Coeur Mining, Inc. (the “Company” or “Coeur”) (NYSE: CDE, TSX:
CDM) announced results from a Preliminary Economic Assessment (PEA)
for its wholly-owned La Preciosa silver-gold project located in
Durango state, Mexico. The PEA indicates an initial estimated mine
life of 17 years recovering an estimated 134.5 million ounces of
silver and generating a 17% after-tax internal rate of return (IRR)
using price assumptions of $25 per silver ounce and $1,500 per gold
ounce.
Over the first 14 years of production, La Preciosa is expected
to produce an average 9.1 million ounces of silver per year at
anticipated average cash operating costs1 of $13.86 per silver
ounce, and is expected to average approximately $93 million in
operating cash flow1 per year. At forecast production rates, La
Preciosa would be one of the top 10 primary silver mines in the
world. The references herein are in U.S. dollars and U.S. customary
units.
Table 1: PEA (Base Case) Highlights and Assumptions
Preliminary Economic
Assessment
Silver/gold price assumptions $25/$1,500 Initial capital
expenditures $348 million Strip ratio 10.6:1 Estimated initial mine
life 17 years Average daily processing rate ~11,000 tons per day
Years 1-14 average grade 2.65 ounces silver per ton Total silver
ounces recovered (% of current resource) 73% of 184 million ounces
Years 1-14 average annual silver production 9.1 million ounces
Years 1-14 average annual cash operating cost per ounce1 $13.86
Years 1-14 average annual operating cash flow1 $93 million
After-tax IRR 17% After-tax NPV (5% discount) $314 million
Mitchell J. Krebs, Coeur's President and Chief Executive
Officer, said, “The results of this initial PEA demonstrate the
viability of the La Preciosa open pit project at higher silver and
gold prices and provide a solid foundation from which we believe we
will enhance the project's economics over time. Subject to Board
authorization, the Company intends to proceed with a feasibility
study, which is expected to be completed in mid-2014. Upon
completion of the feasibility study, the Company and its Board will
evaluate the economics of the project, assess the silver market and
determine whether to proceed with construction.”
Mr. Krebs commented, “Over the next 12 months, we will pursue an
exploration and infill drilling program focused on expanding the
deposit, upgrading inferred mineral resources and drilling on
several of the smaller veins and mineralized intercepts which fall
within the designed pits to increase confidence levels, evaluate
mineability and determine whether they can be incorporated into
future mine plans.
“La Preciosa is located in mining-friendly Mexico, just 45
minutes from the city of Durango, with many local mines and a
readily available workforce. It has easy access to power and
transportation and we believe we now have the water supply
necessary to support future mining activities.”
La Preciosa PEA Highlights and Assumptions
- Measured and indicated resources of
57.2 million tons containing 146.2 million silver ounces and
277,700 gold ounces, and inferred resources of 19.5 million tons
containing 37.7 million silver ounces and 60,300 gold ounces at
June 26, 2013. (Please refer to the Appendix Table for related
grades for the updated mineral resource estimate.)
- Expected average recovery rates of 86%
for silver and 82% for gold at a throughput rate of 11,023 tons per
day (10,000 tonnes per day) for average annual production of 9.1
million silver ounces and 15,100 gold ounces over the initial 14
years of mine life.
- Coeur's open pit mine plan estimates
production of 59.1 million tons at average grades of 2.40 ounces of
silver per ton and 0.004 ounce of gold per ton. The project
envisions surface mine operation for the first 14 years and
continued operation of the processing plant from stockpiled
lower-grade ore for the final three years.
- Capital expenditures are estimated to
be $347.9 million for commercial start-up and an additional $84.2
million of sustaining capital over the initial estimated 17-year
mine life.
- After-tax IRR of 17% and a NPV of $314
million at a base case using a 5% discount rate, $25 per ounce
silver price and $1,500 per ounce gold price, represents a payback
period of 5.3 years.
- Located in a mining-friendly
jurisdiction with infrastructure in place, including anticipated
access to power and transportation and available water supply.
The La Preciosa PEA demonstrates leverage to a rising silver
price as shown in the Economic Sensitivity Analysis below.
