Positive Feasibility Results Establish Cordero as One of the World’s Leading Development-Stage Silver Projects
Positive Feasibility Results Establish Cordero as One of the World’s
Leading Development-Stage Silver Projects
February 20, 2024 , Toronto, Ontario - Discovery Silver Corp. (TSX: DSV, OTCQX: DSVS F)
(“Discovery” or the “Company”) is pleased to announce results from the Feasibility Study (“FS” or “the
Study”) on its 100%-owned Cordero silver project (“Cordero” or “the Project”) located in Chihuahua State,
Mexico. Highlights include (all figures are in US$ unless otherwise noted):
• Large-scale, long-life production: 19-year mine life with average annual production of 37 Moz AgEq
in Year 1 to Year 12.
• Low costs, high margins & low capital intensity: average AISC of less than $12.50 over the first
eight years of the mine life placing Cordero in the bottom half of the cost curve.
• Low capital intensity: initial development capex of $606 million resulting in an attractive after -tax
NPV-to-capex ratio of 2.0.
• Attractive project economics: Base Case after-tax NPV5% (“NPV”) of $1.2 billion and IRR of 22%
with NPV expanding to $2.2 billion in Year 4.
• Tier 1 reserve base : Reserves of Ag - 302 Moz, Au - 840 koz, Pb – 3.0 Blb and Zn – 5.2 Blb,
positioning Cordero as one of the largest undeveloped silver deposits globally.
• Clear upside potential: 240Mt of Measured & Indicated Resource sit outside the FS pit highlighting
the potential to materially extend the mine life at modestly higher silver prices.
• Substantial socio-economic contribution: an initial investment of over $600 million, 2,500 jobs
created during construction, $ 4 billion of goods and services purchased and estimated tax
contributions of over $1.4 billion within Mexico.
• Industry-leading environmental standards : third-party review s of proposed environmental
practices to ensure adherence to both Mexican regulatory standards and E quator Principles 4. The
Study also incorporates investment in infrastructure and technology to recycle wastewater from local
communities with discharged water representing the primary source of water for mine operations.
Tony Makuch, CEO, states: “Our Feasibility Study has delivered outstanding results that clearly establish
Cordero as one of the world’s leading development -stage projects. Cordero is the largest undeveloped
silver project globally based on both reserves and annual production and has low unit costs in support of
high margins and substantial cash flow generation. Cordero is also extremely capital efficient, with an
initial NPV to Capex ratio of 2.0x, with the NPV almost doubling to over $2 billion by year four following
completion of the Phase 2 mill expansion that is primarily funded by internal cash flow . With more than
300 Moz of silver reserves, a mine life of close to 20 years and significant extension potential, Cordero
is uniquely positioned to play a key role in closing market deficits in the silver space and in supplying
future consumption in high-growth areas including the battery vehicle and solar power sectors.
NEWS RELEASE
“Importantly, Cordero will have a major positive socio-economic impact locally in Parral, in the Chihuahua
region and at the national level. Cordero will create up to 2,500 jobs during the construction period, 1,000
direct jobs over the mine life, will purchase in excess of $4 billion of goods and services from local and
regional suppliers, and will generate $ 1.4 billion of tax revenues at all levels of government. As part of
our proactive approach to water management, we also plan to invest in infrastructure and technology that
will support recycling of wastewater produced from local communities for use as our primary source of
water for the Project. Our team in Mexico has already won numerous awards for social responsibility,
environmental protection and workplace culture and we look forward to expanding on these efforts as
part of our commitment to the sustainable development of Cordero and our adherence to the highest
industry standards for environmental protection, water management, social responsibility and health and
safety.”
The Company will be hosting a Conference Call to present the FS results on Tuesday February 20, 2024,
at 11:00am ET. A presentation by management will be followed by Q&A. The webcast can be accessed
at the following link: Webcast Link
FEASIBILITY STUDY SUMMARY
Project Economics
The economics for the FS were based on the following metal prices: Ag - $22.00/oz, Au - $1,600/oz, Pb
- $1.00/lb and Zn - $1.20/lb. A 10% increase in metal prices results in a 40% increase in the Project NPV
to over $1.6 billion. The payback is 5.2 years due to the expansion of the processing plant from 26,000
tpd to 51,000 tpd in Year 3 at a capital cost of $291 million. This expansion will be funded from operating
cash flow. Completion of the expansion in Year 3 results in a peak Project NPV of $2.2 billion in Year 4.
