TORONTO, June 18, 2018 /PRNewswire/ - Sierra Metals
Inc. (TSX: SMT) (BVL: SMT) (NYSE AMERICAN: SMTS) ("Sierra
Metals" or "the Company") is pleased to report the results of a
Preliminary Economic Assessment ("PEA") regarding the Company's
Cusi Mine, located in Chihuahua State, Mexico. The PEA is based on technical inputs
from various independent consulting groups, including; SRK, Redco,
Anddes, Kappes Cassiday and Flopac.
Based on the technical work from the various independent
consultants, the PEA was compiled under National Instrument 43-101
standards by Mining Plus Peru SAC. 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): US$92.2Million at an 8% discount rate
- After-tax Internal Rate of Return (IRR): 75%
- After-tax Payback Period: 4.6 years
- Life of Mine Capital Cost: US$104.5
Million
- Net After-tax Cash Flow: US$150.6
Million
- Total Operating Unit Cost: US$41.36/tonne
- Plant Processing Rate: Currently 650 tonnes per day (TPD)
growing to 1,200 TPD by Q1 2019 and 2,700 TPD by mid-2021.
- Average Silver Recovery Rate 87%
- Mine Life: 9 years based on
existing Mineral Resource Estimate
- Life of Mine Silver Production: 30 Million Ounces
Igor Gonzales, President and CEO
of Sierra Metals commented: "The Company is very encouraged by
the results of this PEA as they support the plan to profitably
develop and grow the Cusi Mine in sustainable and staged steps from
650 TPD currently, to 1,200 TPD by Q1 2019, and further, to 2,700
TPD in 2021 based on consensus metal pricing.
Cusi will move to declare Mineral Reserves at the Mine, and
this PEA represents the first step in that process. The
Company is incorporating an aggressive Capex program into the PEA
of US$11.5 million over the life of
the mine, which includes exploration drilling to increase the
mineral resources at Cusi as well as convert the existing resources
to reserves. Additionally, the PEA reflects an aggressive
development program designed to open a mineable reserve at depth
and on strike. The Opex reflects yearly production development,
definition drilling programs, and other operational costs.
The current study focuses on the current Mineral Resource
reported in the 43-101 Technical Report filed on February 12, 2018 and does not include any
drilling completed after August 31,
2017. The Company is continuing with its successful
brownfield exploration programs and expects to continue to grow the
mineral resources at the Cusi Mine this year. We believe
that this expansion not only provides additional value to the
company, as the PEA quantifies, but could also leverage the value
of future resource additions. New silver ounce discoveries would be
incorporated into production plans earlier than if the Company
maintained current capacity levels."
He concluded, "We are continuing with our strategy to
increase shareholder value and grow the reserve and resource base
at the Company. We successfully completed brownfield exploration
programs at all three mines and increased the mineral reserves and
resources during the past two years. Additionally, we implemented a
successful operational improvement program in Peru and have completed an effective
turn-around program in Mexico, and
we have already seen returns on this well-spent capital. Building
upon these successes, we are working to complete, in addition to
the Cusi PEA, scoping studies at both the Yauricocha and Bolvar
Mines, which will maximize value and profitability through the
implementation of automation and possible throughput increases
which will further drive growth and benefit all shareholders in the
future."
Mineral Resource Estimate
The Property is in the Cusihuarachi District of Chihuahua State,
Mexico, approximately 135 km
southwest of Chihuahua City. Epithermal mineralization has been
mined in the area since its discovery in the early 1800's.
Mineralization is bound between regionally significant northwest
trending faults; Eight mineralized zones are recognized at the
property, mineralized zones are up to 10 meters across and include;
silicified faults, veins, and breccias. Seven epithermal veins are
recognized at the property, veins typically range between 0.5 and
2.0 meters wide, dip steeply, extend 100 to 200 meters along
strike, and extend up to 400 meters depth. Vein orientations range
between northeast and northwest.
This PEA considers depleted measured, indicated and inferred
resources reported on February 12,
2018, by SRK and effective as of August 31st, 2017. These resources are not
demonstrated to be economically viable. The results of this PEA are
indicative of conceptual potential and are not definitive.
