TORONTO, July 9, 2018 /CNW/ - 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 Bolivar Mine,
located in Chihuahua State, Mexico. The PEA is based on technical inputs
from various independent consulting groups, including; SRK, Redco,
Anddes and Transmin.
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$214 Million at an 8% discount rate
- Return on Investment (ROI): 550%
- After-tax Payback Period: 3.4 years
- Life of Mine Capital Cost: US$96
Million
- Net After-tax Cash Flow: US$303
Million
- Total Operating Unit Cost: US$21.18/tonne
- Plant Processing Rate: 5,000 tonnes per day (TPD)
- Average Copper Recovery Rate 85%
- Mine Life: 11 years based on
existing Mineral Resource Estimate
- Life of Mine Copper Payable Production: 252,507,942
pounds
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 Bolivar Mine in sustainable and staged steps
from 3,000 TPD currently, to 3,600 TPD in Q1-2019, and to 5,000 TPD
in mid-2020, based on consensus metal pricing.
The Company is incorporating an aggressive Capex program into
the PEA of US$96.0 million over the
life of the mine, which includes exploration drilling to increase
the mineral resources and 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 July 5, 2018 and does not include any drilling
completed after October 31, 2017. The
Company is continuing with its successful brownfield exploration
programs and expects to continue to grow the mineral resources at
the Bolivar 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. Potential new copper pounds discovered could 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 have completed a PEA at Cusi and Bolivar,
and scoping studies at the Yauricocha Mine expected shortly, 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 Reserve and Resource Estimate
The property is located in the Piedras
Verdes District of Chihuahua State, Mexico, approximately 250 kilometers southwest
of the city of Chihuahua and consists of 14 mineral concessions
(6,800 hectares). The Bolivar deposit is a Cu-Zn 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 Zn-rich
mineralization, and a lower dolomitic horizon, which predominantly
hosts Cu-rich mineralization. In both cases, the highest grades are
developed where structures and associated breccia zones cross these
favorable horizons near skarn-marble contacts.
This PEA considers depleted measured, indicated and inferred
resources reported on 2017 by SRK and effective date as of
October 31, 2017. The results of this
PEA are indicative of conceptual potential and are not
definitive.
Table 1-1: Summary of resource reported by
SRK, 2017 (Effective October 31,
2017)
Class
|
Tonnes
(000's)
|
Ag
(g/t)
|
Au
(g/t)
|
Cu
(%)
|
Ag
(koz)
|
Au
(koz)
|
Cu
(t)
|
Indicated
|
13,267
|
22.5
|
0.29
|
1.04
|
9,616
|
124
|
137,537
|
Inferred
|
8,012
|
22.4
|
0.42
|
0.96
|
5,779
|
109
|
76,774
|
(1)
|
Mineral resources are
not mineral reserves and do not have demonstrated economic
viability. All figures rounded to reflect the relative accuracy of
the estimates. Copper, gold and silver assays were capped where
appropriate.
|
(2)
|
Mineral resources are
reported at cut-off values based on metal price assumptions*,
metallurgical recovery assumptions**, mining/transport costs
(US$17.59/t), processing costs (US$8.33/t), and general and
administrative costs (US$2.41/t).
|
(3)
|
The metal value
cut-off grade for the Bolivar Mine is US$29/t. No mineral resources
are reported for the remaining pillars.
|
*
|
Metal price
assumptions considered for the calculation of metal value are:
Copper (Cu): US$/lb 3.00, Silver (Ag): US$/oz 18.25, and Gold
(Au): US$/oz 1,291.00.
|
**
|
Metallurgical
recovery assumptions are 83% Cu, 78% Ag, and 64% Au.
|
The resources were
estimated by David Keller of SRK consulting (Canada) using Ordinary
Kriging (OK), and reviewed and validated by Giovanny Ortiz, B.Sc.,
PGeo, FAusIMM #304612 of SRK, a Qualified Person.
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 3,000 TPD, to 3,600 TPD in Q1-2019, to 5,000 TPD by
mid-2020.
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, 2018
|
Redco Mining
Consultants
|
Increase mine output
to 5,000 TPD
|
Redco,
2018
|
Sierra Metals
(SM)
|
Increase Piedras
Verdes Pant Capacity to 5,000 TPD
|
Sierra,
2018
|
Transmin
Metallurgical Consultants (TM)
|
Engineering
associated with increased Plantas Verdes plant capacity
|
Transmin,
2018
|
Anddes
Asociados
|
Executive Summary –
Tailings Expansion Design
|
Andess,
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
Longhole Stoping could be used to achieve sustainable production of
5,000 TPD.
As part of their scoping study, Redco considered plans for
ventilation on a general scale. Sierra Metals recognizes that
further and more detailed ventilation plans are required to support
a deeper conceptual mine design.
Mineral Processing
The Piedras Verdes Plant, located 5.1 kilometers from the
Bolivar Mine, uses a conventional crushing-milling-flotation
circuit to recover mineral and to produce commercial quality copper
concentrates with silver and gold by-product credits. Mineral is
delivered from the mine to the plant in 18-tonne trucks.
Mineral processing and the recovery of the mineral is
demonstrated, and copper, silver and gold recoveries are
established at 85.0%, 78.2% and 63.7% respectively.
The Piedras Verdes Plant current throughput is 3,000 TPD. In
line with proposed increases in mine output, the processing
capacity at Piedras Verdes will
increase to 3,600 TPD in Q1-2019, and to 5,000 TPD by mid-2020.
The current tailings storage facility has an in-situ capacity to
store tailings until year end 2019.
A plan is currently underway to construct a much larger capacity
facility which will include the installation of a starter dam
followed by deposition of filtered - dewatered tailings in a
facility which will accommodate 14 million tonnes of filtered
tailings providing capacity for future plant expansion. Engineering
for this program is provided by ANDDES Engineers from Peru.
Economic Analysis
The PEA calculates a Base Case after-tax NPV of US$214 million, with an after – tax Return on
Investment of 550% using a discount rate of 8%. The total life of
mine capital cost of the project is estimated to total US$96.0 million. The payback period for the Life
of Mine (LoM) capital is estimated
at 3.4 years. Operating costs of the life of mine total
US$359 million, equating to an
operating cost of US$21.18 per tonne
milled.
PEA
Highlights
Base case of
$1,291/oz Gold, $18.25/oz Silver, $3.00/lb. Copper
|
Unit
|
Value
|
Net Present Value
(After Tax 8% Discount Rate)
|
US$ M
|
214
|
Return on
Investment
|
ROI (%)
|
550
|
Mill Feed
|
Tonnes
(Mt)
|
16.9
|
Peak Mining
Production Rate
|
t/year
|
1,800,000
|
LOM Project Operating
Period
|
Years
|
11
|
Total Life of Mine
(LoM) Capital Costs
|
US$ M
|
96
|
Net After – Tax
Cashflow
|
US$ M
|
303
|
Total Operating Unit
Costs
|
US$/t
|
21.18
|
LOM Gold Production
(Payable)
|
oz
|
86,472
|
LOM Silver Production
(Payable)
|
oz
|
7,013,157
|
LOM Copper Production
(Payable)
|
t
|
114,537
|
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."
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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.