Crunching Numbers - La Negra ProductionNote: Numbers and assumptions are strictly for this exercise. Final project numbers and mining plans could end up looking different.
Also, this is only one possible scenario.
1) La Negra Production
From Kootenay`s website: ``Interesting analogues to Pan American's Alamo Dorado Mine 190 km to the south of La Negra. Alamo Dorado's mineral zone formed a prominent hill that is now a low strip open pit. - La Negra mineral zone forms a prominent hill lending itself for open pit low strip potential.``
Pan American is already very familiar with La Negra type of deposit. Hopefully they can fast track it into production.
La Negra will likely be a low cash cost per oz deposit, due partly to the following:
* very good or at least reasonable strip ratio
* deposit goes to the surface - little or no overburden to clear out
* open pit
* bulk tonnage
* high grade silver for bulk tonnage
* heap leach - both oxide and sulphide
* very good - or at least reasonable strip ratio
* economies of scale
Start up capital expenditure should be relatively low due mainly to:
* open pit mining (mainly)
* 100% heap leap processing
* deposit reaching the surface (no or little overburden to clear before mining ore)
* no base metal processing unit required (i.e. a zinc recovery unit can get very expensive, but no need to with this deposit)
Assumptions (again, strictly for this exercise):
* 120 g/t silver (there is some lead for by-product credit, but I`m not using it here)
* 85% silver recovery rate
* 6,000 tonne per day heap leach operation
* 7 year mine life
* 70,000,000 silver oz resource eventually (40 - 50 million from first open pit and the rest from underground and other open pits to be discovered along La Negra trend)
* 49,600,000 silver ounces produced over 7 year mine life
* 7,083,000 silver ounces produced per year
* $22 average long-term silver price
* $10 average cash cost per oz
* $12 average operating contribution per oz
* 60% of op contribution will be dividend out to owners (Pan Am and Kootenay, based on ownership percentages)
* 1 CAD $ = 1 US $, long-term average
Results:
Pan American will likely (once earn-in has been completed) create a separate subsidiary company for La Negra. Profits will be distributed from the sub company to Pan American and Kootenay, based on the percentage ownership and payback agreement.
7,083,000 million Ag oz per yr * $12 op contribution per oz = $85 million op contribution per yr
$85 million * 60% dividend = $51 million to be dividend out to owners per yr
The other $34 million to cover La Negra overhead costs, ongoing exploration costs, any ongoing capital requirements, taxes, etc.
$51 million annual dividend * 10% = $5.1 million dividend paid out to Kootenay annually (early years)
$51 million annual dividend * 25% = $12.8 million dividend paid out to Kootenay annually (later years)
This is before any dividend taxes that may have to be paid.
This is just for the La Negra mine.
2) Promontorio Mine Production
It will take longer to get into production. We will likely need to wait for higher (stable) silver prices. But, it will get into production at some point.
Kootenay will realize similar type of dividend payouts once Promontorio is in production.
3) Production From Future Discoveries
There are a number of potential deposit areas on other mineral trends on the property. I believe Pan American will drill them up and bring into production, eventually.
Kootenay will realized further dividend payouts from these future deposits.