La Cigarra PEA: Kootenay Silver’s US$1.3B NPV Vs Mexico Permits

A US$1.3 billion after-tax net present value is a striking number for a silver project that has never produced a single ounce and sits inside one of the world’s most demanding permitting environments for open-pit mines.

That contradiction is the whole story of Kootenay Silver’s La Cigarra project in Chihuahua, Mexico. The economics on paper are exceptional. The route to realising them runs straight through a regulatory system that discounts projects like this before they get a chance to prove themselves.

What makes this moment worth examining is the price backdrop. The Preliminary Economic Assessment (PEA) landed on 15 June 2026 with silver near US$67/oz, and spot has barely moved since, sitting around US$66.50/oz as of 18 September 2026. These economics are not the product of a speculative price spike. They reflect a level that HSBC, J.P. Morgan and UBS now treat as roughly the structural norm, with 2027 forecasts clustered between US$63/oz and US$80/oz.

What follows here is a breakdown of what the La Cigarra numbers actually mean in context, what has to happen technically and regulatorily before any of that value becomes real, and where the genuine risks sit for anyone tracking this project or the wider undeveloped Mexican silver space.

What the La Cigarra numbers actually say

Start with the number an operator looks at first, because it tells you how quickly the capital comes back and therefore how much of the project’s value is insulated from future price weakness.

The after-tax payback period is 1.9 years.

Why the 1.9-year payback matters On a 14-year mine life, recovering initial capital in under two years means the bulk of the operation runs as a return-generating asset rather than a debt-servicing one. It protects the project’s value against a downturn in silver later in the mine life, which is precisely the risk that sinks marginal developments.

From there, move to the internal rate of return (IRR), the measure most institutions run projects against. La Cigarra shows a 41% after-tax IRR at consensus prices of US$50/oz silver and US$3,611/oz gold. This is the more analytically useful benchmark because consensus prices are auditable and repeatable, rather than a snapshot of where spot happened to sit on a given day.

Only then does the headline figure earn its place. At spot prices of roughly US$67/oz silver and US$4,210/oz gold at the time of release, the after-tax net present value (NPV), meaning the project’s total future cash flows discounted back to today’s money, reaches US$1,295 million with a 64% IRR. The consensus case delivers a still-substantial US$763 million NPV.

Both figures come from a study prepared by Sacré-Davey Engineering, dated 15 June 2026 and confirmed without material change in the NI 43-101 technical report filed 7 August 2026.

A 41% IRR at the conservative consensus price, not spot, tells you this project clears most institutional hurdle rates comfortably before any current market premium is factored in. That distinction is what makes the development option worth taking seriously rather than dismissing as a price-spike artifact.

Silver at US$66 and what the banks are projecting through 2027

The consensus case is the floor, but how conservative that floor really is depends entirely on where silver goes. And the current price is not far from the spot figure used in the PEA itself, which means the US$1.3 billion NPV reflects present-day reality rather than a bullish forecast.

Spot silver sat at roughly US$66.50/oz on 18 September 2026. The more revealing signal is where the major banks expect it to settle, and the range is telling.

Start with the most conservative view. J.P. Morgan Global Research forecasts silver averaging US$70.60/oz in 2026 and US$63.90/oz in 2027. Even that lower 2027 figure sits nearly US$14 above the US$50/oz consensus price used in La Cigarra’s PEA.

HSBC lands higher, at US$75/oz for 2026 and US$68/oz for 2027, both revised upward from January 2026 estimates of US$68.25/oz and US$57/oz respectively.

UBS is the most constructive, forecasting US$70/oz by December 2026, US$75/oz by mid-2027, and US$80/oz by September 2027.

Institutional views are not static, and the direction of travel cuts both ways.

Forecast volatility in action J.P. Morgan cut its 2026 full-year silver average from US$84.30/oz to US$70.60/oz, and its 2027 forecast from US$85.80/oz to US$63.90/oz. A single bank revising by roughly US$22 in one year is a reminder that anchoring a project’s value to any one scenario, especially the spot case, is a mistake.

The spread between J.P. Morgan’s US$63.90/oz floor and UBS’s US$80/oz ceiling for 2027 is wide enough that your view on silver’s direction will drive your view on La Cigarra’s development timeline as much as any technical milestone. The one thing every forecast agrees on is that silver stays comfortably above the PEA’s consensus assumption, which makes the US$763 million NPV a conservative anchor rather than an optimistic one.

