TORONTO, June 27, 2018 /PRNewswire/ -
Sierra Metals Inc. (TSX: SMT) (BVL: SMT) (NYSE American:
SMTS) ("Sierra Metals" or "the Company") is pleased to
report the results of the Preliminary Economic Assessment ('PEA')
regarding the Company's Yauricocha Mine, located in Alis
district, Yauyos province, department of Lima, Peru. The PEA is based on technical
inputs from various independent consulting groups including
SRK, Redco, Ingenieria Carillo, Anddes, Tierra Group,
Geoservice Engineers
Based on the technical work from the various independent
consultants, the PEA was complied under National Instrument
43-101 standards by Mining Plus Peru SAC. The full technical report
will be filed within 45 days of this news release.
Highlights of the PEA include:
- After-tax Net Present Value (NPV): US$393 Million at an 8% discount rate
- Return on Investment (ROI): 486%
- After-tax Payback Period Life of Mine Capital: 4.1
years
- Life of Mine Capital Cost: US$238
Million
- Net After-tax Cash Flow: US$532
Million
- Total Operating Unit Cost: $43.86/tonne
- Mine Processing Rate: 5,500 tonnes per day
(TPD)
- Plant Processing Rate: 5,500 TPD
- Life of Mine: 10 years based on existing
Mineral Resource Estimate
- Life of Mine Zinc Payable Production 621.1 Million
Pounds
Igor Gonzales, President and CEO
of Sierra Metals commented: "Sierra Metals is planning to
expand the Yauricocha mine through sustainable growth stages from
its current 3,000 TPD, to 3,600 TPD in Q1 2019, and to 5,500 TPD in
2021. Engineering studies support the increased processing capacity
at the Chumpe ore processing plant of up to 5,500 TPD. Management
are very pleased and encouraged by the positive results of this PEA
which support the profitable development and growth of the
Yauricocha Mine. The expansion of our capacity is a natural step
that follows mineral resources increases in recent years. The
expansion adds to the value of our resources by accelerating its
production timing and also adds to the potential value to future
resource increases, which we expect to continue due to the on-going
aggressive exploration campaign at the mine."
He concluded, "We are continuing with our strategy to
increase shareholder value and grow the economic potential of the
Company. Building upon a successful PEA recently announced
for the expansion of the Cusi Mine, we are now adding another
successful study for the expansion of the Yauricocha Mine, and a
third PEA will follow shortly for our Bolivar Mine. This PEA
follows a successful brownfield exploration program and a
successful operational improvement program at the Yauricocha Mine,
demonstrating returns on this well-spent capital. Building
upon these successes, we are continuing to endeavour to maximize
value and profitability through the implementation of automation,
best practices and further potential throughput increases which
will drive further growth and benefit all
shareholders."
Mineral Resource Estimate
The Yauricocha Mine located in the Allis district, Yauyos
province, department of Lima, approximately 12 kilometers west of
the Continental Divide and 60 kilometers south of the Pachacayo
railway station. Polymetallic mineralization has been mined at
Yauricocha for more than 50 years. Mineralization is
genetically and spatially related to the Yauricocha stock; six
skarn bodies host mineral resources around the margins of the
stock. Near surface mineral is exhausted but significant mineral
resources are reported at depth.
This Preliminary Economic Assessment (PEA) considers
measured, indicated and inferred resources reported by SRK dated
November 10, 2017 and effective as of
July 31, 2017. The
resource has not been depleted as part of this study.
Table 1-1: Summary of resource reported
by SRK, November 10, 2017 (Effective
July 31, 2017)
Class
|
Tonnes
(kt)
|
Ag
(g/t)
|
Au
(g/t)
|
Cu
(%)
|
Pb
(%)
|
Zn
(%)
|
Density
|
Measured
|
3,094
|
69.97
|
0.79
|
1.72
|
1.23
|
3.2
|
3.74
|
Indicated
|
10,111
|
59.91
|
0.6
|
1.46
|
0.83
|
2.67
|
3.8
|
Measured +
Indicated
|
13,205
|
62.26
|
0.65
|
1.52
|
0.92
|
2.79
|
3.79
|
Inferred
|
6,632
|
43.05
|
0.55
|
1.19
|
0.47
|
2.16
|
3.71
|
(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, copper, lead and zinc assays were capped where
appropriate.
|
(2)
|
Mineral resources are
reported at a unit value CoG's based on metal price assumptions*,
variable metallurgical recovery assumptions (variable metallurgical
recoveries** as a function of grade and relative metal distribution
in individual concentrates), generalized mining/processing
costs).