Table 2: Economic Sensitivity Analysis - After-tax IRR, NPV
and Payback Period
(Base case at $25 silver price is shown in bold below.)
Silver Price
NPV @ 5% NPV @
10% IRR %
Payback (millions)
(years) $ 33 $
796.6 $ 471.4 34.3 % 2.5 $ 31 $ 672.9 $ 384.2 29.9 % 2.9 $ 28 $
487.2 $ 253.3 23.2 % 3.6
$ 25 $ 314.1
$ 130.1 16.8 % 5.3 $ 23 $ 177.1
$ 32.3 11.7 % 9.6 $ 21 $ 31.6 $ (71.4 ) 6.2 % 11.5 $ 19 $ (124.6 )
$ (183.2 ) 0.1 % 14.5
Capital Expenditures
Estimated capital expenditures are shown in the table below.
Mobile mining equipment valued at $84 million is assumed to be
leased and is not included in the estimated capital expenditures.
The cost of leasing is $2.88 per ton ore processed and is included
in operating costs. Sustaining capital expenditures are estimated
to total $84.2 million over the initial 17-year mine life. The
Company used a high level of design and engineering rigor for this
PEA-level study with more than 50% of the capital equipment
estimates supported by current price quotations.
Table 3: Capital Expenditures
Mine capital and pre-strip $ 22.1 Process plant $ 218.4
Other infrastructure $ 26.4 Contingency $ 49.0 Coeur (owner's cost)
$ 32.0
Total start-up capital expenditures $
347.9 Total sustaining capital expenditures $
84.2
Mining and Processing
The PEA envisions using hydraulic shovels, loaders and a fleet
of 195-ton haul trucks for the open pit operations. The processing
plant incorporates an 11,000 ton per day mill with agitated leach,
counter current decantation clarification and a Merrill-Crowe plant
to produce silver-gold doré.
Table 4: Cost Parameters
PEA Production Cost Assumptions
Average mine costs $1.38/ton material mined
Total mining cost $16.25/ton ore processed Equipment lease
cost $2.88/ton ore processed Processing costs $13.04/ton ore
processed Site G&A $1.59/ton ore processed Treatment, refining,
transportation $0.60/ton ore processed
Total operating cost
$34.36/ton ore processed
Opportunities for Optimization
Recommendations in the PEA for cost saving opportunities range
from optimizing the mine design and conducting infill and
exploration drilling to expanding reserves and optimizing
metallurgical recoveries. Coeur also expects to further evaluate
in-pit waste disposal sites, grinding, power consumption and the
tailings storage method.
Feasibility Study Phase
The feasibility study phase will focus primarily on the open pit
mine optimization and metallurgical testing to maximize plant
operating efficiency and recoveries. Geomechanical studies will
evaluate rock strength and fracture characteristics to provide
information for slope design. The evaluation will also include
tradeoff analyses comparing dry stack versus conventional tailing
storage, tailing locations, and alternate cyanide destruction
methods. The feasibility study will also investigate the potential
to supplement or extend mine production through the inclusion of
underground mining of resources that lie beyond the boundary of the
currently designed surface pit.
In parallel with the feasibility process, Coeur will complete
baseline environmental work and prepare an Environmental Impact
Statement as a part of an application for construction and
operating permits.
Coeur anticipates total 2013 expenditures of $12 million,
including $6 million for the PEA and $5 million for exploration and
feasibility work, and an additional $18 million of expenditures in
2014, including $5 million for exploration. All such costs will be
expensed.
Exploration Upside
La Preciosa is situated within a contiguous block of concessions
totaling more than 125 square miles (32,400 hectares). The La
Preciosa deposit and the majority of prior exploration work are
contained within a smaller core of concessions covering
approximately 4.2 square miles (1,100 hectares), or 3% of the total
land package. Coeur believes the surrounding, larger land package
contains similar host rocks and structural features to those in the
core concessions but these have not yet been explored in a
systematic manner.
The Company's exploration priorities will be to (i) upgrade key
inferred mineral resources included in the current PEA mineral
resource results to at least indicated status, (ii) commence
exploration near the current mineral resources for extensions and
new mineral occurrences and, (iii) conduct a full district
compilation of all historic data to assist with regional
exploration.