Units Base Case
Base Case
Metal Prices
+10%
Base Case
Metal Prices
-10%
After-Tax NPV (5% discount rate) (US$ M) $1,177 $1,647 $707
Internal Rate of Return (%) 22.0% 27.2% 16.1%
Payback (yrs) 5.2 4.3 6.5
Note – refer to Appendix C for a more detailed sensitivity analysis.
Production & Costs
Annual production over the life-of-mine (“LOM”) is expected to average 33 Moz AgEq. In Years 5 – Year
12 production averages more than 40 Moz AgEq with peak production in Year 8 of 64 Moz AgEq. These
production levels position Cordero as one of the largest primary silver mines globally. All -In Sustaining
Costs (“AISC”) average less than $13.50/oz AgEq over the LOM. These costs were effectively flat in
comparison to the PFS due to cost inflationary pressures being offset by improved silver payabilities and
reagent cost reductions.
Units Year 1 – 4
(Phase 1)
Year 5 – 12
(Phase 2)
Year 13 -19
(Phase 2) LOM
AgEq Produced – Average/yr1 (Moz) 29 40 28 33
AgEq Payable – Average/yr (Moz) 26 35 24 29
AgEq Produced - Total (Moz) 116 323 196 635
AgEq Payable - Total (Moz) 102 279 169 550
All-In Sustaining Cost (AISC)2 (US$/AgEq oz) $13.22 $13.01 $14.36 $13.47
1. AgEq Produced is metal recovered in concentrate. AgEq Payable is metal payable from concentrate and incorporates metal payment
terms outlined in the Concentrate Terms section below. AgEq is calculated as Ag + (Au x 72.7) + (Pb x 45.5) + (Zn x 54.6); these factors
are based on metal prices of Ag - $22/oz, Au - $1,600/oz, Pb - $1.00/lb and Zn - $1.20/lb.
2. AISC is a non- GAAP measure; refer to the Non- GAAP Measures section of the release for further information on this measure. See
Technical Disclosure section for AISC calculation methodology.
LOM Production
Note – Au/Pb/Zn production is shown on an AgEq basis based on: Ag = $22/oz, Au = $1,600/oz, Pb = $1.00/lb and Zn = $1.20/lb
Study Project Team
The FS was supported by a high-quality project team consisting of the following groups:
• Study lead: Ausenco Engineering Canada ULC (“Ausenco”)
• Metallurgical testwork: Blue Coast Research under the supervision of Libertas Metallurgy Ltd ,
Sacanus Holdings and Ausenco
0
10
20
30
40
50
60
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15 Y16 Y17 Y18 Y19 Y20
AgEq Produced (Moz)
Ag Au Pb Zn
• Resource estimation: RedDot 3D Inc . in conjunction with RockRidge Consulting and third-party
review by Hardrock Consulting, LLC
• Process & infrastructure design: Ausenco and M3 Mexicana S. de R.L de C.V.
• Mine planning & costing – AGP Mining Consultants Inc. with third-party review by Hard Rock
Consulting LLC
• Tailings design, hydrogeology and geotechnical – WSP USA Inc.
• Environmental: Ausenco, Investigacion Y Desarrollo De Acuiferos Y Ambiente and CIMA
Consultores Ambientales
Next Steps
The following work is planned for 2024 with the objective of reaching a construction decision later this
year or early 2025.
• Front-end Engineering Design (“FEED”): FEED engineering work consists of early project planning
and advancement of engineering definition and will enable the Company to place orders for long lead-
time items and to award the EPC/EPCM contract for the development of the Project.
• Permitting: the Company formally submitted for evaluation its Environmental Impact Assessment
(“Manifestacion de Impacto Ambiental ” or “MIA”) in August 2023. The review process for the MIA
submission by Secretaría de Medio Ambiente y Recursos Naturales (“SEMARNAT”) is ongoing. The
other principal permit required for construction and operation of Cordero is the Change of Land Use
(“Cambio de Uso de Suelo” or “CUS”). Formal submission of the CUS is expected to be made by the
third quarter of 2024.
• Project financing: the Company plans to progress all financing options for the Project through the
course of 2024. These options include equity, debt, offtake, joint ventures, partnerships, lease
financing on major equipment, streams, royalties and other strategic alternatives.
• Water management: a scoping study was completed for the FS to upgrade local water treatment
plants in the region and for the construction of a water pipeline to site. Further engineering work on
the plant upgrade is expected to be completed through the course of the year.
• Key de- risking items: the Company also plans to advance during the year the acquisition and
leasing of surface rights where appropriate and permitting for the land, power and water required for
the development and operation of Cordero.
