Cerro de Pasco Resources Announces Positive Preliminary Economic Assessment FOR the Santander Pipe
Santander Pipe PEA
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CERRO DE PASCO RESOURCES ANNOUNCES POSITIVE PRELIMINARY ECONOMIC
ASSESSMENT FOR THE SANTANDER PIPE
MONTRÉAL, CANADA – (February 21, 2023) Cerro de Pasco Resources Inc. (CSE: CDPR) (OTC MKTS: GPPRF)
(Frankfurt: N8HP) (“CDPR” or the “Company”) is pleased to announce the results of the Preliminary Economic
Assessment (“PEA”) for its brownfield Pipe Project (“the Project” or “the Santander Pipe”). The Project forms a
strategic cornerstone for CDPR’s 100% owned Santander Mine, located in central Peru. A NI 43-101 technical
report will be filed on SEDAR and will be available on the Company's website within 45 days. All dollar amounts
are in US dollars, unless otherwise noted.
• The Santander Pipe demonstrates positive financial returns, with a pre-tax net present value (“NPV”) at 6%
discount rate of USD 71.3 million, generating an estimated internal rate of return (“IRR”) of 46.6%.
• The PEA considers the Project as a standalone operation with zinc concentr ate production estimated at
313,600 dry metric tonnes (“dmt”) over a 5-year schedule.
• Project cash cost (“C1”) and all -in sustaining cost (“AISC”) of USD 0. 82/lb Zn and USD 1.05/lb Zn,
respectively, generating revenues of USD 388.6 million and pre-tax free cash flow of USD 99.6 million.
• Considered in the Project are synergies to be realized from the existing 2,500 tpd sulfide concentrator,
electrical power grid, pumping station, water treatment plant, tailings facility, and other infrastructure
from the existing Santander Magistral operation. Current on -going Magistral operation—mining and ore
processing—is not considered in the PEA study.
• The mineral resource estimate (“MRE”) to be mined considers Indicated Mineral Resource of 3.23 Mt with
6.94% Zn and Inferred Mineral Resource of 1.78 Mt with 5.95% Zn; while t he industrial circuit plans to
process an average of 770,000t of mineralized material per year (with peak production at 900,000 tonnes
year), with an average grade of 4.7% of Zn, 89% recovery and 51% in Zn concentrate grade.
• The Project is also set to benefit from significant potential resources, such as the Santander Pipe
mineralization above the 4020 level, estimated to contain some 3 to 4 million tonnes averaging 4 to 6% Zn,
and the newly discovered Pipe North zone.
“We are very pleased with the results of the PEA Study. The Santander Pipe is a compelling Project with robust
economics for at least 5-years with low cost. The PEA validates our consolidated expansion and operating plan
for the Santander operation.” said Jorge Lozano, CDPR’s Chief Operating Officer. “It outlines an updated life-
of-mine plan, significant near-term upside potential, and steps taken to further de-risk the Project and secure
financial performance.”
“Considering the economics of the study focuses only on the main area of the Santander Pipe, other technical
adjustments and the new exploration discoveries, the PEA exceeds previous projections and confirms the
transformative nature of the Santander Pipe P roject for the Santander Mine. The CAPEX for the Pipe project
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will be in part funded through proceeds from the ongoing operation, thus allowing flexibility as we evaluate
the best financing options for the project. The CDPR team continues to work diligently to maintain a strong
focus on capital discipline, optimization of operating costs, design improvements, and equipment
performance”.
Table 1. PEA Highlights
Unit TOTAL
Throughput Rate (tonne-per-day processed) tpd 2,500
Estimated Production Period years 5
Tonnes Processed Million tonnes 3.85
Head Grade Zn % 4.67
Metallurgical Recovery Zn % 89.0
Head Grade Cu % 0.11
Metallurgical Recovery Cu % 70
Zn Concentrate Production Thousand tonnes 313.6
Cu Concentrate Production Thousand tonnes 13.8
Revenues (less by product cost)(1) MUSD 388.6
Total OPEX MUSD 182.14
Initial + Sustaining CAPEX MUSD 67.96
EBITDA MUSD 167.6
Pre-Tax Free Cash Flow (FCF) MUSD 99.6
Operating Cost ($/t processed) $/t 47.35
Total Cash Cost C1(2) ($/lb Zn) $/lb 0.82
All-In Sustaining Cost(2) (“AISC”)1 ($/lb Zn) $/lb 1.05
Pre -Tax - Net Present Value (6%) MUSD 71.3
Pre-Tax Internal Rate of Return % 46.6
After-Tax - Net Present Value (6%) MUSD 31.2
After-Tax Internal Rate of Return % 25.1
After-Tax Payback years 2.6
(1) Long-term metal price assumptions are: US$2,800/t of Zn, US$1,820/t of Pb, US$9,002/t of
Cu, and US$22.0/oz of Ag
(2)Total cash cost C1 and AISC are non -GAAP measures; these parameters were estimated by
CDPR in accordance with its cost structure, the remaining parameters in the table come directly
from the PEA Financial Model prepared by DRA.
