But there’s more to it than that. A lot more. A quick glance back to where the shares were a few weeks ago tells a much more rounded story. Back then, Soho’s shares were trudging along at around the C
.04 mark, with the market well aware that a PEA was in the pipeline, but hardly falling over itself to buy stock. Then Ralph Shearing went on a mini-roadshow, one that had originally been scheduled to coincide with the release of the preliminary economic assessment (PEA), and spoke at a conference in Toronto focussed on investing in mining in Mexico.
At that point, investors seem to have woken up. The imminence of the PEA suddenly became clear, and, impressed by Ralph’s presentation, and as the likelihood that it would come in with favourable results suddenly began to dawn on them, the buyers flocked in, and momentum began to build. The shares spiked at that C
.145 level, before dropping back when the hard numbers came out. Although he has very little to be unhappy about, given that the shares have still more than doubled in the space of a couple of weeks, Ralph Shearing’s still pretty confident that much of the ground lost in the past couple of days can be made up.
Part of that confidence stems from a straightforward assessment of the numbers currently on the table. "It’s a good mine life, and it makes good profit", he says. According to the study conducted by Snowden, mining at a maximum rate of a million tonnes per year, Tahuehueto should deliver cash flow of US$184.2 million over an 11 year life, generating an internal rate of return (IRR) of 31 per cent.
Nice enough if you can get it, but already the talk is that Tahuehueto has more to offer. One reason for the recent spike in the shares is that there’s no better time to be announcing an economic gold-silver project than now, with gold pushing past US$1,300, and silver up at US$22 and more. The numbers used in the study, would, once-upon-a-year, have been viewed as aggressive. Now, the US$965 gold and US$15 silver that Snowden used, based on three year rolling averages looks conservative. Ralph reckons that if current metals prices were factored in the payback period on the projected US$89.1 million capital cost would drop from the currently envisaged 27 months to less than two years.
Perhaps it’s even more significant, though, that the project is more than likely to deliver up substantial additional resources. At the moment all-in Tahuehueto boasts just over 650,000 ounces of gold, 13 million ounces of silver, as well as 71 million pounds of copper, 300 million pounds of lead, and 560 million pounds of zinc. But, as Ralph Shearing points out, Tahueheuto hosts multiple structures, and Soho has yet to explore four fifths of the overall potential mineralised ground. "I’d hate to get pegged at a certain size", he says, understandably.
So the plan now is to do additional resource drilling and technical drilling with a view to proving up more resources, and rolling them into the pre-feasibility study that’s set to get underway, and which it's expected will be completed in 2011. "The met work we've done so far has been pretty promising", says Ralph. "We are able to separate the base metals into their individual components and have successfully produced stand alone copper, lead and zinc concentrates in bench scale testing. All gold and silver report to the concentrates so we will not have to deal with ore on site. The main thing that we’re going to be doing is trying some different grinds and reagents. But the mineralisation is coarse enough that we’ll be able to get the liberation and we expect further to improve on the decent recoveries obtained to date".
With all that in mind, and factoring in Soho’s well-established Chinese backing, it was perhaps unsurprising that the market suddenly woke up with a start to what the company had to offer. The trick now will be for Ralph and his team to deliver on the upside that’s on offer. In the attached commentary to the PEA he writes: "There is very little doubt in my mind that with additional exploration and development the projected 11 year mine life outlined in the PEA could be dramatically extended". If he’s right, then the future for Soho and Tahuehueto looks promising indeed.