Pan American Goldfields Ltd. Reports on Results of a Preliminary
Economic Assessment for the Cieneguita Gold-Silver Project,
Mexico
VANCOUVER, British Columbia,
June 13, 2013 /PRNewswire/ --
Pan American Goldfields Ltd. (OTCQX: MXOM) (the "Company")
is pleased to announce the results of a Preliminary Economic
Assessment ("PEA") on its 80% owned Cieneguita gold-silver project located in
Chihuahua State, Mexico. The PEA
was prepared by M3 Engineering and Technology Corporation ("M3")
and utilizes a resource model developed by Independent Mining
Consultants, Inc. ("IMC"), both based in Tucson Arizona. The PEA confirms that the
Cieneguita project represents an
exceptional opportunity to develop a highly economic, relatively
low-cost mine in the prolific Sierra
Madre gold and silver belt in Mexico. The complete PEA will be filed at
SEDAR within 45 days. All costs are in US Dollars.
Key Findings of the PEA
- The PEA considers an open pit mining operation using an
operator owned mining fleet which feeds mineralized material to an
adjacent flotation plant and cyanide leach facility with dry stack
tailings disposal. A processing rate of 15,000 tonnes per day
("tpd") provides for an 11 year mine life while processing a total
of 56.7 million tonnes of material from an open pit with a low
overall stripping ratio of 1.2 to 1.
- Forecast life of mine ("LOM") production is 509,000 ounces gold
and 55.5 million ounces silver, or 1.50 million ounces of gold
equivalent, worth a total of about $2.10
billion, using the base case metal prices of $1,400 per ounce gold and $25 per ounce silver.
- The average annual LOM production is forecast to be 46,300
ounces of gold and 5.05 million ounces of silver, or 136,500 ounces
of gold equivalent.
- Average annual production in the first three years of operation
is forecast to be 64,000 ounces gold and 6.84 million ounces
silver, or 186,200 ounces gold equivalent, or about 36% percent
higher than the average LOM annual production, through mining of a
shallow, higher-grade core of the deposit in the early years of the
operation.
- Estimated cash operating costs are estimated to average
$518 per ounce gold equivalent for
the first three years of operation and $701 for the life of the mine, with LOM average
annual pre-tax net operating income of $97.1
million and $1.07 billion LOM,
using base case metal prices.
- Initial start-up capital costs including working capital and
owner's costs are estimated to be $484
million, including a 25% contingency ($81.6 million). Sustaining LOM capital costs are
estimated at $20.5 million.
- Using base case metal prices the PEA indicates the Cieneguita project has a pre-tax Internal Rate
of Return ("IRR") of 22.4%, a payback of 3.0 years and a Net
Present Value at an 8% discount rate ("NPV8") of $248 million. The project is leveraged to higher
metal prices with the pre-tax IRR rising to 32.6%, and the NPV8
increasing to $462 million using
recent metals prices of $1,600 per
ounce gold and $30 per ounce silver,
while the payback decreases to 2.4 years.
Neil Maedel, the Company's Chairman
and Principal Executive Officer commented: "The results of the PEA
define an exceptional project and a highly attractive asset in the
current metal price environment. Cieneguita's location, deposit type and
relatively low capital costs make it a low-risk venture with a very
attractive rate of gold and silver production for a mid-size
producer. We expect to commence a feasibility study immediately to
further de-risk and add value to the Cieneguita project. There is excellent
potential to further enhance the economics of the project through
continued enhancements to the processing flow sheet and through a
planned infill and step out drilling program to better define the
boundaries and grade distribution of the deposit. I would like to
complement our staff and our current board of directors for an
excellent job of guiding the work leading to the completion of a
PEA of the highest standards and which we expect will add
tremendous value for our shareholders".
Resource Base and Mine Schedule
The PEA utilized the mineral resource model that was prepared by
IMC and discussed in the Company's release dated March 13, 2013. The resource estimate as reported
below utilized an indicative minimum or cut-off net smelter return
("NSR") dollar value of $14.10 per
tonne of ore processed with only the revenue from gold and silver
used to define the cut-off NSR. Assumed metal prices and recoveries
Metal prices and assumed are $1,500
per ounce gold and $30.00 per ounce
silver.