For investors wanting to understand why bank forecasts remain elevated even as spot prices have pulled back from 2025 highs, our full explainer on silver’s structural supply deficit examines why higher prices alone are not resolving the underlying production shortfall that underpins analyst confidence in sustained price levels.

The technical gap between a compelling PEA and a sanctioned pre-feasibility study

Strong economics on paper are one thing. Confidence in those economics is another, and a PEA carries materially less of it than the pre-feasibility study (PFS) that follows.

A PEA sits at the lower end of technical confidence in both resource and cost estimates. The gap to a PFS is not administrative box-ticking; it involves genuine engineering uncertainty that can move project economics in either direction. The US$332 million initial capital figure is the number that PFS-level work will either confirm or revise.

The gap between a PEA and a PFS is not merely procedural; feasibility study confidence levels determine how much engineering uncertainty sits behind every cost and cash-flow figure, which is why the US$332 million initial capital estimate carries a wider range of outcomes at this stage than the headline number implies.

The NI 43-101 PEA confidence standards, as codified in CSA Staff Notice 43-307, define a PEA explicitly as a conceptual study of potential viability rather than a demonstration of technical and economic viability, a distinction that underpins the gap in confidence between a PEA and the PFS that follows it.

Six broad workstreams typically define that de-risking path:

• Resource upgrading: infill drilling to convert Inferred resources to Indicated confidence, the standard NI 43-101 requirement before a PFS.
• Metallurgical testing: moving from preliminary testwork to domain-specific recovery models that feed directly into cash-flow modelling.
• Mine design and tailings engineering: engineered pit shells and a fully designed tailings storage facility with containment and closure plans.
• Acid-base accounting: characterising the acid-generation and metal-leaching potential of waste rock and tailings.
• Infrastructure costing: power, water, roads and camp costs engineered to PFS level with vendor quotes.
• Financial modelling: updated economics with tighter contingency and full sensitivity analysis to support a board decision.

Of these, metallurgy and tailings engineering carry the most weight, because they most directly move the project’s cost profile and, in Mexico, its permitting prospects.

Active workstreams at La Cigarra right now

Two of the six categories are confirmed as already underway, and they are not chosen at random.

According to Dale Brittliffe of Kootenay Silver, speaking at the Beaver Creek Precious Metals Summit in September 2026, the company is running tailings dam engineering design alongside analysis of mineral leaching from rock and acid-base accounting (ABA).

Tailings design matters because a 14-year open-pit operation generates a large volume of waste and processed material that must be contained safely, and Mexican regulators scrutinise tailings risk closely. ABA determines whether waste rock will generate acid or leach metals over time, which shapes both waste management costs and the environmental impact assessment.

Kootenay has described its broader programme as aimed at reducing project risks, including through the permitting process, which signals the technical and regulatory tracks are being run in parallel rather than one after the other.

That sequencing is the analytical tell. Tailings and ABA are precisely the two categories that most often determine whether a Mexican permit application succeeds or fails. Prioritising them now suggests the company is building its technical and regulatory case simultaneously, which is what a compressed path to a PFS decision would require. If those two workstreams resolve cleanly, the runway to a PFS shortens considerably.

Mexico’s permitting environment and the discount it places on La Cigarra’s headline economics

Here is where the paper economics meet a harder reality. No amount of engineering fully removes the variable that most defines a Mexican open-pit project: whether it gets permitted, and when.

This is a structural condition, not a passing political inconvenience. Four factors combine to make open-pit permitting in Mexico genuinely demanding:

• Legal and regulatory tightening: recent mining law reforms increased government control over concessions, shortened their duration, and expanded consultation obligations, adding procedural steps that hit large surface projects hardest.
• Environmental and water scrutiny: open-pit operations need large footprints and heavy water use, and SEMARNAT applies detailed environmental impact assessments with particular focus on tailings and water in scarce basins.
• Community consent: ejidos (communal landholders) and Indigenous groups hold real leverage through consultation processes, and open-pit footprints touch more surface land and more stakeholders than underground mines.
• Political stance: recent administrations have emphasised environmental protection and resource nationalism, raising the bar for demonstrating net local benefit before a large surface mine advances.

Recent mining law reforms have shortened concession durations, expanded state priority rights over strategic minerals, and introduced new consultation obligations that disproportionately affect large surface projects, compressing the window operators have to advance from discovery to production under a single concession grant.

