Southern Silver Announces Updated PEA on Cerro Las Minitas: US$501M After-Tax NPV5%; 21% IRR; 48 Month Payback
Southern Silver Announces Updated PEA on
Cerro Las Minitas: US$501M After-Tax NPV5%;
21% IRR; 48 Month Payback
Vancouver, British Columbia--(Newsfile Corp. - June 10, 2024) -
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
1
:
after-tax
NPV5%
of
$501M
(C$682M) and
IRR
of
21.2%
with a
48-month
payback;
Excellent Silver and Zinc Price Leverage - Base-case + 20% Metal Prices
2
:
after-tax
NPV5%
of
$876M
(C$1,193M) and
IRR
of
30.1%
with a
37-month
payback;
1
.
Base Case Metal Prices: Ag- $23.00/oz, Au - $1850/oz, Cu - $4.00/lb, Pb - $1.00/lb and Zn - $1.25/lb
2
.
Base Case +20% metal prices: Ag- $27.60/oz, Au - $2220/oz, Cu - $4.80/lb, Pb - $1.20/lb and Zn - $1.50/lb
The 2024 Preliminary Economic Assessment features:
A Large-Scale Underground Mining Operation
with a
17-year mine life
and an annual
average plant feed of
14.3 Mozs
AgEq
3
(inc. 5.8 Mozs Ag) and life-of-mine (LOM) feed totalling
243.2 Mozs AgEq
3
; (inc. 98.6 Mozs Ag). LOM product sales total
194.3Mozs AgEq
3
at an
AISC
of
$13.23/oz AgEq
3
sold
;
A High-Revenue Project
with gross revenues totalling
$4.47B
with silver and gold representing
45% of revenues, and zinc representing 35% of projected revenues. The project has an
Initial
CapEx of $388M
, an
NPV5%-to-CapEx
ratio of
1.3X
and a paydown of 48 months on a post-tax
basis; and
A Well-Located Project
in a mining friendly jurisdiction with excellent infrastructure in southeast
Durango state, Mexico;
3
.
AgEq is calculated on a (contained metal x metal price)/ Ag price basis
In comparison to the earlier 2022 economic model, the updated PEA now:
Increases the Life of Mine (LOM) production by
5Mt
, representing an approximate 20% increase;
Increases daily mine production capacity to
5300 tonnes per day ("tpd")
, representing an
approximate 18% increase;
Extends the mine life by
2.6yrs
;
Increases the LOM Revenue by
$765M
, representing an approximate 17% increase in revenues.
Increases the after-tax NPV5% by 45% to
$501M
; and
Similarly, increases the post-tax IRR by 3.3% to
21.2%
Lawrence Page. K. C. President, said:
"This latest economic update of Cerro Las Minitas represents a
new milestone in the ongoing evolution and development of the project which is the culmination of a
number of smaller technical improvements, developed over the last 18 months, which together result
in a significant increase in the value of the Cerro Las Minitas asset. This includes the addition of new
mineral resources from the North Felsite zone as first reported in March 2023; the standardization of
the metallurgical recoveries and charges across each of the deposits, including the addition of gold
revenues into the project cash-flow; improvements in the mine scheduling and optimization both the
Operating and Capital costs of the project."
"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 US$28 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 an updated Mineral Resource ("Resource") by KGL, as of March 20
th
2024,
using a $60NSR/t cut-off:
Indicated - 13.3Mt
averaging
102g/t Ag, 0.07g/t Au, 0.17% Cu 1.3% Pb,
and
3.1% Zn
totaling
43.4Moz Ag, 32Koz Au, 49Mlb Cu, 374Mlb Pb and 921Mlb Zn
; and
Inferred - 23.4Mt
averaging
111g/t Ag, 0.14g/t Au, 0.21% Cu, 1.1% Pb
and
2.1% Zn
totaling
83.4Moz Ag, 104koz Au, 111Mlb Cu, 582Mlb Pb and 1,106Mlb Zn.
(see Appendices for Resource details, price and recovery assumptions)
The PEA project team included Kirkham Geosciences Ltd. ("KGL"), Ausenco Engineering USA
South Inc and Ausenco Sustainability ULC. ("Ausenco"), Entech Mining Limited ("Entech"), and
MPC Metallurgical Process Consultants Limited ("MPC");
PEA metal price assumptions: Ag = $23.00/oz, Au = $1850, Cu = $4.00/lb, Pb = $1.00/lb, Zn=
$1.25/lb;
Terms: Net Present Value at a 5% discount ("NPV5%"); Internal Rate of Return ("IRR"); Operating
Costs ("OpEx"); and Capital Costs ("CapEx"), All-in Sustaining Costs ("AISC")
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 17 years of production and after-tax NPV5%
of $501M. Total Capital Expenditure for the project is $565M which requires $388M of initial capital
expenditure and $177M in sustaining and closure capital. The project payback is 48 months.