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PEA SUMMARY
The Project is part of the Santander Property (“the Property”) and is close to the active Magistral Mine, which
is a 2,500 tpd operation that has produced over 7.0 Mt @ 3 – 5% Zn, during 2013 – 2022. The Project used to
be the old Santander Mine owned and operated by Compañía Minerales Santander (CMS) from 1957 to 1992,
and according to historical records, produced over 8 million tonnes (Mt) @ 7% Zn with significant Pb-Ag content
and minor copper credits. The PEA determines 2 years of pre -production develop ment and a five -year
production schedule, with annual production average of 62.7 thousand tonnes of zinc concentrate at average
cash costs (“C1) and all-in sustaining costs (“AISC”) per tonne of zinc of US$0.82 and US$1.05, respectively.
• Santander Pipe Mineral Resource Estimate (MRE):
o Indicated Mineral Resources of 3.23 Mt @ 6.94% Zn and 0.17% Cu, with contained metal in the
order of 224 thousand tonnes of Zn and 5.5 thousand tonnes of Cu.
o Inferred Mineral Resources of 1.78 Mt @ 5.95% Zn and 0.15% Cu, with contained metal in the
order of 106 thousand tonnes of Zn and 2.7 thousand tonnes of Cu.
• The PEA describes additional geologic potential for the Project in two main components:
o The first upside potential is the Pipe North zone, an extension of the Santander Pipe mineral
corridor, discovered in June 2022. DRA reviewed the exploration and validated the discovery
of the Pipe North zone as a new exploration target. CDPR has budgeted more drilling for 2023
– 2024 to further explore and define the Santander Pipe North Extension, which is part of a 900
m long mineralization corridor that includes the Santander Pipe.
o The second upside potential comprises the unmined mineralization in the Upper Zone of the
Santander Pipe, within the old mined out areas. The PEA MRE does not consider this area due
to the old supporting information not being fully complemented and validated at the time of
this report; the area should be further characterized once CDPR has access to the old Santander
mine. Recent estimates indicate a potential resource of between 3 and 4 Mt in these upper
levels.
• The mine access trade -off study supports the option to dewater and rehabilitate the old La Cuñada
Shaft (“the Shaft”) for mineral hoisting, and the use of the ongoing Exploration Tunnel, from the
Magistral Mine to the Santander Pipe, to execute the underground drilling program for resource
definition and to mobilize personnel and equipment.
• The PEA supports the use of Avoca mining method with waste rock backfill and 20 and 15 m high
sublevels in the Upper and Lower Zones, respectively. This is based on the geometry of the mineralized
zones, geotechnical conditions, optimized stope recovery an d dilution, and increased productivity up
to 2,500 tpd production rate.
• The PEA metallurgical testwork indicates the possibility of upgrading the existing Santander Processing
Plant to accommodate the additional capacity requirements to process both the S antander Pipe and
Magistral Mine material. The upgrade of the Santander concentrator would involve the retrofit of
additional equipment to the existing Pb circuit which will allow this circuit to also produce copper
concentrate.
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• The PEA metallurgical testwork show that the quality of concentrate is similar to the one achieved
historically in the old Santander Mine. It is possible to obtain saleable commercial grade concentrates
with no significant presence of deleterious elements leading to penalty.
• The PEA supports the use of existing infrastructure to support the Project operation, i.e., processing
plant and TSF, power grid, magazines, drainage tunnel, workshops, roads, and auxilliary facilities.
Preparation of the PEA
The PEA was prepared independently by DRA Americas Peru (“DRA”), a subsidiary of DRA Global Limited (ASX:
DRA | JSE: DRA), a diversified global engineering, project delivery, and operations management group. The PEA
was prepared in accordance with the requ irements of National Instrument 43 -101 – Standards of Disclosure
for Mineral Projects and has an effective date of January 31, 2023. A Technical Report relating to the PEA,
prepared in accordance with NI 43-101, will be filled on www.sedar.com and posted on the Company’s website
within 45 days of this news release.
