Sierra Metals' Bolivar PEA pegs NPV at $283M (U.S.) Sierra Metals' Bolivar PEA pegs NPV at $283M (U.S.)
2020-10-20 07:13 ET - News Release
Mr. Luis Marchese reports
SIERRA METALS ANNOUNCES POSITIVE PRELIMINARY ECONOMIC ASSESSMENT RESULTS FOR DOUBLING OUTPUT AT ITS BOLIVAR MINE IN MEXICO TO 10,000 TONNES PER DAY
Sierra Metals Inc. has released results of a preliminary economic assessment (PEA) regarding the company's Bolivar mine, located in Chihuahua state, Mexico.
This PEA report was prepared as a National Instrument 43-101 technical report for Sierra Metals by SRK Consulting (Canada) Inc. The full technical report will be filed on SEDAR within 45 days of this news release.
Highlights of the PEA include:
After-tax net present value (NPV): $283-million (U.S.) at an 8-per-cent discount rate;
Incremental benefit of increasing the production to 10,000 tonnes per day from 5,000 tpd estimated to have an after-tax NPV (at 8-per-cent discount) of $57.4-million (U.S.), and IRR (internal rate of return) of 27.9 per cent;
Net after-tax cash flow: $521-million (U.S.);
Life of mine and sustaining capital cost: $317-million (U.S.);
Total operating unit cost: $19.77 (U.S.)/tonne and $1.16 (U.S.)/pound copper equivalent;
Plant processing rate after expansion: 10,000 tonnes per day (tpd);
Average LOM copper grade: 0.72 per cent;
Copper price assumption: $3.05 (U.S.)/lb;
Mine life: 14 years based on existing mineral resource estimate;
Life-of-mine copper payable production: 583 million pounds.
Luis Marchese, chief executive officer of Sierra Metals, commented: "I am very encouraged by the results of this PEA, which support the company's organic growth strategy and plan to profitably develop and grow the Bolivar mine production rate to 10,000 tpd in 2024 from today's capacity of 5,000 tpd, based on current analyst consensus metal price estimates. The company plans to continue with its disciplined approach of profitable growth and now plans to proceed with the next step of the completion of a prefeasibility study to further derisk the plan and determine the best path forward."
He continued: "The PEA study compared the value of the current operations at Bolivar at 5,000 tpd against several output expansion alternatives from 7,000 to 15,000 tpd and determined 10,000 tpd as the optimum production level based on our current mineral resource base. We note that the estimated value for Bolivar at 5,000 tpd, using current analyst estimates at $225-million (U.S.), was roughly in line with the value estimated in our 2018 PEA ($214-million), which justified our expansion to 5,000 tpd two years ago. The value could be further increased by the potential sale of magnetite (iron ore) as a byproduct and recent exploration drilling, which could further increase the resources and value of our asset, as they get incorporated into future operating plans."
He concluded: "We are continuing with our strategy to increase the value of the company on a per-share basis. This builds upon the demonstrated success we have shown with increasing our current mineral resource base and improving the throughput at all mines. We expect these positive developments to further improve profitability and cash flow for the company and all shareholders this coming year as well as in the future."
Mineral resource estimate
The property is located in the Piedras Verdes district of Chihuahua state, Mexico, approximately 250 kilometres southwest of the city of Chihuahua and consists of 14 mineral concessions (6,800 hectares). The Bolivar deposit is a copper-zinc skarn and is one of many precious and base metal deposits of the Sierra Madre belt, which trends north-northwest across the states of Chihuahua, Durango and Sonora in northwestern Mexico (Meinert, 2007). Mineralization exhibits strong stratigraphic control, and two stratigraphic horizons host the bulk of the mineralization: an upper calcic horizon, which predominantly hosts zinc-rich mineralization, and a lower dolomitic horizon, which predominantly hosts copper-rich mineralization. In both cases, the highest grades are developed where structures and associated breccia zones cross these favourable horizons near skarn-marble contacts.
This PEA considers depleted measured, indicated, and inferred resources reported in 2019 by SRK and effective as of Dec. 31, 2019. The results of this PEA are indicative of conceptual potential and are not definitive.
SUMMARY OF MINERAL RESOURCES ESTIMATE AS REPORTED BY SRK, 2020
(effective Dec. 31, 2019)
Class Tonnes Ag Au Cu Ag Au Cu
(mt) (g/t) (g/t) (%) (moz) (koz) (t)
Indicated 19.4 15.1 0.21 0.77 9.4 127.8 149,116
Inferred 21.4 14.2 0.21 0.78 9.8 145.6 167,077
(1) Mineral resources are not mineral reserves and do not have demonstrated economic viability.