Table 1-1: Summary of resource reported by
SRK, February 12, 2018 (Effective
August 31, 2017)
Class
|
Area
|
AgEq
(g/t)
|
Ag
(g/t)
|
Au
(g/t)
|
Pb
(%)
|
Zn
(%)
|
Tonnes
(000's)
|
Measured
|
SRL
|
268
|
225
|
0.13
|
0.55
|
0.68
|
362
|
Measured
|
268
|
225
|
0.13
|
0.55
|
0.68
|
362
|
Indicated
|
Promontorio
|
241
|
213
|
0.08
|
0.37
|
0.44
|
1097
|
Indicated
|
Eduwiges
|
293
|
198
|
0.26
|
1.35
|
1.32
|
928
|
Indicated
|
SRL
|
296
|
242
|
0.32
|
0.62
|
0.64
|
1435
|
Indicated
|
San
Nicolas
|
195
|
176
|
0.13
|
0.21
|
0.22
|
414
|
Indicated
|
San Juan
|
208
|
189
|
0.13
|
0.2
|
0.21
|
121
|
Indicated
|
Minerva
|
222
|
198
|
0.4
|
0.09
|
0.05
|
57
|
Indicated
|
Candelaria
|
386
|
366
|
0.14
|
0.17
|
0.28
|
46
|
Indicated
|
Durana
|
224
|
219
|
0.06
|
0.05
|
0.02
|
97
|
Indicated
|
267
|
217
|
0.21
|
0.64
|
0.66
|
4195
|
Inferred
|
Promontorio
|
218
|
185
|
0.1
|
0.35
|
0.62
|
308
|
Inferred
|
Eduwiges
|
229
|
115
|
0.09
|
1.78
|
1.79
|
147
|
Inferred
|
SRL
|
216
|
158
|
0.22
|
0.55
|
1.04
|
658
|
Inferred
|
San
Nicolas
|
181
|
161
|
0.14
|
0.21
|
0.23
|
340
|
Inferred
|
San Juan
|
200
|
186
|
0.04
|
0.15
|
0.27
|
44
|
Inferred
|
Minerva
|
149
|
143
|
0.05
|
0.08
|
0.06
|
5
|
Inferred
|
Candelaria
|
185
|
125
|
0.16
|
0.62
|
1.17
|
128
|
Inferred
|
Durana
|
124
|
115
|
0.01
|
0.17
|
0.09
|
3
|
Inferred
|
207
|
158
|
0.16
|
0.54
|
0.84
|
1633
|
(1)
|
Mineral resources are
reported inclusive of ore reserves. Mineral resources are not ore
reserves and do not have demonstrated economic viability. All
figures rounded to reflect the relative accuracy of the estimates.
Gold, silver, lead and zinc assays were capped where
appropriate.
|
(2)
|
Mineral resources are
reported at a single cut-off grade of 105 g/t AgEq based on metal
price assumptions*, metallurgical recovery assumptions, mining
costs (US$29.41/t), processing costs (US$18.3/t), and general and
administrative costs (US$3.74/t).
|
*
|
Metal price
assumptions considered for the calculation of the cut-off grade and
equivalency are: Silver (Ag): US$/oz 18.30, Lead (US$/LB 0.93),
Zinc (US$/lb. 1.15) and Gold (US$/oz 1,283.00).
|
|
The resources were
estimated by SRK. Giovanny Ortiz, B.Sc., PGeo, FAusIMM #304612 of
SRK, a Qualified Person, performed the resource calculations for
the Cusi Mine.
|
**
|
Based on the
historical production information of Cusi, the metallurgical
recovery assumptions are: 84% Ag, 57% Au, 86% Pb, 51%
Zn.
|
Note: Mining has continued since the publication of this
resource and resources have not been subsequently depleted.