*Metal price
assumptions considered for the calculation of the unit values are:
Gold (US$1,255/oz), Silver (US$17.80/oz), Copper (US$2.60/lb), Zinc
(US$1.25/lb).
** Metallurgical
recovery assumptions for the Yauricocha Mine are variable and
dependant on mining method and process/recovery costs which vary
between US$41 and US$48.
|
(3)
|
The unit value CoG's
for the Yauricocha Mine are variable and dependent on mining method
and process/recovery costs, which vary between US$41 and
US$48
|
The geometry and grade of mineralization at Yauricocha lends
itself to the sub-level caving mining method, more than 98% of
total mineral production (3,000 TPD) is via sub-level caving.
Mineral and waste is hoisted to the 720 level and transported by
electric locomotive to the Chumpe plant for processing. Yauricocha
has three hoisting shafts with a combined capacity of 4,600 TPD, at
the current waste to mineral of 0.5:1 ratio this equates to 3,067
TPD of mineral and 1,533 TPD of waste.
Sierra Metals commissioned Redco to evaluate, on a conceptual
level, how production at Yauricocha could be increased. Redco
determined that with the introduction of mineralized bodies, which
are part of the resource but are not currently mined, production
could be increased to 5,500 TPD. Production increases require a
significant amount of advanced development, and the existing
hoisting system does not have the capacity to maintain current
production and accommodate additional waste associated with the
advanced development.
Sierra Metals is constructing the Yauricocha Shaft, with
capacity to hoist 5,600 TPD. When this shaft is completed
(January-2020) the combined hoisting capacity will be 10,200 TPD.
Advanced development ahead of increased production will increase
the waste to mineral ratio.
As part of their evaluation, Redco assumed that:
- Established operating costs of US$43.86/tonne would be used in the mine
plan
- Operating costs per tonne would reduce to US$38.66/tonne as production rates reached 5,500
TPD
Factors that could negatively impact production as the mine
extends to depth are increased dewatering costs and increased
potential for mud-rush.
Redco determined that:
- With the completion of the Yauricocha shaft, production
rates could be increased
- Conceptual economic analysis indicates that 5,500 TPD
mineral production is the optimal mine output, which represents a
production increase of 66% on current output
- Based on the current resource and proposed 5,500 TPD
optimal mine output, the Life of Mine
(LoM) would be 10-years
- Throughout the LoM 29,375 meters of waste development and
124,572 meters of development in mineral will be
required
- The processing capacity of the Chumpe plant will need
expanding from 3,000 TPD if it is to process increased mine
output.
- Tailings capacity will need expanding to handle the waste
product of the Chumpe Plant
- LoM capital requirements (Mine, Plant, Closure) to
realize the proposed mine plan (5,500 TPD) and increase processing
capacity (5,500 TPD) are estimated in the region of $238 million
Risks to the proposed mine plan are limited as Yauricocha is an
established operation with proven mining methodology, mineral
processing and metallurgical recovery, however, some risks are
highlighted:
- Subsidence related to sublevel caving is recorded around
the Central and Mascota shafts. These shafts are critical for the
ingress and egress of material, if continued subsidence impacts the
hoisting capacity of these shafts the proposed mine plan would be
significantly impacted. Contingency planning in case of a failed
shaft is not considered in the proposed mine plan
- The proposed mine plan considers inferred resources which
are low confidence and are not suitable for the application of
economic factors. Further drilling would improve confidence in
these resources and better determine their potential economic
viability
- Dewatering and ventilation demands will increase with
depth and properly engineered solutions are needed if the mine plan
is to be implemented
- Mud-rush is a known issue at Yauricocha and potential for
mud-rush is likely to increase at depth, mitigating this risk is
essential to the proposed mine plan
- The Chumpe processing plant will need to be expanded to
handle increased throughput
- Tailings storage capacity will need to be expanded to
handle increased waste from the processing plant
Sierra Metals engaged various specialist groups to evaluate how,
on a conceptual level, mining, mineral processing, and tailings
management could be adapted at the Yauricocha mine and Chumpe Plant
(combined to form the Property) to achieve a sustainable and staged
increase in mine production and mill throughput.