(2) All figures are rounded to reflect the relative accuracy of the estimates.
(3) Mineral resources are reported at a value per tonne cut-off of $24.25 (U.S.)/t using the
following metal prices and recoveries: Cu at $3.08 (U.S.)/t and 88-per-cent recovery; Ag at
$17.82 (U.S.)/ounce and 78.6-per-cent recovery, Au at $1,354 (U.S.)/oz and 62.9-per-cent recovery.
Mining methodology
Bolivar is a producing operation. The primary mining method at Bolivar is underground room-and-pillar mining. Previous mining at Bolivar has sometimes used lower cost and more productive long-hole stope mining in areas where the mineralized zones have a steeper dip angle, and the mine plans to undertake a geotechnical assessment program in 2020/2021 to expand the use of long-hole mining.
Mineral processing
The Piedras Verdes plant, located 5.1 kilometres from the Bolivar mine, uses a conventional crushing-grinding-flotation circuit to recover mineralized mineral and to produce commercial quality copper concentrates with silver and gold byproduct credits. Mineral is delivered from the mine to the plant in 18-tonne trucks. The mine is constructing an underground tunnel that will enable mineralized material to be delivered via underground truck transport to a portal adjacent to the mill. This development will eliminate the impact of bad weather on the current surface truck haulage system and will provide a lower-cost and more reliable method of delivering mineralized material to the plant.
Mineral processing and the recovery of the mineral is demonstrated, and copper, silver and gold recoveries are established at 88 per cent, 78.7 per cent and 62.43 per cent, respectively.
The Piedras Verdes plant's current throughput capacity is 5,000 tpd. In line with proposed increases in mine output, the processing capacity at Piedras Verdes will increase to 10,000 tpd in 2024.
A new dry-stack tailing storage facility (TSF) is to be located just to the west of the existing facility, and has an expected life through 2025. The site is also installing an additional thickener and filter presses to allow additional water recovery. Thickened tails (60 per cent of solids) are currently being placed in the TSF. After the filter presses are constructed, dry-stack tailings will be placed in the new TSF starting in the latter part of 2020. The PEA considers the use of tailings as backfill and has included the capital and operating costs for a backfill plant. Storing some of the tailings underground would increase the life of the new TSF, and potentially permit the removal of mineralized material pillars that are currently unrecoverable.
The overall project infrastructure exists already and is functioning and adequate for the purpose of the supporting the mine and mill.
Economic analysis
This PEA indicates an after-tax NPV of $283-million (U.S.) (using a discount rate of 8 per cent) at 10,000 tpd (in 2024). Total operating cost for the life of mine is $827-million (U.S.), equating to a total operating cost of $19.77 (U.S.) per tonne milled and $1.16 (U.S.) per pound copper equivalent. Highlights of the PEA are provided in the associated table.
PEA HIGHLIGHTS
PEA highlights
Base case of $1,541/oz gold,
$20/oz silver, $3.05/lb copper Unit Value
Net present value (after-tax
8% discount rate) US$ m $283
LOM mill feed tonnes (mt) 41.8
Mining production rate t/year 3,600,000
LOM project operating period years 14
Total life-of-mine (LOM) capital costs US$ m 317
Net after-tax cash flow US$ m 521
EBITDA US$ m 1,086
Total operating unit costs US$/t 19.77
LOM copper production (payable) mt 0.25
LOM gold production (payable) moz 0.15
LOM silver production (payable) moz 12.9
Quality control
All technical data contained in this news release have been reviewed and approved by:
Americo Zuzunaga, FAusIMM CP (mining engineer) and vice-president of corporate planning, is a qualified person under National Instrument 43-101 -- Standards of Disclosure for Mineral Projects.
Augusto Chung, FAusIMM CP (metallurgist) and vice-president of metallurgy and projects to Sierra Metals, is a qualified person under National Instrument 43-101 -- Standards of Disclosure for Mineral Projects.
About Sierra Metals Inc.
Sierra Metals is a diversified Canadian mining company focused on the production and development of precious and base metals from its polymetallic Yauricocha mine in Peru and Bolivar and Cusi mines in Mexico. The company is focused on increasing production volume and growing mineral resources. Sierra Metals has recently had several new key discoveries and still has many more exciting brownfield exploration opportunities at all three Mines in Peru and Mexico that are within close proximity to the existing mines. Additionally, the company also has large land packages at all three mines with several prospective regional targets providing longer-term exploration upside and mineral resource growth potential.
We seek Safe Harbor.