Sierra Metals commissioned various specialist groups (Table 1-2)
to evaluate how, on a conceptual level, mining, mineral processing,
and tailings management could be adapted at the property to achieve
a sustainable and staged increase in mine production and mill
throughput from 650 TPD, to 1,200 TPD by Q1 2019, and 2,700 TPD by
mid-2021.
Table 1-2: Groups involved in development for
conceptual plan considered in the PEA
Group
|
Concept
|
Report
|
SRK Consulting (U.S),
Inc.
|
Resource
Estimation
|
SRK, 2017
|
Redco Mining
Consultants
|
Increase mine output
to 2,700 TPS
|
Redco,
2018
|
Sierra Metals
(SM)
|
Increase Mal Paso
Plant Capacity to 1,200 TPD
|
Sierra,
2018
|
Ingenieria Carillo
(IC)
|
Engineering
associated with increased Mal Paso plant capacity
|
|
Kappes Cassiday and
Associates (KCA)
|
Preliminary design of
1,500 TPD plant at
Cusihuariachi
|
KCA, 2018
|
Anddes Consulting
(AC)
|
Expansion of tailings
storage capacity
|
Anddes,
2018
|
Flopac
|
Tailings Storage up
to Q1-2020
|
Flopac
|
Mining Methodology
To determine how mine output could be increased, Sierra Metals
commissioned Redco Mining Consultants ("Redco') to undertake a
scoping study, considering; existing development and
infrastructure, geotechnical characteristics, geological controls
and mineralization style. The study (Redco, 2018) determined that
mechanized bench and fill mining could be used to achieve
sustainable production of 2,700 TPD. Improved productivity would be
associated with improved safety as the requirement for man time
spent in stopes is significantly reduced.
Head-grades are expected to reduce from the current 201 g/t Ag
to 161 g/t Ag @ 1,200 TPD and 145 g/t Ag @ (2,700 TPD). Redco
estimates that a US$104.5 million
capital investment throughout the life of mine is required to
mechanize the Cusi Mine and achieve a 2,700 TPD production
rate.
As part of their scoping study, Redco considered plans for
ventilation and dewatering on a very general scale. Sierra Metals
recognize that further and more detailed ventilation and dewatering
plans are required to support the overall conceptual mine
design.
Mineral Processing
The Mal Paso Plant, located 44 kilometers from the Cusi Mine,
uses a conventional crushing-milling-flotation circuit to recover
mineral and to produce commercial quality Lead/Silver and Zinc
concentrates. Mineral is delivered from the mine to the plant in
20-tonne trucks.
Mineral processing and the recovery of the mineral is
demonstrated, and silver recoveries are established at 87%.
The Mal Paso Plant increased throughput from 450 TPD at the
beginning of 2018 to 650 TPD currently. In line with proposed
increases in mine output, the processing capacity at Mal Paso will
increase to 1,200 TPD in 2019, and a new plant with a capacity of
1,500 TPD is proposed at Cusihuariachi, to come online mid-2021
which would bring total capacity to 2,700 TPD.
The Company undertook an internal review to determine how the
Mal Paso plant could be adjusted to increase throughput to 1,200
TPD. This study identified bottlenecks in the existing plant, how
to overcome these bottlenecks, and how to achieve the desired
throughput at Mal Paso. Sierra Metals have begun to purchase the
pieces of equipment and project that the remaining pieces of
equipment will be purchased and installed before Q1 2019.
An independent processing plant of 1,500 TPD, operating
complementarily to Mal Paso which currently runs at 650 TPD with
planned growth to 1,200 TPD by Q1 2019, will be required to process
2,700 TPD. Sierra Metals commissioned Kappes Cassiday and
Associates (KCA) to produce a conceptual design for a modular plant
to process 1,500 TPD at Cusihuariachi from mid-2021. The modular
plant is designed to be easily scalable in 1,500 TPD
increments.
The proposed plant at Cusihuariachi is significantly closer to
the Cusi Mine than the Mal Paso Plant, KCA estimate that this would
translate to an operational saving of US$4/tonne. A further saving of US$1/tonne, related to mineral processing, is
envisaged by KCA. This combined US$5/tonne operational saving, the equivalent of
US$2.7 million/year. (i.e. 1,500 TPD
x 360 days x US$5/tonne) would be
offset against projected Capital requirements of US$30 million.