Gold Gold Silver Silver Lead Lead Zinc Zinc
Resource Class Ktonnes (g/t) (koz) (g/t) (koz) (%) (klbs) (%) (klbs)
Measured Mineral
Resource 4,429 0.497 70.8 37.44 5,331 0.179 17,478 0.277 27,047
Indicated Mineral
Resource 30,614 0.446 439.0 32.77 32,255 0.152 102,587 0.244 164,680
Measured/Indicated
Resource 35,043 0.452 509.8 33.36 37,586 0.155 120,065 0.248 191,726
Inferred Mineral
Resource 22,920 0.478 352.2 28.55 21,039 0.133 67,204 0.220 111,165
The measured and indicated mineral resource is 35.0 million
tonnes at 0.45 g/t gold, 33.4 g/t silver, 0.16% lead, and 0.25%
zinc. In terms of contained metal this amounts to 509,800 ounces of
gold and 37.6 million ounces of silver. The inferred mineral
resource is an additional 22.9 million tonnes at 0.48 g/t gold,
28.6 g/t silver, 0.13% lead, and 0.22% zinc. This amounts to
352,200 contained gold ounces and 21.0 million contained silver
ounces. There is no guarantee that any of the mineral resource will
be converted to mineral reserves. There is also no guarantee that
any of the inferred mineral resource will be upgraded to, measured
or indicated mineral resource. Further, the PEA is an estimate of
the economic viability of the project and there is no certainty
that the results projected will be realized and actual results may
vary substantially.
IMC prepared a mining schedule and pit design from the above
resource that included material of all resource classifications
(measured, indicated, and inferred) and was based on mining 15,000
tpd of ore for 350 days per year for 5,250,000 tonnes per year
("tpy") of ore. Year 1 ore feed is scheduled at 4,200,000 tonnes,
80% of nominal plant capacity, and is made up of the ore mined
during preproduction and year 1. IMC employed a variable cut-off
grade strategy when developing the mine schedule so that the
highest mined grades, or ore with the highest NSR cut-off, were
mined earlier in the mine life to achieve quicker project payback
and to balance the mine and plant production capacities.
Accordingly, the schedule indicates the mined gold and silver
grades in the first three years of operation are about 34% and 43%
higher than the LOM averages, respectively. The material below the
variable cut-off grade and above the minimum cut-off NSR value of
$15.00 per tonne is placed in a low
grade stockpile. The $15.00 NSR
cut-off covers process and G&A cost plus $0.90 per tonne for mine re-handle. The NSR
values are based on the same metal prices as used for the resource
estimate noted above.
The direct mill ore or material that will be transported
directly to the mill and processed, amounts to 50.6 million tonnes
grading 0.49 g/t gold, 34.4 g/t silver, and 0.16% lead. The low
grade stockpile amounts to 6.1 million tonnes grading 0.30 g/t
gold, 12.5 g/t silver, and 0.07% lead and is processed during Years
10 and 11. Based on the IMC schedule the project commercial life is
11 years after the preproduction period (year -1). Total ore
production amounts to 56.7 million tonnes grading 0.47 g/t gold,
32.0 g/t silver, and 0.15% lead, with total material removed from
the pit at 124.4 million tonnes. With the low grade stockpile
considered as ore, total waste amounts to 67.7 million tonnes for a
waste to ore ratio of 1.2 to 1.
Development Overview
The PEA is based on the metallurgical testing, processing flow
sheet and metal recoveries as described in the Company's
March 13, 2013 release. Ore from the
open pit is delivered at the nominal rate of 15,000 tpd to the
processing plant which includes a conventional crushing (primary
crushing followed by secondary and tertiary crushing) and grinding
(ball milling) circuit to produce a p80 -212 micron product. The
ground product is passed to a flotation plant consisting of lead
and bulk pyrite flotation circuits. The lead flotation circuit will
consist of rougher and cleaner flotation to produce a high value
lead concentrate which will be shipped off site and sold to a third
party smelter. This concentrate will contain about a third of the
gold and half of the silver contained in the ore. The lead rougher
flotation tailings will be floated to produce a bulk pyrite
concentrate which will be reground to at least p80 -37 microns and
then leached with cyanide. The gold and silver in the cyanide leach
solution will be recovered via a Merrill-Crowe plant with
gold-silver dore bars produced on site. Dore production will
contain about one third of the gold and one half of the contained
silver values. Overall metal recoveries from the scheduled ore
production are about 60% for gold and 95% for silver and 72% for
lead, with total LOM gold and silver production estimated at
509,000 ounces and 55.5 million ounces, respectively, along with
134 million pounds of lead.
