Southern Silver Announces Preliminary Economic Assessment on Cerro Las Minitas with After-Tax Net Present Value at a 5% Discounted Rate of US$349M, Internal Rate of Return of 17.9% and a 60 Month Payback
Southern Silver Announces Preliminary
Economic Assessment on Cerro Las Minitas
with After-Tax Net Present Value at a 5%
Discounted Rate of US$349M, Internal Rate of
Return of 17.9% and a 60 Month Payback
Vancouver, British Columbia--(Newsfile Corp. - August 29, 2022) -
Southern Silver Exploration Corp.
(TSXV: SSV) ("Southern Silver")
reports results from its Preliminary Economic Assessment ('PEA")
on its 100% owned Cerro Las Minitas project ("CLM").
PEA Highlights
(all figures in $US unless otherwise noted)
:
Robust Project Economics - Base Case:
after-tax
NPV5%
of
$349M
(C$450M) and
IRR
of
17.9%
(using Ag- $21.95/oz, Cu - $3.78/lb, Pb - $0.94/lb and Zn - $1.33/lb);
Excellent Silver and Zinc Price Leverage - Base-case +15%:
after-tax
NPV5%
of
$561M
(C$730M)
and
IRR
of
24.4%
(Ag- $25.24/oz, Cu - $4.35/lb, Pb - $1.08/lb and Zn - $1.53/lb);
Large-Scale Underground Mining Operation
with a
15-year mine life
with an annual average plant
feed of
14.2 Mozs
AgEq
(inc. 5.8 Mozs Ag) at an
AISC
of
$13.27/oz AgEq sold
;
High-Revenue Project:
Base Case gross revenues total
US$3.7B
with silver representing 42% of
revenues, zinc representing 39% of revenues. The project has an
Initial CapEx of $341M
and an NPV-
to-CapEx ratio of 1.0X;
Well Located Project
in a mining friendly jurisdiction with excellent infrastructure in southeast Durango
state, Mexico; and
Further Exploration Upside:
Drilling through to August 2022 has confirmed mineralized extensions to
the Mina La Bocona and Skarn Front deposits that have not been incorporated into the current Resource
Model. Other deposits remain open laterally and to depth and remain to be explored
Lawrence Page. Q. C. President, said:
"Cerro las Minitas is aptly named in Mexico as the "Hill of
Mines" and is located in the Faja de Plata or "Silver Belt" of northern Mexico where numerous silver
and base metal mines have been developed and are currently operating. This location is significant
since all the elements necessary to establish a mine are present in infrastructure, competent work
force, access to transportation, miner-friendly legislation, power and access to mills and smelters and
an environment amenable for year-round operations.
The PEA modelling is based upon a Mineral Resource Estimate prepared in late 2021 with data
derived from 171 drill holes. Since that time, twenty-four additional drill holes have been completed
resulting in the identification of a further 400 metres of mineralized strike-length and additional value
added. The property remains under-explored and the current PEA, with details disclosed in this news
release, presents the outline of a large-scale, underground, silver and base metal mine with robust
economics which can only grow larger and more valuable as drilling continues to define additional
high - grade mineralization.
Since acquisition of the property in 2010 and subsequent identification of the mineral resources, a
very profitable and valuable mine has been modelled in the results of the PEA disclosed today. Total
acquisition, exploration and development costs are approximately $35 million and significantly, the
property is not burdened with royalties, presenting potential financing opportunities for additional
drilling and development work on the property. This presentation of the results of the PEA marks a
significant milestone in the development of the property and 'the best is yet to come' ".
PEA SUMMARY:
Study support
The study is based on the Mineral Resource Update ("Resource") by KGL, as of October 27
th
2021, using a $60NSR/t cut-off:
Indicated - 12.3Mt
averaging
106g/t Ag, 0.16% Cu 1.3% Pb,
and
3.3% Zn
totaling
42.1Moz Ag, 44Mlb Cu, 358Mlb Pb and 895Mlb Zn
; and
Inferred - 19.6Mt
averaging
117g/t Ag, 0.23% Cu, 1.2% Pb
and
2.3% Zn
totaling
73.6Moz
Ag, 98Mlb Cu, 500Mlb Pb and 1,009Mlb Zn.