Table 1: CLM Project Economics
Item
Units
Base Case
Revenue
US $M
$4,470
EBITDA
US $M
$2,076
LOM pre-tax cash flow
US $M
$1,512
LOM after-tax cash flow
US $M
$923
NPV pre-tax (5% Discount)
US $M
$887
NPV pre-tax (8% Discount)
US $M
$648
NPV pre-tax (10% Discount)
US $M
$525
IRR pre-tax
%
30.0%
NPV after-tax (5% Discount)
US $M
$501
NPV after-tax (8% Discount)
US $M
$340
NPV after-tax (10% Discount)
US $M
$258
IRR After Tax
%
21.2%
Initial Capital Expenditures
US $M
$388
Payback (discounted, after-tax)
months
48
After-Tax, Free Cash Flow
Figure 1 illustrates the estimated annual and cumulative after-tax cash flow over the life-of-mine for both
the Base Case (blue) and the Base Case +20% metal values (grey). Mine scheduling targets higher
margin mineralization in the first eight years of production resulting in a more aggressive paydown of
capital and improved economics with an annual average After-tax Free-cashflow of $107M in the first
eight years of production and $78M over the life-of-Mine.
Figure 1: Annual and LOM cashflow
To view an enhanced version of this graphic, please visit:
https://images.newsfilecorp.com/files/5344/212164_12aa046c341ee9e3_002full.jpg
Economic Sensitivities
The Project's gross revenues, NPV5% and IRR shows greatest sensitivity to metal prices.
Table 2: Gross Revenue, NPV5% and IRR sensitivity at base-case +/- 20% and current pricing
All Metal Price (Ag, Au, Cu, Pb, Zn) Sensitivity
Metal Price
Revenue (US$M)
NPV, after tax @
0% (US$M)
NPV, after tax @
5% (US$M)
IRR, after Tax
Spot
$5,493
$1,583
$931
31.4%
+20%
$5,364
$1,501
$876
30.1%
Base Case
$4,470
$923
$501
21.2%
-20%
$3,576
$339
$122
9.9%
Note: Base Case price assumes Ag = $23.00/oz, Au = $1850/oz, Cu = $4.00/lb, Pb = $1.00/lb, Zn = $1.25/lb
"Spot" assumes May 29 2024 prices:
Ag = $31.53/oz, Au = $2332/oz, Cu = $4.69/lb, Pb = $1.05/lb, Zn = $1.41/lb
Other factors that may impact the NPV sensitivity include changes in Operating Costs ("OpEx") and
Initial Capital. These relative impacts together with changes in silver and zinc prices are shown in Table
3 and Figure 2.
Table 3: NPV sensitivity as a function of select metals prices, recoveries, CapEx and OpEx:
Sensitivity NPV @ 5%, after Tax (US$M)
Sensitivity
Silver Price
Zinc Price
Silver in Pb
Recovery
Zinc Recovery
Initial Capital
OPEX
20%
$665
$628
$427
$351
15%
$624
$596
$446
$388
10%
$583
$565
$570
$533
$464
$426
5%
$542
$533
$535
$523
$483
$464
0%
$501
$501
$501
$501
$501
$501
-5%
$460
$469
$467
$479
$520
$539
-10%
$419
$437
$433
$457
$538
$576
-15%
$378
$405
$398
$435
$556
$613
-20%
$337
$373
$364
$413
$575
$650
Note: +15% and +20% Silver and Zn recoveries are not applicable
Figure 2: After-tax NPV5% sensitivities
To view an enhanced version of this graphic, please visit:
https://images.newsfilecorp.com/files/5344/212164_12aa046c341ee9e3_003full.jpg
Production and Costs:
Annual mine production is estimated to deliver 14.3 Moz AgEq (includes 5.8 Mozs Ag) to the processing
facility averaged over a 17-year period. Potential annual product of sales (net deductions, treatment and
refining) averaging 11.4 Moz AgEq (includes 4.9 Mozs Ag).
