the 1933 Act) unless registered under the 1933
Act and applicable state securities laws, or an exemption from such
registration requirements is available.
Cautionary Note Regarding Forward-Looking
Statements
This news release may include forward-looking
statements that are subject to inherent risks and uncertainties.
All statements within this news release, other than statements of
historical fact, are to be considered forward looking. Although
Discovery believes the expectations expressed in such
forward-looking statements are based on reasonable assumptions,
such statements are not guarantees of future performance and actual
results or developments may differ materially from those described
in forward-looking statements. Statements regarding the results of
the pre-feasibility study and the anticipated capital and operating
costs, sustaining costs, net present value, internal rate of
return, payback period, process capacity, average annual metal
production, average process recoveries, concession renewal,
permitting of the Project, anticipated mining and processing
methods, proposed pre-feasibility study production schedule and
metal production profile, anticipated construction period,
anticipated mine life, expected recoveries and grades, anticipated
production rates, infrastructure, social and environmental impact
studies, availability of labour, tax rates and commodity prices
that would support development of the Project. Information
concerning mineral resource/reserve estimates and the economic
analysis thereof contained in the results of the pre-feasibility
study are also forward-looking statements in that they reflect a
prediction of the mineralization that would be encountered, and the
results of mining, if a mineral deposit were developed and mined.
Forward-looking statements are statements that are not historical
facts which address events, results, outcomes or developments that
the Company expects to occur. Forward-looking statements are based
on the beliefs, estimates and opinions of the Company’s management
on the date the statements are made and they involve a number of
risks and uncertainties. Factors that could cause actual results to
differ materially from those described in forward-looking
statements include fluctuations in market prices, including metal
prices, continued availability of capital and financing, and
general economic, market or business conditions. There can be no
assurances that such statements will prove accurate and, therefore,
readers are advised to rely on their own evaluation of such
uncertainties. Discovery does not assume any obligation to update
any forward-looking statements except as required under applicable
laws. The risks and uncertainties that may affect forward-looking
statements, or the material factors or assumptions used to develop
such forward-looking information, are described under the heading
"Risks Factors" in the Company’s Annual Information Form dated
March 29, 2023, which is available under the Company’s issuer
profile on SEDAR at www.sedar.com.
NON-GAAP MEASURES:The Company has included
certain non-GAAP performance measures as detailed below. In the
mining industry, these are common performance measures but may not
be comparable to similar measures presented by other issuers and
the non-GAAP measures do not have any standardized meaning.
Accordingly, it is intended to provide additional information and
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS.CASH COSTS
PER OUNCEThe Company calculated total cash costs per ounce by
dividing the sum of operating costs, royalty costs, production
taxes, refining and shipping costs, by payable silver-equivalent
ounces. While there is no standardized meaning of the measure
across the industry, the Company believes that this measure is
useful to external users in assessing operating performance.ALL-IN
SUSTAINING COSTS ("AISC")The Company has provided an AISC
performance measure that reflects all the expenditures that are
required to produce an ounce of payable metal. While there is no
standardized meaning of the measure across the industry, the
Company’s definition conforms to the all-in sustaining cost
definition as set out by the World Gold Council in its guidance
dated June 27, 2013. Subsequent amendments to the guidance have not
materially affected the figures presented.FREE CASH FLOWFree Cash
Flow is a non-GAAP performance measure that is calculated as cash
flows from operations net of cash flows invested in mineral
property, plant and equipment and exploration and evaluation
assets. The Company believes that this measure is useful to the
external users in assessing the Company’s ability to generate cash
flows from its mineral projects.
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