Updated Mineral Resource Estimate
The updated MRE is supported by the available drilling database comprising 306 historic drillholes (17,797 m)
and 41 drillholes (31,958 m) drilled by the previous owner between 2011 and 2021 . The mineral resource
statement of the Santander Pipe, with an effective date of June 30, 2022, is summarized in Table 2 below.
Table 2. Mineral Resource Statement of the Santander Pipe
Elevation
Zone Category Tonnage
(kt) Zn (%) Pb (%) Ag (g/t) Cu (%)
Between
4020 m and
3885 m
Indicated 1,656 7.5 0.03 15.6 0.11
Inferred ---- ---- ---- ---- ----
Below
3885 m
Indicated 1,569 6.34 0.003 11.2 0.23
Inferred 1,779 5.95 0.013 7.9 0.15
Total Indicated 3,225 6.94 0.017 13.5 0.17
Inferred 1,779 5.95 0.013 7.9 0.15
Notes:
1. Mineral Resources are reported above a US$40 NSR cut-off.
2. Metal prices used in the NSR calculations were US$3,000/t for Zn, US$2,200/t for Pb, US$9,300/t for
Cu, and US$25/oz for Ag.
3. NSR = (17.5 x %Zn) + (11.1 x %Pb) + (40.8 x %Cu) + (0.37 x g/t Ag), assuming recoveries of 90% for Zn,
70% for Pb, 60% for Cu and 50% for Ag.
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4. Two main mineralised zones are recognised at depth: (1) mineralized strata above 3,950 masl that has
been largely mined down to level 4,020 masl, and (2) mineralization below 3,850 masl outlined by the
deeper exploration drill holes.
5. The declared Mineral Resources at Santander Pipe are below an elevation of 4,020 masl where the old
mining operation did not reach production.
6. The Inferred Mineral Resource in this estimate has a lower level of confidence than that applied to an
Indicated Mineral Resource. While an Inferred Mineral Resource cannot be considered to be, or
converted into a Mineral Reserve, it is reasonably expected that the majority of the Inferred Mineral
Resource could be upgraded to an Indicated Mineral Resource with continued exploration.
7. The Mineral Resources in this Technical Report were estimated using the Canadian Institute of Mining,
Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions (2014)
and Best Practices Guidelines (2019) prepared by the CIM Standing Committee on Reserve Definitions
and adopted by the CIM Council.
8. The PEA MRE has been estimated by Mr. Graeme Lyall (QP).
9. The MRE has an effective date of June 30, 2022.
10. Resources are presented undiluted and in situ and are considered to have reasonable prospects for
economic extraction. Isolated and discontinuous blocks above the stated cut -off grade are excluded
from the mineral resource estimate. Must -take material, i.e. , isolated blocks below cut -off grade
located within a potentially mineable volume, was included in the mineral resource estimate.
11. Mineral Resources, which are not Mineral Reserves, do not have demonstrated economic viability. The
estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title,
taxation, sociopolitical, marketing, or other relevant issues.
The Mineral Resource model for the Santander Pi pe has been updated following observations and
recommendations made by DRA in January of 2022 as part of the previous NI 43-101 report on the Santander
Property. The current resource model for Santander Pipe was initially developed by CDPR . This model was
reviewed and revised with DRA to ensure that all aspects relating to the Mineral Resource Estimate comply
with CIM reporting standards.
3D Geological interpretations of the mineralized domains were completed using Leapfrog GEO software. Metal
grades were interpolated into blocks by ordinary kriging using Leapfrog’s EDGE block modelling module. The
Mineral Resources were classified into Indicated or Inferred using CIM definition standards and guidelines.
Levels with historic mining at Santander Pipe, above 4020 masl, are not included in the Mineral Resource.
Mineral Resources are reported above a Net Smelter Return (NSR) cut-off of US$40. The calculation of the NSR
factors in metal prices, recoveries, as well as treatment and refining charges and deductions. The numbers used
are based on recent production and processing of the Magistral mine products, and CDPR corporate guidance.
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Geological Setting and Mineral Resource Potential
Santander Pipe and Related Mineralization
The first upside potentia l is the Pipe North zone, an extension of the Santander Pipe mineral corridor,
discovered in June 2022. DRA reviewed the exploration and validated the discovery of the Pipe North zone as
a new exploration target. CDPR has budgeted more drilling for 2023 to further explore and define the Santander
Pipe North Extension, which is already established in a 900 m long mineralization corridor that includes the
Santander Pipe.