Peak annual Plant Feed is achieved in Year 6 with 22.3 Mozs AgEq (includes 9.4 Moz Ag) being
processed with peak annual product of sales of 18.0 Moz AgEq (includes 7.9 Moz Ag). Table 4
summarizes the estimated metal production from the CLM project.
Table 4: CLM LOM Production and Metal Sales
Units
Y1-8
LOM
AgEq Plant Feed (Yearly Average)
(Moz)
17.9
14.3
AgEq Product of Sales (Yearly Average)
(Moz)
14.4
11.4
AgEq Plant Feed (Total)
(Moz)
143.7
243.2
AgEq Product of Sales (Total)
(Moz)
115.4
194.3
All-In Sustaining Cost (AISC)
(US$/AgEq
oz)
$12.23
$13.23
Units
Y1-8
LOM
Ag Plant Feed (Yearly Average)
(Moz)
7.6
5.8
Ag Product of Sales (Yearly Average)
(Moz)
6.5
4.9
Ag Plant Feed (Total)
(Moz)
60.8
98.6
Ag Product of Sales (Total)
(Moz)
51.9
83.9
Note: AgEq was determined assuming contained metal and 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 9 years. Total plant feed (mine
production) is estimated to be 243.2 Mozs AgEq (includes 98.6 Mozs Ag) with 194.3 Moz AgEq
(includes 83.9 Moz Ag) sold. Total all-in sustaining costs ("AISC") are estimated to be $US 2.57B
averaging $US13.23/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/5344/212164_12aa046c341ee9e3_004full.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, South Skarn,
and North Felsite 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 March 22, 2023 by Kirkham Geosciences Ltd. was used for
the evaluation and MSO analyses considered a preliminary cut-off value of $60/t NSR;
The Resource Model is restated with standardized metal prices, metal recoveries and smelter
terms in this current disclosure (see Appendices);
MSOs considered a minimum mining width of 3.5 m (inclusive of 1.0 m width for unplanned dilution
in rock), 25 m sub-levels, and 20 m strike lengths;
A total of 29.5 Mt averaging $131/t NSR (104 g/t Ag, 0.11g/t Au, 0.19 % Cu, 1.06 % Pb, and 2.41
% Zn) was sent to the processing facility, representing a conversion of approximately 88.3% of the
Resource value at a $60/t cut-off value;
Depending on the width of the stope and the strike of continuous sections of wider zones,
transverse stoping was selected and mined bottom-up. For predominately narrower zones
(typically less than 18m) longitudinal stoping was selected and mined either top-down or bottom-up
depending on location and timing of development. Overall, the average stope width by tonnage
was 16.5 m;
Detailed geotechnical analysis including hydrogeological modelling is to be completed in further
studies of the deposit, however preliminary investigations have been completed. The preliminary
investigations support the selection of longhole stoping as an appropriate method for this
Preliminary Economic Assessment. An equivalent linear overbreak slough (ELOS) was assumed
to be 1.0m (0.5m from each wall) and additional dilution for mining of backfill was considered.
Backfill dilution was varied depending on exposure, with 0.5m considered from the backs (top-
down), 0.25m from the floor (bottom-up), 0.5m from the far wall (longitudinal stoping), and 0.5m
from one adjacent wall (transverse stoping mined centre-out);
A stope recovery factor of 93% and development recovery factor of 97% was considered.
The grade and average stoping widths are illustrated in Figure 4 and Figure 5 respectively.
Figure 4: US$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/5344/212164_12aa046c341ee9e3_005full.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/5344/212164_12aa046c341ee9e3_006full.jpg
Processing:
The process plant for the PEA study is a conventional sulphide flotation system consisting of:
Primary jaw crushing to 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 and a gold-bearing pyrite concentrate
for leaching.
The pyrite leach incorporates ultra-fine grinding to improve conventional cyanidation and gold
recovery by Merrill-Crowe precipitation and induction melting to produce Au-Ag doré bars.
Barren tailings to Paste Plant for underground mine cement backfill with the surplus, dry-stacked to
surface
Design Annual Throughput of 1,935 kilo-tonnes based on nominal 5,300 tpd throughput.
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 10 years.
Table 5: Head grade over Yr1-8 and LOM
HEAD GRADES
Units
Y1-8
Average
LOM
Avg. Annual Plant Feed
(kt)
1,930
1,930
Ag
(g/t)
119
104
Au
(g/t)
0.14
0.11