Further details on the Company’s 2024 work program can be found in the news release dated January
24, 2024, and filed under the Company’s profile on www.sedarplus.ca.
Resource Update
In conjunction with the FS, the Mineral Resource Estimate for Cordero has been updated to incorporate
an additional 33,400 m of drilling (total drilling of 310,900 m in 793 drill holes). The Measured & Indicated
Resource has grown by 70 Moz AgEq to 1,202 Moz AgEq with the Inferred Resource being reduced by
12 Moz AgEq to 155 Moz AgEq as summarized below. The overall expansion of the resource was largely
driven by exploration success at depth and in the northeast part of the deposit.
• Measured & Indicated Resource of 1,202 Moz AgEq at an average grade of 52 g/t AgEq (719 Mt
grading 21 g/t Ag, 0.06 g/t Au, 0.31% Pb and 0.60% Zn)
• Inferred Resource of 155 Moz AgEq at an average grade of 32 g/t AgEq (149 Mt grading 14 g/t
Ag, 0.03 g/t Au, 0.18% Pb and 0.35% Zn)
Mineral resources that are not mineral reserves do not have demonstrated economic viability . Further
details on the Resource including all supporting technical disclosure are outlined in Appendix A.
CAPITAL EXPENDITURES
Cordero is a very capital-efficient project due to numerous underlying advantages:
• Staged expansion of the process plant
• Simple and conventional process design
• Minimal earthworks due to gentle topography, the location of bedrock near -surface and
favourable geotechnical characteristics of the bedrock
• M inimal early mine development and pre-stripping resulting from the deposit extending to surface
• Close proximity to existing infrastructure including nearby highway and adjacent powerline
• Favourable mining jurisdiction with access to a highly skilled local workforce and no need for a
camp given the proximity of the town of Parral approximately 40 km to the south
Initial Capital (to achieve plant throughput of 9.6 Mt/a)
Initial capital to build Cordero Phase 1 is estimated to total $606 million and will be incurred over a two-
year construction period. This capital estimate includes Phase 1 of the process plant with nameplate
capacity of 9.6 Mt/a (~26,000 tpd) , the construction of on-site infrastructure, a power transmission line,
the upgrade of the local water treatment plant and water pipeline, all pre- stripping activities and
construction of the TSF starter dam that will provide 3 years of initial tailings storage.
Contingency for the initial capital estimate averages 12% and is applied to direct and indirect costs .
Owners costs represent 2. 3% of d irect costs. I ndirect costs represent 16 % of d irect costs. These
proportions are in-line with typical industry averages and are consistent with a cost base for a greenfield
project build in Mexico and commensurate with the level of complexity of the project build.
Expansion Capital (to expand plant to 19.2 Mt/a)
The processing facility will be expanded to a nameplate capacity of 19.2 Mt/a (~ 51,000 tpd) at an
estimated cost of $291 million. Most of the costs associated with the expansion will be incurred in Year
3. The expansion includes the addition of parallel grinding and flotation circuits, additional on- site
infrastructure and a tailings dam lift that is concurrent with plant expansion.
An expansion of the flotation circuit is planned for Year 7 at a cost of $ 17 million to accommodate an
increase in zinc grades.
Sustaining Capital
Sustaining capital over the LOM totals $388 million (excluding closure costs net of salvage). This includes
$221 million to be spent on tailings management facility expansions with the remainder to be spent on
mine equipment, the process plant, mobile equipment and replacements/refurbishments of infrastructure
assets. Sustaining capital for the process plant has been classified as operating costs under the
maintenance category . Sustaining capital for mining only includes down payments on replacement
equipment with the remaining lease costs classified as mine operating costs.
DESCRIPTION (all in US$ millions) INITIAL
CAPITAL
EXPANSION
CAPITAL
SUSTAINING
LOM CAPEX
TOTAL LOM
CAPEX
CAPITAL EXPENDITURES
Mining $117 $2 $110 $229
Onsite Infrastructure $44 $14 - $57
Processing Plant $210 $148 - $359
Tailings Facility (TSF) $28 $60 $221 $310
Offsite Infrastructure $57 - $16 $73
Indirects $73 $44 $11 $128
Owners Costs $11 $4 - $14
Contingency $65 $37 $31 $133
Closure costs / Salvage value - - $75 $75
Capital Expenditures - Subtotals $606 $309 $463 $1,377
OPERATIONS
Mining
The mine plan incorporates accelerated stripping as well as stockpiling of low-grade material to optimize
the grade profile over the LOM.
• The mine plan is based on a detailed mine design that incorporates mining dilution, ore loss, safety
berms and haul roads.