Project Timetable
A construction decision will be made following completion of the
feasibility study in the second half of 2014. Assuming a positive
decision, construction is expected to take two years, with
potential initial production beginning in the second half of
2016.
The PEA was completed by M3 Engineering & Technology
Corporation (M3) of Tucson, Arizona, with the support of
Independent Mining Consultants, Inc. (IMC) and Resource Evaluation,
Inc. (REI) of Tucson, Arizona. Coeur selected M3 to conduct the PEA
due to their extensive experience in Mexico, having designed and
constructed over 16 mining projects in the country, including
Goldcorp's Peñasquito mine.
The PEA is preliminary in nature and it includes inferred
mineral resources that are considered too speculative geologically
to have the economic considerations applied to them that would
enable them to be characterized as mineral reserves and there is no
certainty that the results reflected in the PEA will be realized.
Mineral resources that are not mineral reserves do not have
demonstrated economic viability. Mineral resource estimates do not
account for mineability, selectivity, mining loss and dilution.
There is no certainty that the inferred mineral resources will be
converted to the measured and indicated categories or that the
measured and indicated mineral resources will be converted to the
proven and probable mineral reserve categories.
About Coeur
Coeur Mining, Inc. is the largest U.S.-based primary silver
producer and a growing gold producer. The Company has four precious
metals mines in the Americas generating strong production, sales
and cash flow. Coeur produces from its wholly owned operations: the
Palmarejo silver-gold mine in Mexico, the San Bartolomé silver mine
in Bolivia, the Rochester silver-gold mine in Nevada and the
Kensington gold mine in Alaska. The Company also has a
non-operating interest in the Endeavor mine in Australia. In
addition, the Company has two silver-gold feasibility stage
projects - the La Preciosa project in Mexico and the Joaquin
project in Argentina. The Company also conducts ongoing exploration
activities in Mexico, Argentina, Nevada, Alaska and Bolivia. The
Company owns strategic investment positions in eight silver and
gold development companies with projects in North and South
America.
1. Cash operating costs and operating cash flow are non-GAAP
measures. Please see “Non-U.S. GAAP Measures” under “Cautionary
Statements” below.
Cautionary Statements
This news release contains forward-looking statements within the
meaning of securities legislation in the United States and Canada,
including statements regarding future mineral production, reserve
potential, capital expenditures, exploration drilling, potential
size of a mineralized zone, potential expansion of mineralization,
potential quantity and/or grade of minerals, potential type(s) of
mining operation, the estimation of mineral reserves and resources,
anticipated operating results such as production and cost levels
and expectations as to the timing of development decisions, project
construction and initial production related to La Preciosa. Such
forward-looking statements are identified by the use of words such
as “believes,” “intends,” “expects,” “indicates,” “demonstrates,”
“hopes,” “may,” “should,” “will,” “plan,” “projected,”
“contemplates,” “anticipates” or similar words, and involve known
and unknown risks, uncertainties and other factors which may cause
Coeur's actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Such factors include, among others, the risks inherent
in developing large-scale mining projects, such as changes in the
estimated economics at the feasibility stage, potential cost
overruns, and permitting and construction delays, the risks and
hazards inherent in the mining business (including environmental
hazards, industrial accidents, weather or geologically related
conditions), changes in the market prices of gold and silver and a
sustained lower price environment, the uncertainties inherent in
Coeur's production, exploratory and developmental activities,
including risks relating to permitting and regulatory delays, any
future labor disputes or work stoppages, the uncertainties inherent
in the estimation of gold and silver ore reserves and resources,
changes that could result from Coeur's future acquisition of new
mining properties or businesses, the loss of any third-party
smelter to which Coeur markets silver and gold, the effects of
environmental and other governmental regulations, the risks
inherent in the ownership or operation of or investment in mining
properties or businesses in Mexico, Coeur's ability to raise
additional financing necessary to conduct its business, make
payments or refinance its debt, as well as other uncertainties and
risk factors set out in filings made from time to time with the
United States Securities and Exchange Commission, and the Canadian
securities regulators, including, without limitation, Coeur's most
recent reports on Form 10-K and Form 10-Q. Actual results,
developments and timetables could vary significantly from the
estimates presented. Readers are cautioned not to put undue
reliance on forward-looking statements. Coeur disclaims any intent
or obligation to update publicly such forward-looking statements,
whether as a result of new information, future events or otherwise.