(see Appendices for Resource details)
Only sulphide mineralization was included in the study;
The PEA project team included Kirkham Geosciences Ltd. ("KGL"), M3 Engineering & Technology
Corp. ("M3"), Entech Mining Limited ("Entech"), and Metallurgical Process Consultants Limited
("MPC"); and
Base Case PEA metal price assumptions: Ag = $21.95/oz, Cu = $3.78/lb, Pb = $0.94/lb, Zn =
$1.33/lb.
Cautionary Statement
The PEA is preliminary in nature, it may include mineral resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable them
to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral
resources that are not mineral reserves have not demonstrated economic viability. The mineral
resources may be affected by subsequent assessment of mining, environmental, processing,
permitting, taxation, socio-economic, and other factors.
Project Economics
The CLM project demonstrates robust LOM revenues over 15 years of production and after-tax Net
Present Value at a 5% discounted rate (NPV5%) of $349M. Projected maximum cash outlay for the
project is estimated to be US$341M and project payback is approximately 60 months.
Table 1: CLM Project Economics
Item
Units
Base Case
Revenue
$M US
$3,705
Total Costs (excl. income tax and EBITDA
royalty)
$M US
$2,581
LOM pre-tax cash flow
$M US
$1,124
LOM after-tax cash flow
$M US
$696
NPV pre-tax (5% Discount)
$M US
$619
NPV pre-tax (10% Discount)
$M US
$336
IRR pre-tax
%
25.4%
NPV after-tax (5% Discount)
$M US
$349
NPV after-tax (10% Discount)
$M US
$156
IRR After Tax
%
17.9%
Max Cash Outlay
$M US
$341
Payback (discounted, after-tax)
months
60
After-Tax, Free Cash Flow
Figure 1 illustrates the estimated annual and cumulative after-tax cash flow over the life-of-mine ("LOM").
Mine scheduling targets higher margin mineralization in the first eight years of production leading to a
more aggressive paydown of capital and improved economics.
Figure 1: Annual and LOM after-tax Cash Flow
To view an enhanced version of this graphic, please visit:
https://images.newsfilecorp.com/files/5344/135230_a6c73f215430abf0_003full.jpg
Economic Sensitivities
The Project's gross revenues, NPV5% and IRR shows greatest sensitivity to metal prices.
Table 2: Gross Revenue, NPV5% and IRR sensitivity at base-case and +/- 15% pricing
All Metal Price (Ag, Cu, Pb, Zn) Sensitivity
Metal Price
Revenue (US$M)
NPV, after tax @ 0% (US$M)
NPV, after tax @ 5% (US$M)
IRR, after Tax
Base Case
$3,705
$696
$349
17.9%
+15%
$4,261
$1,024
$562
24.4%
-15%
$3,149
$368
$137
10.6%
Note: Base Case price assumes Ag = $21.95/oz, Cu = $3.78/lb, Pb = $0.94/lb, Zn = $1.33/lb
Other factors that may impact the NPV sensitivity include changes in silver and zinc metal recoveries,
OpEx and Initial Capital. These relative impacts together with changes in silver and zinc prices are
shown in Table 3 and Figure 2.
Table 3: NPV sensitivity as a function of select metals prices, recoveries, CapEx and OpEx:
Sensitivity NPV @ 5%, after Tax (US$M)
Sensitivity
Silver Price
Zinc Price
Silver in Pb
Recovery
Zinc Recovery
Initial Capital
OPEX
20%
$468
$460
$286
$240
15%
$438
$432
$302
$268
10%
$408
$404
$405
$387
$318
$295
5%
$379
$377
$377
$368
$333
$322
0%
$349
$349
$349
$349
$349
$349
-5%
$320
$321
$321
$330
$365
$376
-10%
$290
$294
$293
$311
$381
$403
-15%
$260
$266
$265
$292
$396
$431
-20%
$231
$239
$236
$273
$412
$458
Note: +15% and +20% Silver and Zn recoveries are not applicable
Figure 2: After-tax NPV5% sensitivities
To view an enhanced version of this graphic, please visit:
https://images.newsfilecorp.com/files/5344/135230_a6c73f215430abf0_006full.jpg
Production and Costs:
Potential annual mine production is estimated to deliver 14.2 Moz AgEq (includes 5.8 Mozs Ag) to the
processing facility averaged over a 15-year period. Potential annual saleable product in concentrate,
which excludes treatment and refining, is estimated to average 12.7 Moz AgEq (includes 5.3 Moz Ag)
with annual product of sales (net deductions, treatment and refining) averaging 11.3 Moz AgEq (includes