• Following a steady ramp up period, the mining rates over the life of the mine are relatively consistent
at approximately 70 Mt/a.
• T he ultimate pit contains 1,042 Mt in total consisting of 327 Mt of ore, 696 Mt of waste and 19 Mt of
stockpiled oxide material above cut-off. The average strip ratio is 2.0:1 and is even over the LOM.
• Pit slope designs were based on eight geotechnical core holes and logging of core from exploration
core holes.
Processing
Processing was broken into two main phases to optimize the capital efficiency of the project. Oxides and
sulphides are co-processed up to a maximum oxide tonnage proportion of 15% of total mill feed.
• Phase 1 throughput (Year 1 to Year 4): Year 1 is a ramp up year with throughput at 80% of nameplate
capacity of 9.6 Mt/a (~26,000 tpd). Year 4 is a transition year to Phase 2 throughput levels. Oxides
represent 1% of mill feed during Phase 1.
• P hase 2 throughput (Year 5+): Nameplate capacity of 19.2 Mt/a (51,000 tpd)
• Process design
− Phase 1: primary crushing, grinding (SAG and ball milling to a targeted grind size of 200 micron)
and two-stage flotation to produce Precious Metals and Zn concentrates.
− Phase 2: addition of parallel grinding and flotation circuits.
Head grades
The mine plan focuses on feeding higher grades to the mill earlier in the mine life:
• Year 1 – 4: processing of higher-grade sulphide material predominantly from the Pozo de Plata zone
• Year 5 – 16: processing of higher-grade sulphides from the NE Extension and the South Corridor
• Year 17 – 19: processing of mostly lower-grade stockpiled material
TONNES PROCESSED / HEAD
GRADES UNIT PHASE 1 PHASE 2 LOM Year 1 – 4 Year 5 – 12 Year 13 – 19
Oxide tonnes processed (Mt) 0 6 14 20
Sulphide tonnes processed (Mt) 45 143 119 307
Tonnes processed (Mt) 45 149 132 327
Head Grades
Ag (g/t) 42 30 23 29
Au (g/t) 0.19 0.07 0.06 0.08
Pb (%) 0.57 0.44 0.32 0.41
Zn (%) 0.67 0.86 0.58 0.72
AgEq (g/t) 99 81 58 74
Recoveries
Metal recoveries to the two concentrates are based on the three rounds of detailed metallurgical testwork
completed by the Company and are summarized below:
METALLURGICAL RECOVERIES
(weighted average)
PHASE 1 PHASE 2 LOM Year 1 – 4 Year 5 – 12 Year 13 – 19
Ag 91% 87% 81% 87%
Au 28% 28% 28% 28%
Pb 91% 88% 81% 86%
Zn 84% 86% 84% 85%
Tailings Storage Facility (TSF)
• The TSF was designed adhering to design criteria to minimize risk for its lifecycle in accordance with
the Global Industry Standard on Tailings Management (“GISTM”).
• The design is based on deposition of high-density thickened tailings into a tailings storage facility that
utilizes the ‘downstream expansion’ embankment construction method.
• The TSF is located directly eas t of the open pit . The design incorporates a total of five dam stages
over the LOM (starter dam and four downstream expansions).
• Total capacity of the TSF is greater than the estimated volume requirement of 327 Mt generated by
the FS mine plan and additional downstream expansion can be incorporated to store additional
tailings if required.
OPERATING COSTS
Operating costs are summarized in the table below.
PARAMETER UNITS FS COST
OPERATING COSTS
Mining $/t mined 2.35
Mining $/t milled 7.35
Processing – Milling (Phase 1) $/t milled 6.56
Processing – Milling (Phase 2) $/t milled 6.24
Site G&A (Phase 1) $/t milled 0.97
Site G&A (Phase 2) $/t milled 0.54
Mining
• Mining is assumed to be owner-operated with lease financing. Estimated mining costs were built from
first principles. The cost of diesel was assumed to be $1.15/L compared to $1.10/L in the PFS.
• The lease financing structure assumes a 25% initial deposit, a term of five years and an annual lease
financing cost of 10.2%.
Processing
• Processing costs for the crushing/milling/flotation/concentrate dewatering, and G&A costs were
developed from first principles.
• P rocessing costs benefit from a conventional grinding and flotation concentrator process design, low
power unit costs, a targeted coarse grind size of 200 micron, relatively low cost of labor, and
economies of scale.
G&A
• G&A costs estimates are based on a small management camp and administration offices at site. The
majority of the work force will be Mexican nationals commuting daily from the town of Parral. Parral