The company, then known as Mitre Mining, last November struck an agreement to acquire the suspended mining operation with resources of 25 million ounces of silver equivalent.
It quickly doubled resources to 50Moz AgEq and has followed that up with a further 80% boost to 91Moz grading 341 grams per tonne AgEq, adding 40.4Moz at 391gpt AgEq.
It has grown the resource by 66Moz grading 440gpt AgEq since taking control of the project earlier this year, increasing tonnes and grade in the process.
Today’s update exceeds the expectations of Canaccord Genuity, which was looking to see another 50% increase at around 70-80Moz AgEq.
Canaccord analyst Tom Prendiville said the target of 100Moz AgEq seemed “conservative and easily achievable” given it was based on re-modelling existing datasets around open pits and underground workings and did not include any of Andean’s own drilling, which has returned some of the highest silver grades seen on the ASX
Andean CEO Tim Laneyrie said the company continued to use a conservative approach to its modelling, such as depletion modelling and cut-off grades, so may be able to revise its estimates as its understanding of the project matures.
He describes Cerro Bayo as already being “an outstanding silver asset with genuine scale and high grades” today.
The resource update is confined to previous operating areas of the Cerro Bayo and Laguna Verde complexes, with plenty of growth potential emerging in new areas.
Recent drilling at Pegaso 7 has returned intercepts such as 1.1m at 1100gpt AgEq. The rigs have moved to Cristal with early results such as 3.3m at 785gpt AgEq and indications that the veins broaden at depth.
The halo around Cristal also generates broad mineralisation such as 41m at 75gpt AgEq.
Speaking at the recent Resources Rising Stars conference in Queensland, Andean non-executive director Dave Southam said with some 80,000m of drilling outside the resource, the company was confident about what it has in the ground.
He promised the next update in December would also be “substantial”.
By the time of the mid-2025 update, it will have the information needed to right-size what will likely be “one of the cheapest restarts” in the global mining sector.
The existing processing plant has a 2Mtpa ball mill and 500,000tpa flotation circuit that Southam suggested could be doubled in scale given the thematic for a silver market that was already in deficit, an issue likely to be exacerbated by dominant producer Mexico’s recent open pit ban.
The Chilean government supports the restart. Cerro Bayo was last operated in a lower price environment in 2017.
As the only mining project in an area the size of Tasmania, it was responsible for around 80% of the province’s gross domestic product, with some 100Moz AgEq recovered since 1995.
“If you are a gold bull you should be a silver bull. It has the same set of dynamics, plus one, its use … Solar is where a lot of silver is used, and right now, there is a deficit,” Southam said.
Chile is the world’s fourth-largest silver producer and could grow substantially off the Cerro Bayo restart, Southam said.
The project’s upside is still emerging, Southam said, noting there is no drilling below 300m.
“You would think this area that has been mined for decades would have no new discoveries. Well, we have made two.
“You would be shocked at what you can find when you prospect around this ground. This is an epithermal system to the veins outcrop at surface so even people like me, a non-geologist, can spot them.”
Canaccord’s Prendiville believes once Andean achieves 100Moz AgEq it would have sufficient scale to appeal to potential acquirers, especially given the $150 million of existing infrastructure and the fact Andean is trading at a 1x enterprise value per ounce, well below its producing peers of 4-8x.
With First Majestic Silver paying US$970 million for Mexico’s Gatos Silver, M&A activity is ramping up in the space.
Newmont already owns the 20Moz gold and 450Moz silver Cerro Negro deposit elsewhere in the Deseado Massif and could be a potential acquirer.
Canaccord maintains its high conviction in Andean’s future with a A$2.50 target price and a ‘speculative buy’ given favourable silver tailwind and the upside potential.
Andean has about $10 million cash remaining.