Tailings Capacity
Tailings produced at Mal Paso are currently stored in two
conventional tailings storage facilities. As of February 2018, planned and permitted raises to
existing tailings facilities would provide 520,000 cubic meters of
storage capacity, the equivalent of one year and seven months
storage at a production rate of 1,200 TPD.
Sierra Metals recognize that increasing tailings storage
capacity is critical to achieving and sustaining increased rates of
production.
At the new Cusihuriachi site, Anddes Consulting (AC) has
evaluated the merits of nine new potential tailings storage
facilities as identified by Sierra Metals. Also, at the Mal Paso
site, a further four sites were reviewed and based on preliminary
work these sites are undergoing more detailed evaluation ahead of
final selection and detailed engineering. The four sites at Mal
Paso offer varying storage capacities between 600,000 cubic meters
and 2.5 million cubic meters.
The proposed plant at Cusihuariachi would require the
development of a new tailings facility separate from those used at
Mal Paso. A potential site for a dry-stack (>75% solids)
tailings storage facility has been identified and is undergoing
preliminary investigations. Conceptually, the identified site would
provide storage for 5.4 million tonnes of tailings, the equivalent
of 11 years capacity operating at 1,500 TPD.
Economic Analysis
The PEA calculates a Base Case after-tax NPV of US$92.2 million, with an after-tax IRR of 75%
using a discount rate of 8%. The total life of mine capital cost of
the project is estimated to total US$104.5
million. The payback period for the Life of Mine (LoM) capital is estimated at 4.6 years.
Operating costs of the life of mine total US$259.3 million, equating to an operating cost
of US$41.36 per tonne milled.
PEA
Highlights
Base case of
$1,283/oz Gold, $18.30/oz Silver, $0.93/lb. Lead, $1.15/lb.
Zinc
|
Unit
|
Value
|
Net Present Value
(After Tax 8% Discount Rate)
|
US$ M
|
92.2
|
Internal Rate of
Return
|
IRR
|
75%
|
Mill Feed
|
Tonnes
(Mt)
|
6.27
|
Peak Mining
Production Rate
|
t/year
|
972,000
|
LOM Project Operating
Period
|
Years
|
9
|
Total Life of Mine
(LoM) Capital Costs
|
US$ M
|
104.5
|
Net After – Tax
Cashflow
|
US$ M
|
150.6
|
Total Operating Unit
Costs
|
US$/t
|
41.36
|
LOM Gold Production
(Payable)
|
Oz
|
19,706
|
LOM Silver Production
(Payable)
|
MOz
|
30
|
LOM Lead Production
(Payable)
|
t
|
28,256
|
LOM Zinc Production
(Payable)
|
t
|
19,160
|
Quality Control
All technical data contained in this news release has been
reviewed and approved by:
Gordon Babcock, P.Eng., Chief
Operating Officer and a Qualified Person under National Instrument
43-101 – Standards of Disclosure for Mineral Projects.
Americo Zuzunaga, MAusIMM CP
(Mining Engineer) and Vice President of Corporate Planning is a
Qualified Person and chartered professional qualifying as a
Competent Person under the Joint Ore Reserves Committee (JORC)
Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves.
Augusto Chung, FAusIMM CP
(Metallurgist) and Consultant to Sierra Metals is a Qualified
Person and chartered professional qualifying as a Competent Person
on metallurgical processes.
About Sierra Metals
Sierra Metals Inc. is Canadian based growing polymetallic mining
company with production from its Yauricocha Mine in Peru, and its 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.
The Company's Common Shares trade on the Bolsa de Valores de Lima and on the Toronto Stock
Exchange under the symbol "SMT" and on the NYSE American Exchange
under the symbol "SMTS."