None of this amounts to a ban. At least two open-pit mining permits have reportedly been issued in Mexico, according to Brittliffe, and the San Nicolas zinc project has featured in permitting discussions, signals that the framework is navigable rather than closed.

Kootenay’s stated posture is to follow standard procedures, fulfil all regulatory requirements, and conduct early-stage environmental and community work. That is consistent with best practice, though it is not a guarantee of outcome.

How the discount shows up Mexican open-pit silver projects tend to trade at lower price-to-net-asset-value multiples than comparable projects in more permit-predictable jurisdictions, even when the underlying economics are similar or better.

That discount is not irrational pessimism. It is the market pricing the probability distribution of outcomes for a project that must clear a demanding, multi-stakeholder regulatory gauntlet before the US$1.3 billion NPV becomes accessible. Understanding it that way helps you calibrate how much premium to add if early permitting milestones are actually met, because the discount is designed to compress on visible progress.

What the La Cigarra case signals for the broader undeveloped Mexican silver universe

Step back from the single project, and La Cigarra becomes a clean case study for an entire class of assets: undeveloped Mexican silver projects caught between strong commodity tailwinds and persistent jurisdictional headwinds.

The structural supply deficit in primary silver production is concentrating attention on undeveloped Mexican silver assets at exactly the moment when permitting reform is making the development path more demanding, a tension that shapes how the market prices the class of projects La Cigarra represents.

The tailwinds are real. Bank forecasts of US$63-80/oz through 2027 and current spot near US$66.50/oz mean most institutional expectations sit above the US$50/oz consensus price these PEAs use. That makes the reported NPV floor conservative relative to where the market actually expects silver to trade.

The headwinds are equally real, and permitting is the binding one. For a project with economics as strong as La Cigarra’s, project quality is not the constraint. The regulatory path is.

Three conditions would tip the balance toward value realisation for this class of assets:

1. Silver prices sustained above the consensus levels used in PEAs, keeping economics comfortably positive through the long development lead time.
2. Demonstrable permitting progress by one or more high-profile Mexican open-pit projects, creating a template that lowers perceived risk sector-wide.
3. Completed PFS-level technical work that removes engineering uncertainty and gives regulators a substantive foundation to assess.

La Cigarra’s scale gives it strategic relevance in that context. Total payable silver of 63.6 Moz over the mine life and 6.22 Moz/year in the early years place it in the range that larger producers seeking silver growth would examine, particularly as the technical programme de-risks.

La Cigarra’s specific development outlook

The near-term markers to watch are concrete: a completed tailings design, finished acid-base accounting, and infill drilling to convert resources from Inferred to Indicated.

Each ties directly back to the permitting track. Clean tailings and ABA results give Mexican regulators the technical basis for an environmental review, while resource conversion firms up the economics a PFS would carry.

If the next twelve months deliver those results alongside one or two visible permitting precedents from comparable projects, the discount applied to La Cigarra today could narrow materially. That narrowing is the identifiable catalyst for a re-rating.

Separating what the PEA confirms from what still has to be earned

The honest read on La Cigarra is neither bullish nor bearish. It is calibrated. The PEA has established some things firmly, and left others contingent.

The economics have been confirmed through independent technical review, filed under NI 43-101 on 7 August 2026: a US$763 million NPV at consensus prices, US$1,295 million at spot, IRRs of 41% to 64%, a 1.9-year payback, and US$332 million in initial capital over a 14-year mine life. These clear institutional hurdle rates even at conservative prices.

What still has to be earned is the harder half.

• What the PEA has confirmed: exceptional first-study economics; a large, long-life production profile at 63.6 Moz; independent NI 43-101 validation; a well-defined and already-active de-risking programme.
• What still has to be earned: resource conversion from Inferred to Indicated; completed metallurgy, tailings and acid-base accounting work; PFS-level cost confidence; and the environmental and community approvals that Mexico’s permitting framework demands.

The real inflection point is not the PEA, which is now published, but the moment tailings design and ABA results are complete enough to give regulators the foundation for a substantive environmental review. That moment is still ahead, and the two active workstreams are the leading indicators to watch.

If you are tracking this project, the question is not whether the economics are compelling. They are. It is whether technical de-risking and permitting evolution over the next twelve to twenty-four months justify the development option premium.

This article is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making investment decisions. Past performance does not guarantee future results. Financial projections are subject to market conditions and various risk factors, and forward-looking statements are speculative and subject to change based on market developments and company performance.