The importance of ore sorting and stripping ratios
After Eloro Resources published the initial mineral resource estimate (MRE) for the Iska Iska silver-tin polymetallic project in the Bolivian Potosi Department, the share price came under significant pressure. We believe this was based on certain misconceptions specifically about the impact of ore-sorting and the stripping ratio on the value of the Iska Iska project. Ore-sorting, an innovative technology, should significantly increase concentrator feed grades, so recovery in both the polymetallic and the tin domain should rise significantly, allowing bulk mining techniques to be used without resulting dilution issues. Coupled with a very low strip ratio of 1:1, downstream processing costs will drop substantially, making Iska Iska eventually a highly profitable mine, in our view. We reiterate our Buy rating for the shares of Eloro Resources and calculate a fully diluted share price target of CAD 12.70, derived from an in-situ net asset valuation of Iska Iska’s Santa Barbara Breccia Pipe. We highlight that the current pullback in the company’s share price is an interesting entry point for long-term investors, in our view.
The most obvious reason for the share price development may have been the “low” silver grades in the polymetallic domain that may have raised fears that operating costs per tonne would not be covered. To investors accustomed to silver values of 40 g/t and above, Eloro’s reported grades of 13.6 g/t (inferred) may indeed appear to be a shortfall. However, this single value does not reflect that much of Iska Iska’s mineralization occurs in veins and vein breccias. Thus ore-sorting should not only substantially reduce operating costs by selectively removing waste material, but also increase feed grades to the grinding circuit.
Sensor-based ore sorting works by selectively removing waste material. This results in a major increase in grades of feed to the grinding circuit, which (1) significantly reduces energy and operating costs and (2) significantly increases the efficiency and life of a mining operation. While ore-sorting does not work for all deposits (f. ex. Novagold recently announced that ore-sorting was eliminated from its prestigious Donlin gold project), at least 40% of the run-of-mine silver-zinc-lead (Ag-Zn-Pb) polymetallic mineralization could be pre-rejected as waste at Iska Iska, according to Tomra, a German based company and global leader in ore-sorting technology. For the tin (Sn) domain, even up to 80% by weight could be pre-rejected as sub-cut-off grade waste. Given the magnitude of Iska Iska’s potentially open pittable polymetallic and tin resource, we believe that metallurgical and pyrometallurgical ore-enrichment will become a critical success factor for Eloro.
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