Following the metal recovery steps all process tailings will be
passed to a hydraulic filter press which will remove water and
allow for storage in a single dry stack tailings storage facility
located adjacent to the process plant. Water recovered from the
press is recycled for use in the process plant. The existing
infrastructure in the general area will need to be improved to
support the development of the project as defined in the PEA,
including the construction of an upgraded power line to supply
power from the national grid as well as a dedicated water supply
pipeline.
Capital and Operating Costs
Capital and operating costs were all estimated by M3 except for
the mining related costs that were estimated by IMC. Capital costs
were generally developed from design drawings and quantities and
vendor quotes. Operating costs were estimated based on a first
principles approach. All costs are considered current to Q2
2013.
The initial capital requirement is estimated as follows:
Category $ Millions
Mining and Pre-production development 35.4
Process plant 120.6
Infrastructure, tailings disposal and auxiliaries 115.5
Engineering, procurement, construction management, freight,
etc. 92.1
Contingency (25%) 81.6
Working capital, owner's costs, spares, etc. 38.9
Total 484.1
Sustaining capital requirements over the LOM are estimated at an
additional $20.5 million.
The operating costs are estimated as follows, on an per tonne of
ore processed basis:
Category $ per tonne
Plant Operations 10.73
General & Administrative 1.64
Mining ($1.67 per tonne of material) 3.77
Treatment & Refining Charges 2.82
Total 18.96
Total life of mine operating costs is estimated at $1.08 billion. The estimated LOM direct cash
operating cost is $701 per ounce of
gold equivalent or $12.53 per ounce
of silver equivalent (treating gold, silver and lead revenue as a
by-product credit as appropriate) based on the base case metal
prices.
Both M3 and IMC have recent extensive and relevant experience in
developing capital and operating costs on similar size projects in
Mexico. In particular, M3 has been
responsible for the design, engineering and construction of the
Penasquito, Alamo Dorado, Mercedes and San Jose operations in Mexico, and is currently in advanced
engineering or construction on the Morelos project and several Grupo Mexico owned
projects in Mexico and the Escobal
project in Guatemala.
Financial Results
The PEA demonstrates strong project economics and high leverage
to gold and silver prices. The financial results were developed for
three different metal price assumptions including the base case and
two higher cases (cases 1 and 2) which reflect metal prices
observed within the last 12 months.
The financial analysis for the base case indicates a pre-tax
NPV5 of $350 million, a NPV8 of
$248 million, a 22.4% IRR and payback
of 3.0 years. On an after-tax basis the base case indicates a NPV5
of $223 million, a NPV8 of
$140 million, a 16.3% IRR and a
payback of 4.0 years. The project is expected to generate
$1.07 billion of LOM pre-tax
cumulative net operating income. The financial results are
summarized in the table below.
Financial Results Summary
Metal Price Assumptions Base Case Case 1 Case 2
Gold ($/oz.) $1,400.00 $1,600.00 $1,800.00
Silver ($/oz.) $25.00 $30.00 $35.00
Lead ($/lb.) $1.00 $1.00 $1.00
Pre-Tax Economic Indicators
NPV @ 5% ($000) $350,255 $609,463 $868,671
NPV @ 8% ($000) $247,838 $461,972 $676,106
IRR % 22.4 32.6 41.9
Payback (yrs) 3.0 2.4 2.0
After-Tax Economic Indicators
NPV @ 5% ($000) $223,489 $409,546 $595,603
NPV @ 8% ($000) $140,409 $293,847 $447,284
IRR % 16.3 24.0 31.0
Payback (yrs) 4.0 3.0 2.6
Pre-Tax Cumulative Net Operating Income
Total - All Metals LOM($000) $1,068,508 $1,435,193 $1,801,877
Opportunities and Next Steps
Some of the opportunities to improve upon the capital and/or
operating costs that have been or will be evaluated in the coming
months and prior to completion of the feasibility study include the
following:
- Evaluation of alternative metallurgical processing options,
including the "all leach" option which would allow for all metal
production to remain on site, with savings in both capital and
operating costs
- Additional metallurgical work to improve gold recoveries over
those noted in the current base case processing option
- Evaluate the possible substitution of the all new equipment
considered in the PEA with used or surplus process or mining
equipment to lower the capital cost
- Evaluate other processing rates which may allow for maximizing
the economic returns while minimizing initial capital costs
- Evaluation of the capital and operating costs associated with
alternate cyanide recovery options as well as crushing and grinding
circuit equipment and configurations
- Evaluate the options to outsource and/or lease various
equipment, including mining equipment, as well as to stage the
development to reduce the initial capital requirement
Pan American intends to aggressively advance the Cieneguita project towards the completion of a
feasibility study, leaving open the option for completing an
interim pre-feasibility study. An in-fill and step out drill
program is required to move the inferred class resource into the
measured/indicated class so that it can be included within the mine
plan as ore in future feasibility level studies. The Cieneguita deposit is open along strike as
well as along the north and south margins, and is still open at
depth. The proposed drill program will address these issues of
resource delineation as well as provide geotechnical information
for open pit slope stability and provide additional material for
metallurgical testing. The comprehensive drilling program is
currently planned to start in the next few months.
