After-tax NPV of US$361 Million
Sierra Metals Inc. (TSX: SMT) (BVL: SMT) (NYSE AMERICAN:
SMTS) ("Sierra Metals" or "the Company") is pleased to report the
results of an updated Preliminary Economic Assessment ("PEA")
regarding the Company's Bolivar Mine, located in Chihuahua State,
Mexico to now include iron ore concentrate production.
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This PEA report was prepared as a National Instrument 43-101
Technical Report for Sierra Metals Inc. ("Sierra Metals") by SRK
Consulting (Canada) Inc. ("SRK"). The full technical report will be
filed on SEDAR within 45 days of this news release.
Highlights of the PEA include:
- Updated After-tax Net Present Value (NPV): US$361 Million
vs. US$283 Million previously at an 8% discount rate
- The incremental benefit includes iron ore production and
increasing production to 10,000 TPD from 5,000 TPD is now estimated
to have an after-tax NPV (@8%) of US$78.2 million, an IRR of 69.0%
vs. an NPV of US$57.4 million, and an IRR of 27.9% previously
reported
- Net After-tax Cash Flow: US$650 Million vs. US$521 Million
previously
- Life of Mine & Sustaining Capital Cost: US$345
Million
- Total Operating Unit Cost: US$25.62/tonne and US$1.50/lb
copper equivalent
- Average LOM Copper Grade 0.72%
- Average LOM Iron Ore Grade 13.5% from ROM ore, 15% from long
term residues stockpile
- Copper Price Assumption US$3.05/lb
- Iron Ore Concentrate Price Assumption for 62% Fines
US$75.90/DMT
- MineLife: 14 years based on existing Mineral Resource
Estimate
- Life of Mine Copper Payable Production: 551 million
pounds
Luis Marchese, CEO of Sierra Metals commented: "I am very
encouraged by the results of this updated PEA now including iron
ore production. As mentioned in the previous PEA published in
October 2020, the value could be further increased by the potential
sale of magnetite (iron ore) as a by-product. Today we are happy to
report that we are confirming enhanced economics and improving the
value of the Bolivar Mine. The economics in this PEA confirms the
rationale for approving this project in April of this year, which
is proceeding on a fast track basis.
Additional to the iron ore project, the plan is to profitably
develop and grow the Bolivar Mine through accelerating staged
increases to a production rate of 10,000 TPD in 2024 from today's
capacity of 5,000 TPD, based on current analysts consensus metal
price estimates.
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 increases in our mineral resource base
and working to improve the throughput at all mines. At the same
time, we continue to use best practices to deal with the daily
effects of COVID-19 on our workforce and communities. We expect
these positive developments to improve profitability further 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, located 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 in 2019 by SRK and effective as of December 31,
2019. The results of this PEA shown in Table 1-1 are indicative of
conceptual potential and are not definitive.
Table 1-1: Summary of Mineral Resources estimate as reported by
SRK, 2020 (Effective December 31, 2019)
Class
Tonnes (Mt)
Ag (g/t)
Au (g/t)
Fe (%)
Cu (%)
Ag (M oz)
Au (k oz)
Cu (t)
Indicated
19.4
15.1
0.21
13.8
0.77
9.4
127.8
149,116
Inferred
21.4
14.2
0.21
13.5
0.78
9.8
145.6
167,077
Source: SRK, 2020
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 US$24.25/t using the following metal prices and recoveries; Cu
at US$3.08/t and 88% recovery; Ag at US$17.82/oz and 78.6%
recovery, Au at US$1,354/oz and 62.9% 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. The mine plans are 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 kilometers from the
Bolivar Mine, uses a conventional crushing-grinding-flotation
circuit to recover mineralized ore and produce commercial-quality
copper concentrates with silver and gold by-products credits. The
mineralized ore is delivered from the mine to the plant in 18-tonne
trucks. In addition, 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. In addition, it will provide a lower
cost and more reliable method of delivering mineralized material to
the plant.
Mineral processing and the recovery of the mineral are
demonstrated, and copper, silver and gold recoveries are
established at 88%, 78.7% and 62.43%, 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 tailing storage facility ("TSF") (herein referred to as
"New TSF") is to be located just to the west of the existing
facility and has an expected life through 2025. The PEA considers
the use of tailings as a 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 to support the mine and mill.
Economic Analysis
This PEA indicates an after-tax NPV of US$361million (using a
discount rate of 8%) at 10,000 TPD (in 2024). The total operating
cost for the life of mine is US$1,071 million, equating to a total
operating cost of US$25.62 per tonne milled and US$1.50 per pound
copper equivalent. Highlights of the PEA are provided in Table
1-2.
Table 1-2: PEA Highlights
Updated PEA Highlights
Base case of $1,541/oz Gold,
$20.00/oz Silver, $3.05/lb Copper, Iron Concentrate (62% Fe)
$75.90/DMT.
Unit
Value
Net Present Value (After Tax 8%
Discount Rate)
US$ M
361
LOM Mill Feed (ROM ore)
Tonnes (Mt)
41.8
LOM Mill Feed (residues
stockpile)
Tonnes (Mt)
6.0
Mining Production Rate
t/year
3,600,000
LOM Project Operating Period
Years
14
Total Life of Mine (LoM) Capital
Costs
US$ M
345
Net After – Tax Cashflow
US$ M
650
EBITDA
US$ M
1,299
Total Operating Unit Costs
US$/t
25.62
LOM Copper Production
(Payable)
Mt
0.25
LOM Gold Production (Payable)
Moz
0.15
LOM Silver Production
(Payable)
Moz
12.9
LOM Iron Concentrate Production,
62% Fe (Payable)
Mt
5.7
Quality Control
All technical data contained in this news release has 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.
About Sierra Metals
Sierra Metals Inc. 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.
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".
For further information regarding Sierra Metals, please visit
www.sierrametals.com.
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Forward-Looking
Statements
This press release contains "forward-looking information" and
"forward-looking statements" within the meaning of Canadian and
U.S. securities laws (collectively, "forward-looking
information"). Forward-looking information includes, but is not
limited to, statements with respect to the date of the 2020
Shareholders' Meeting and the anticipated filing of the
Compensation Disclosure. 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, the risks described under the heading "Risk
Factors" in the Company's annual information form dated March 30,
2020 for its fiscal year ended December 31, 2019 and other risks
identified in the Company's filings with Canadian securities
regulators and the United States Securities and Exchange
Commission, which filings are available at www.sedar.com and
www.sec.gov, respectively.
The risk factors referred to above are not an exhaustive list of
the factors that may affect any of the Company's forward-looking
information. Forward-looking information includes statements about
the future and is 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 such 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20210816005226/en/
Mike McAllister Vice President, Investor Relations Sierra
Metals Inc. Tel: +1 (416) 366-7777 Email: info@sierrametals.com
Americo Zuzunaga Vice President of Corporate Planning
Sierra Metals Inc. Tel: +1 (416) 366-7777
Luis Marchese CEO Sierra Metals Inc. Tel: +1 (416)
366-7777
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