the decision to go ahead and build pirquitas was based on much lower silver and base metals prices. last november, when the company came out with new constructions cost estimates, they also revised the metals prices.

the new estimates were silver at $9.35/oz, tin at $3.65/lb, and zinc at $1/lb. at those prices, the project's net present value was $334 million given a 0% discount rate, or $189 million with a more realistic rate of 5%.

but by the time the report was finished, the actual metals prices were silver $14.55, tin had doubled to $7.28, and zinc was $1.02. at those prices the project npv at 0% was $868, and at 5% it was $586. thanks to the base metal credits, the cash costs of producing silver were a negative $2.52/oz, and total costs were -0.49/oz.

to put that in perspective, it means that once pirquitas is built, the mine can be operated at a profit even if they never find an ounce of silver there. the base metals will pay for not only the cash costs, but all costs.

at yesterday's conference call, they didn't give complete information, but they said at current metal prices, the npv at 5% is now $920 million. for reference, silver is now north of $20, tin is around $8.70, and even lowly zinc is up to $1.15. I would guess that at a 0% discount rate, the npv is now around $1.5 billion.

pirquitas is going to be a cash machine. it is forecast to produce 10.9 million ounces, all of it for free. and those are the most pessimistic assumptions. it doesn't the additional zinc in and adjacent to the pit, or the indium they found grading 18-19g/ton, which i don't know how to quantify. it also doesn't include the additional 43 million ounces of silver resource that may be used to extend the ten-year mine life. and it assumes the price of silver won't increase for the next ten years (good luck with that one.)

the company's total market cap is about $2.3 billion, of which $920 million can be attributed to pirquitas. that means you get the other sixteen projects, including pitarrilla, a company-maker all by itself, for about $1.4 billion. since the company has another 1.4 billion ounces of silver resource (ex-pirquitas) the market is valuing silver standard at only $1 per resource ounce of silver. and on top of that, you get snowfield's 3.5 million ounces of gold, almost all of it measured and indicated, for free.

this is one of the premier companies in the silver industry, and there is no doubt in my mind that we will look back at this stock selling in the mid-30's as being very, very cheap.