Mr. Gary Parkison, CPG, Director
of Pan American Goldfields Ltd., is the qualified person who
supervised the preparation of the technical information in this
release. Mr. Alberto Bennett, PE, Vice President of M3, and
Mike Hester, FAusIMM, Vice President
of IMC, have also reviewed and approved the data contained in this
release.
Pan American Goldfields will be hosting a conference call and
webinar at 1:00PM PDT on Thursday June 13, 2013 to discuss the highlights
of the Cieneguita PEA. Pre-registration is required. Link and
call-in information can be found on the company website at
http://www.panamgoldfields.com in the calendar section under the
Investors tab.
About Pan American Goldfields Ltd.
Pan American Goldfields is a precious metals mining and
exploration company. Its focus is the production of gold and silver
and the development and expansion of its Cieneguita mine in Mexico's booming Sierra Madre gold-silver belt.
On behalf of the Board of Directors,
Neil Maedel, Chairman
Safe Harbor Disclosure
The information in this press release contains forward-looking
statements regarding future events or the future financial
performance of the Company. Please note that any statements that
may be considered forward-looking are based on projections; that
any projections involve judgment, and that individual judgments may
vary. Moreover, these projections are based only on limited
information available to us now, which is subject to change.
Although those projections and the factors influencing them will
likely change, we are under no obligation to inform you if they do.
Actual results may differ substantially from any such forward
looking statements as a result of various factors, many of which
are beyond our control, including, among others, the timing and
outcome of our feasibility study on our Cieneguita Project; the
costs and results of our initial production activities on our
Cieneguita Project; the future financial and operating performances
of our projects; the estimation of mineral resources and the
realization of mineral reserves, if any, on our existing and any
future projects; the timing of exploration, development, and
production activities and estimated future production, if any;
estimates related to costs of production, capital, operating and
exploration expenditures; requirements for additional capital and
our ability to raise additional capital on a timely basis and on
acceptable terms; government regulation of mining operations,
environmental risks, reclamation and rehabilitation expenses; title
disputes or claims against our existing and any future projects;
and the future price of gold, silver, or other minerals. These and
other factors can be found in our filings with the SEC, including
in our Annual Report on Form 10-K under "Item 1A - Risk Factors"
filed with the Securities and Exchange Commission on May 16, 2013. The Company undertakes no
obligation to release publicly the results of any revision to these
forward-looking statements to reflect events or circumstances
following the date of this release.
Additional Information
Pan American Goldfields Ltd., its directors and executive officers
may be deemed to be participants in the solicitation of proxies
from the Pan American stockholders in connection with the matters
to be considered at Pan American's 2013 Annual Meeting of
Stockholders. Pan American has filed a definitive proxy statement
and form of WHITE proxy card with the U.S. Securities and Exchange
Commission in connection with the 2013 Annual Meeting of
Stockholders. PAN AMERICAN STOCKHOLDERS ARE STRONGLY ENCOURAGED TO
READ THE DEFINITIVE PROXY STATEMENT AND THE WHITE PROXY CARD AS
THEY CONTAIN IMPORTANT INFORMATION. Information regarding the
identity of potential participants, and their direct or indirect
interests, by security holdings or otherwise, is set forth in the
proxy statement and other materials filed with the SEC.
Stockholders will be able to obtain any proxy statement, any
amendments or supplements to the proxy statement and other
documents filed by Pan American with the SEC for no charge at the
SEC's website at http://www.sec.gov. Copies will also be available
at no charge by writing to Pan American Goldfields Ltd., 570
Granville Street, Suite 1200, Vancouver,
BC V6C 3P1, by calling Pan American's proxy solicitor,
MacKenzie Partners, toll-free at (800) 322-2885 or by email at
proxy@mackenziepartners.com.
For further information:
Email: info@panamgoldfields.com
Tel: +1-604-340-8678
Website: http://www.panamgoldfields.com
SOURCE Pan American Goldfields Ltd.