Continue to Follow, Like and Watch our progress:
Web: www.sierrametals.com | Twitter: sierrametals
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Inc
Forward-Looking Statements
This press release contains "forward-looking information" and
"forward-looking statements" within the meaning of Canadian and
U.S. securities laws related to the Company (collectively,
"forward-looking information"). Forward-looking information
includes, but is not limited to, statements with respect to the
Company's operations, including the anticipated developments in the
Company's operations in future periods, the Company's planned
exploration activities, the adequacy of the Company's financial
resources, and other events or conditions that may occur in the
future. Statements concerning mineral reserve and resource
estimates may also be considered to constitute forward-looking
statements to the extent that they involve estimates of the
mineralization that will be encountered if and when the properties
are developed or further developed. These statements relate to
analyses and other information that are based on forecasts of
future results, estimates of amounts not yet determinable and
assumptions of management. Any statements that express or involve
discussions with respect to predictions, expectations, beliefs,
plans, projections, objectives, assumptions or future events or
performance (often, but not always, using words or phrases such as
"expects", "anticipates", "plans", "projects", "estimates",
"assumes", "intends", "strategy", "goals", "objectives",
"potential" or variations thereof, or stating that certain actions,
events or results "may", "could", "would", "might" or "will" be
taken, occur or be achieved, or the negative of any of these terms
and similar expressions) are not statements of historical fact and
may be forward-looking information.
Forward-looking information is subject to a variety of risks and
uncertainties, which could cause actual events or results to differ
from those reflected in the forward-looking information, including,
without limitation, risks inherent in the mining industry including
environmental hazards, industrial accidents, unusual or unexpected
geological formations, floods, labour disruptions, explosions,
cave-ins, weather conditions and criminal activity; commodity price
fluctuations; higher operating and/or capital costs; lack of
available infrastructure; the possibility that future exploration,
development or mining results will not be consistent with the
Company's expectations; risks associated with the estimation of
mineral resources and the geology, grade and continuity of mineral
deposits and the inability to replace reserves; fluctuations in the
price of commodities used in the Company's operations; risks
related to foreign operations; changes in laws or policies, foreign
taxation, delays or the inability to obtain necessary governmental
permits; risks relating to outstanding borrowings; issues regarding
title to the Company's properties; risks related to environmental
regulation; litigation risks; risks related to uninsured hazards;
the impact of competition; volatility in the price of the Company's
securities; global financial risks; inability to attract or retain
qualified employees; potential conflicts of interest; risks related
to a controlling group of shareholders; dependence on third
parties; differences in U.S. and Canadian reporting of mineral
reserves and resources; potential dilutive transactions; foreign
currency risks; risks related to business cycles; liquidity risks;
reliance on internal control systems; credit risks, including risks
related to the Company's compliance with covenants with respect to
its BCP Facility; uncertainty of production and cost estimates for
the Yauricocha Mine, the Bolivar Mine and the Cusi Mine; and other
risks identified in the Company's filings with Canadian securities
regulators and the U.S. Securities and Exchange Commission ("SEC"),
which filings are available at www.sedar.com and www.sec.gov,
respectively.
This list is not exhaustive of the factors that may affect any
of the Company's forward-looking information. Forward-looking
information includes statements about the future and are inherently
uncertain, and the Company's actual achievements or other future
events or conditions may differ materially from those reflected in
the forward-looking information due to a variety of risks,
uncertainties and other factors. The Company's statements
containing forward-looking information are based on the beliefs,
expectations, and opinions of management on the date the statements
are made, and the Company does not assume any obligation to update
forward-looking information if circumstances or management's
beliefs, expectations or opinions should change, other than as
required by applicable law. For the reasons set forth above, one
should not place undue reliance on forward-looking information.
Note Regarding Reserve and Resource Estimates
All reserve and resource estimates reported by the Company are
calculated in accordance with the Canadian National Instrument
43-101 - Standards of Disclosure for Mineral Projects and the
Canadian Institute of Mining and Metallurgy Classification system.
These standards differ significantly from the requirements of the
SEC. The differences between these standards are discussed in our
SEC filings. Mineral resources which are not mineral reserves do
not have demonstrated economic viability.
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SOURCE Sierra Metals Inc.