“CDPR has already elected to access this area where drilling during 2022 has intersected a continuation
of skarn mineralization to the north of the Santander Pipe. A tunnel is being mined southwards from the
Magistral mine, and with a view to eventually linking this tunne l with the Santander Pipe mine once it
has been dewatered. This tunnel will provide closer access for exploring this whole target area with
much shorter drill holes.
DRA geologists have also noted that during the process of reviewing satellite and geophysical imagery
of this general area, there is a circular geomorphological feature filled with scree material located close
to the north of the “Pipe North” area. Given that the Santander Pipe is not the only pipe-like deposit to
be found in this mining district, it is postulated that this scree material may be hiding a similar feature
to the Santander Pipe underneath. If economic mineralization were to be confirmed beneath this
location, mining from surface would be the easier option in terms of time and cost .” DRA Global—
Santander Pipe PEA (2023, Section 25.2.3.2, page 153).
The second upside potential comprises unmined mineralization in the Upper Zone of the Santander Pipe, within
the old mined out areas. The PEA Mineral Resource Estimation does not consider this area because it should
be further characterized once CDPR gets access to the old Santander mine. Recent and historic estimates
indicate a potential resource of between 3 and 4 Mt in these upper levels, averaging 4 to 6% Zn (see Figure 1).
This unclassified potential resource was estimated by depleting the PEA mineral resource block model with the
3D envelopes of the historic mined areas. Further work will be carried out to c onfirm the 3D envelopes of
historic mine voids, to determine the grade and tonnage of the remaining mineral resource, and to estimate
the mineable portion of this mineral resource.
“Historic cut-off grades were higher than current considerations, resulting in those materials that, under
current economic conditions, would be considered economic, were left unmined. Additionally, there
were other non -technical issues that anticipated mi ne closure in the early 90’s, and that would have
resulted in recoverable materials being left behind.
DRA considers that the recovery of potential economic mineralization in the historic mined areas
represents an opportunity to improve initial mining cash flows and the overall project economics.” DRA
Global—Santander Pipe PEA (2023, Section 14.8.2, page 125).
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Figure 1. North-facing section showing potential for additional mineral resource in historic mined
elevations: (a) estimated Zn content, (b) Mineral Resource Category
Geological Context
The Santander Property lies within the Central Peruvian Metallogenic Belt where the zinc mines and their
associated Pb-Ag production have represented 12%, 7%, and around 10% of the world´s zinc, lead, and silver
production, respectively, over the last two decades (USGS, 2001-2020). This tectonic segment of the Andean
Cordillera hosts numerous world -class ore deposits, such as Antamina and Iscaycruz, in a 120 km wide and
800 km long belt.
The Santander Property comprises Cretaceous carbonate and clastic sedimentary rocks that were tightly folded
into a series of northwest -trending anticlines and synclines, within a thrust -faulting structural context that,
along with the occurrence of magmatic activity and intrusive rocks (Eocene – Miocene), favored the
development of intrusion -related/carbonate-hosted polymetallic deposits. Amongst the local lithology, two
groups stand out: the massive and marly limestones of Jumasha and Chulec Formations, hosting both the
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Magistral Deposit (active operation) and the Santander Pipe mineralization, and the massive limestones of the
Santa Formation, hosting the Naty prospect, owned by CDPR.
Three mineralization trends lie within the Santander Property and are the source of past and current mining
operations and future resource potential (see Figure 2):
1. Magistral trend: Goes parallel to the Santander Fault—the largest structural feature of the Property—
and hosts the Magistral Deposits and prospects such as Blanquita, Blato, Los Toros, and Los Toros
Norte. The Magistral Mine has been active since 2013 and has produced ove r 6.7 Mt @ 3 to 5% Zn,
during 2013 – 2022.
2. Santander Pipe trend: Goes along one of the main anticlines, located at the eastern portion of the
Property, and hosts (i) the Santander Pipe and Pipe North Zn -Pb-Cu mineralization, (ii) the Puajanca
prospect Pb-Ag mineralization lying 900 m SW of the Romina Project (owned by a third party), and (iii)
the Natty prospect, located ~3 km North of the active Magistral Mine and containing a NW -SE strike
portion of the Santa Formation. Historical drilling carried out by Votorantim, in 2011, found
mineralization at 300 m depth within the Santa Formation, less than 900 m east of Naty. Furthermore,
surface exploration, carried out by Trevali, obtained outcrop chip samples with some sporadic grades
between 1.3 to 17.95% Zn grade in this area.
3. Romina trend: Goes along folded rocks across the northeast part of the Property and hosts the Romina
Project mineralization occurrences (Puagjanca, Esperanza , Adriana, and Andrea) and the Why Not
prospect, owned by a third party.