This report is a Preliminary Economic Assessment (PEA)
designed to give an indication of the economic viability of
operating the Property at an increased mine output from 3,000 TPD
currently, to 3,600 TPD by Q1 2019, and 5,500 TPD in
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 5,500 TPD
|
Redco,
2018
|
Sierra Metals
(SM)
|
Planta Concentradora
Chumpe – Memoria Descriptiva – Ampliacion 1500,000
TMS/MES
|
Sierra,
2018
|
Ingenieria Carillo
(IC)
|
Engineering
associated with increased Chumpe plant capacity
|
|
AnddesConsulting
(AC)
|
Expansion of tailings
storage capacity
|
Anddes,
2018
|
Tierra
Group
|
Memorandum
Tecnico
|
TG, 2018
|
Geoservice
Engineers
|
|
GE, 2018
|
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 mineral output could be increased and that the optimal mineral
output is 5,500 TPD.
As part of their scoping study, Redco considered plans for
mine development, hoisting capacity, ventilation and dewatering on
a general scale. Sierra Metals recognizes the further mine
development, increased hoisting capacity development, detailed
ventilation and dewatering plans are required to support the
overall mine design.
Mineral Processing
The Chumpe plant is located approximately one kilometer
from the Yauricocha Mine, material is transported to the plant on
rails. Mineral is processed using conventional two-stage crushing
followed by grinding-classification and differential flotation
circuit to produce commercial quality lead/silver, zinc and
copper.
Mineral processing and the recovery of the minerals are
demonstrated, and recoveries are 65.0% Copper, 85.0% Lead, 16% Gold
and 90.0% Zinc. Total silver recovery was 67%.
Planned adjustments to the Chumpe plant will not materially
change the processing processes but will extend processing capacity
from 3,000 TPD to 5,500 TPD.
Tailings Capacity
The Project site has an existing tailings storage facility
which accommodates pulp tailings which has been constructed in
stages of four-meter lifts. There are three more lifts required to
complete construction of the dam. At completion, the facility will
be able to accommodate an additional eight million tonnes of
tailings. At that point, the company will be using a dry-stacking
concept to manage tailings deposition which will be based on OPEX.
Based on the last expansion, the facility will allow storage of the
tailings material at current production rates. An additional
expansion of the tailings storage capacity will occur after final
construction of the final lift. At that time the facility
will incorporate dry-stacking techniques which will accommodate
sufficient tailings capacity throughout the life of the
mine.
Economic Analysis
The PEA calculates a Base Case after – tax NPV of
US$393 million with an after – tax
Return on Investment (ROI) of 486 using a discount rate of 8%. The
total life of mine capital cost of the project is estimated to
total US$238 million. The payback
period for the LoM capital is estimated at 4.1 years. Operating
costs of the LoM total US$593
million, equating to an operating cost of US$43.86 per tonne milled.
PEA Highlights
Base case of US$1,323/oz Gold, US$18.68/oz Silver,
US$0.98/lb Lead, US$1.19/lb Zinc, US$3.15/lb
Copper.
|
Unit
|
Value
|
Net Present Value
(After Tax 8% Discount Rate)
|
US$ M
|
393
|
Return On Investment
(ROI)
|
ROI%
|
486
|
Mill Feed
|
Tonnes
(Millions)
|
13.5
|
Mining Production
Rate
|
t/year
|
1,800,000
|
LOM Project Operating
Period
|
years
|
9
|
Total Capital
Costs
|
US$ M
|
238
|
Net After – Tax
Cashflow
|
US$ M
|
532
|
Total Operating Unit
Cost
|
US$/t
|
43.86
|
LOM Gold Production
(Payable)
|
oz
|
17,621
|
LOM Silver Production
(Payable)
|
oz
|
11,408,281
|
LOM Lead Production
(Payable)
|
t
|
87,881
|
LOM Zinc Production
(Payable)
|
t
|
281,746
|
LOM Copper Production
(Payable)
|
t
|
102,821
|
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
| Facebook: SierraMetalsInc | LinkedIn: Sierra Metals
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.