Additionally, Coeur undertakes no obligation to comment on
analyses, expectations or statements made by third parties in
respect of Coeur, its financial or operating results or its
securities.
The qualified persons who prepared the PEA are Josh Snider and
Thomas Drielick of M3 and the qualified persons who prepared the
mineral resource estimate effective June 26, 2013 are Don Earnest
of REI, and John Marek of IMC, all of whom reviewed the applicable
scientific and technical information concerning La Preciosa in this
news release and verified the data disclosed, including sampling,
analytical and test data underlying such information . A Technical
Report of the La Preciosa PEA, compliant with Canada National
Instrument 43-101, Standards of Disclosure for Mineral Projects,
will be filed later this month.
Donald J. Birak, Coeur's Senior Vice President of Exploration
and a qualified person under Canadian National Instrument 43-101,
reviewed the scientific and technical information concerning
Coeur's mineral projects in this news release. A description of the
key assumptions, parameters and methods used to estimate mineral
reserves and resources generally, as well as data verification and
quality assurance procedures and a general discussion of the extent
to which the estimates may be affected by any known environmental,
permitting, legal, title, taxation, socio-political, marketing or
other relevant factors, will be included in the Technical Report
for La Preciosa to be filed on SEDAR at www.sedar.com later this month and is consistent
with Technical Reports for each of Coeur's properties as filed on
SEDAR at www.sedar.com.
Cautionary Note to U.S. Investors-The United States Securities
and Exchange Commission permits U.S. mining companies, in their
filings with the SEC, to disclose only those mineral deposits that
a company can economically and legally extract or produce. We may
use certain terms in public disclosures, such as "measured,"
"indicated," "inferred” and “resources," that are recognized by
Canadian regulations, but that SEC guidelines generally prohibit
U.S. registered companies from including in their filings with the
SEC. U.S. investors are urged to consider closely the disclosure in
our Form 10-K which may be secured from us, or from the SEC's
website at http://www.sec.gov.
Non-U.S. GAAP Measures
We supplement the reporting of our financial information
determined under United States generally accepted accounting
principles (U.S. GAAP) with certain non-U.S. GAAP financial
measures, including cash operating costs and operating cash flow.
We believe that these adjusted measures provide meaningful
information to assist management, investors and analysts in
understanding our financial results and assessing our prospects for
future performance. We believe these adjusted financial measures
are important indicators of our recurring operations because they
exclude items that may not be indicative of, or are unrelated to
our core operating results, and provide a better baseline for
analyzing trends in our underlying businesses. We believe cash
operating costs and operating cash flow are important measures in
assessing the Company's overall financial performance.
APPENDIX
Table 5: La Preciosa Mineral Resources, Effective Date of
June 26, 2013
Mineral Resources Short Tons Average
Grades (oz/t) Contained Ounces (000) (000)
Ag Au Ag Au Measured
12,664 2.78 0.005 35,194 68.3 Indicated 44,576 2.49 0.005 110,979
209.3
Total Measured and Indicated 57,240 2.55
0.005
146,173 277.7 Inferred 19,504 1.93 0.003 37,726 60.3
Footnotes to the Mineral Resources:
1. Metal prices used for estimation of Mineral Resources were
$27.45 per troy ounce of silver and $1,508 per troy ounce of
gold.
2. There are no Mineral Reserves presently at La Preciosa.
3. A Net Smelter Return (NSR) cutoff of $20.43/tonne
($18.54/short ton) was used, based on the following parameters:
NSR =
[(Ag price per ounce -refining charge) x
plant recovery x payable recovery] +
[(Au price per ounce -refining charge) x plant recovery x payable
recovery]
4. Rounding of short tons, grades and troy ounces, as required
by reporting guidelines, may result in apparent differences between
tons, grades and contained metal contents.
5. The NI 43-101-compliant Technical Report, disclosing the
results of the PEA, will be filed on http://www.sedar.com later this month.
6. Inferred Mineral Resources are considered too speculative
geologically to have the economic considerations applied to them
that would enable them to be considered for estimation
of Mineral Reserves.
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