4.7 Mozs Ag).
Peak annual Plant Feed is achieved in Year 8 with 22.7 Mozs AgEq (includes 8.2 Moz Ag) being mined
with peak annual saleable product in concentrate of 20.7 Moz AgEq (includes 7.5 Moz Ag), and peak
annual product of sales of 18.0 Moz Ag Eq (includes 6.7 Moz Ag). Table 4 summarizes the estimated
metal production from the CLM project.
Table 4: CLM LOM Production and Metal Sales
Units
Y1-8
LOM
AgEq Plant Feed (Yearly Average)
(Moz)
16.8
14.2
AgEq Saleable Product (Yearly
Average)
(Moz)
15.2
12.7
AgEq Product of Sales (Yearly
Average)
(Moz)
13.4
11.3
AgEq Plant Feed (Total)
(Moz)
134.8
213.6
AgEq Saleable Product (Total)
(Moz)
121.4
190.4
AgEq Product of Sales (Total)
(Moz)
107.5
168.8
All-In Sustaining Cost (AISC)
(US$/AgEq oz)
$12.73
$13.27
includes Contained Silver
Units
Y1-8
LOM
Ag Plant Feed (Yearly Average)
(Moz)
6.9
5.8
Ag Saleable Product (Yearly
Average)
(Moz)
6.3
5.3
Ag Product of Sales (Yearly
Average)
(Moz)
5.6
4.7
Ag Plant Feed (Total)
(Moz)
55.2
86.4
Ag Saleable Product (Total)
(Moz)
50.6
79.1
Ag Product of Sales (Total)
(Moz)
45.2
70.8
Note: AgEq was determined assuming only base case metal pricing
Mine Schedule and All-In-Sustaining-Cost (AISC)
Mine scheduling targets higher value silver-lead production in the first 8 years of mine life with lower
AgEq grading material (zinc-copper dominant) being targeted in the final 7 years. Total plant feed (mine
production) is estimated to be 213.6 Mozs AgEq (includes 86.4 Mozs Ag) with 168.8 Moz AgEq
(includes 70.8 Moz Ag) being sold. Total all-in sustaining costs ("AISC") are estimated to be $US 2.24B,
averaging $US 91.61/t mined or $US10.49/oz AgEq plant feed, US$11.76/oz AgEq for saleable product
and $US13.27/oz AgEq sold. LOM production and AISC are illustrated in Figure 3.
Figure 3: LOM AgEq sales and AISC:
To view an enhanced version of this graphic, please visit:
https://images.newsfilecorp.com/files/5344/135230_a6c73f215430abf0_008full.jpg
OPERATIONS:
Mining:
The mine plan was completed by Entech and incorporates longitudinal and transverse longhole stoping
methods. Two separate portals are proposed to access the various deposits, with one portal accessing
the Blind-El Sol and Skarn Front deposits, and a second portal accessing the La Bocona and South
Skarn deposits. The process in creating the mine plan is further described below:
Datamine® Mineable Stope Optimizer ("MSO") was used to produce shapes for mine planning
purposes. The Resource model from October 27, 2021 by Kirkham Geosciences Ltd. was used
for the evaluation and MSO analyses considered a preliminary cut-off value of $US 64/t NSR;
MSOs considered minimum mining width of 3.0 m minimum mining width (inclusive of 1.0 m width
for unplanned dilution in rock), 25 m sub-levels, and 20 m strike lengths;
A total of 24.5 million tonnes averaging $US 128/t NSR (109 g/t Ag, 0.20 % Cu, 1.07 % Pb, and
2.57 % Zn) was sent to the processing facility, representing a conversion of approximately 78% of
the Resource at a $US 64/t cut-off value;
Depending on the width of the stope and the strike of continuous sections of wider zones,
transverse stoping was selected and mined bottom-up. For predominately narrower zones
(typically less than 18m) longitudinal stoping was selected and mined either top-down or bottom-up
depending on location and timing of development. Overall, the average stope width by tonnage
was 16.5 m;
Detailed geotechnical analysis including hydrogeological modelling is to be completed in further
studies of the deposit. The assumptions made for the study included that longhole stoping would
be an appropriate method for this Preliminary Economic Assessment. An equivalent linear
overbreak slough (ELOS) was assumed to be 1.0m (0.5m from each wall) and additional dilution
for mining of backfill was considered. Backfill dilution was varied depending on exposure, with
1.0m considered from the backs (top-down), 0.25m from the floor (bottom-up), 0.5m from the far
wall (longitudinal stoping), and 0.5m from one adjacent wall (transverse stoping mined centre-out);
A stope recovery factor of 93% and development recovery factor of 97% was considered.
The grade and average stoping widths are illustrated in Figure 4 and Figure 5 respectively.
Figure 4: US$NSR/t grade distribution of the Cerro Las Minitas MSO model - looking northeast
To view an enhanced version of this graphic, please visit:
https://images.newsfilecorp.com/files/5344/135230_a6c73f215430abf0_009full.jpg
Figure 5: Average Stope Width of the Cerro Las Minitas MSO model - looking northeast
To view an enhanced version of this graphic, please visit:
https://images.newsfilecorp.com/files/5344/135230_a6c73f215430abf0_010full.jpg
Processing:
The process plant for the base-case PEA-level study is a conventional sulphide flotation system
consisting of:
Primary crushing, a 15,000 tonnes ROM stockpile, reclaim and secondary crushing, closed-circuit
ball mill grinding and sequential Cu-Pb-Zn (each with rougher-regrind-cleaner stages) flotation
circuit producing three filtered concentrates for sale;
Sulphide tails are dry sequestered for potential future recovery of refractory gold;
Barren tailings to Paste Plant for underground mine cement backfill with the surplus, dry-stacked to
surface
Design Annual Throughput of 1,642,500 tonnes based on nominal 4,500 tpd throughput and 5,500
tpd instantaneous throughput. (92% availability LOM).
Head grades:
MSO scheduling successfully prioritized higher grade material to the mill earlier in the mine life resulting
in higher heads grades (and associated annual revenue) in the first eight years of production as
compared to the final 7 years.
Similarly, processed tonnes averages 1.79 million tonnes in the first eight years of mine life and 1.44
million tonnes in the final 7 years.
Table 5: Head grade over Yr1-8 and LOM
HEAD GRADES
Units
Y1-8 Average
LOM
Avg. Annual Plant Feed
(kt)
1,791
1,630
Ag
(g/t)
120
110
Cu
(%)
0.14
0.20
Pb
(%)
1.4
1.1
Zn
(%)
2.8
2.6
AgEq
(g/t)
293
272
Recoveries and Tailings:
Only sulphide mineralization was included in the mine model. Average grades are reported above.
A series of Batch/Locked cycle testwork/variability testwork programs conducted between 2018
and 2022 confirmed that the Cu-Pb-Zn sequential flotation flowsheet would be appropriate for
processing all the sulphide mineralization from the deposit.
Circuit design based on high Eh stainless grinding media and optimised reagent selection for
sequential flotation which maximizes base metal grades and recoveries while minimizing
misplacement of base metals to other concentrates.
While mining progresses through various geo-metallurgical ore types, the plant is designed to
handle wide variations in both grade and sulphide mass pull. The LOM data indicates that 75% -
80% of the mined tonnage is Skarn Front type ore, and the tabled grades reflect this averaging.
Recent testwork confirmed that arsenic elimination from the zinc circuit allows generation of a
pyrite/arsenopyrite-rich concentrate containing 80% of the ROM gold to be produced. This material
is to be filtered and sequestered for possible future recovery of the refractory gold.
Non-sulphide tailings surplus to the backfill requirements are dry stacked in a suitable area some
1000m NW of the process plant.
CONCENTRATE TERMS:
Metal Payables
The project is expected to produce three clean, high-quality concentrates with minimal penalty elements
as established in Southern Silver's metallurgical test work. Southern Silver utilized Industry standard