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Discovery Reports Preliminary Economic Assessment on Cordero with After-Tax NPV of US$1.2 B, IRR of 38% and Payback of 2.0 Years

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November 30, 2021, Toronto, Ontario - Discovery Silver Corp. (TSX-V: DSV, OTCQX: DSVSF) (“Discovery” or the “Company” - https://www.commodity-tv.com/ondemand/companies/profil/discovery-metals-corp/) is pleased to announce results from its Preliminary Economic Assessment (“PEA” or “the Study”) on its 100%-owned Cordero silver project (“Cordero” or “the Project”) located in Chihuahua State, Mexico.

Study highlights include (all figures are in USD unless otherwise noted):

  • Excellent project economics: Base Case after-tax NPV5% of $1.2 B (C$1.5 B) and IRR of 38% (Ag - $22.00/oz, Au - $1,600/oz, Pb - $1.00/lb and Zn - $1.20/lb).
  • Exceptional silver price leverage: Upside Case after-tax NPV5% of $1.9 B (C$2.4 B) and IRR of 55% (Ag - $27.50/oz, Au - $1,880/oz, Pb - $1.10/lb and Zn - $1.45/lb based on one-year trailing 90th percentile prices).
  • Large-scale, high-margin, long mine life asset: 16-year mine life with average annual production of 26 Moz AgEq at an AISC of $12.35/oz AgEq.
  • Low capital intensity: initial development capex of $368 M; attractive NPV-to-capex ratio of 3.2x.
  • Rapid payback: post-tax payback of 2.0 years for Base Case and 1.4 years for Upside Case.
  • Technically robust study: 99% of tonnes processed in the PEA mine plan are in the Measured & Indicated category; process design and metallurgical recovery estimates are based on the Company’s comprehensive 2021 metallurgical testwork program.  
  • Silver-dominant revenues: silver represents +60% of the net smelter return in the first five years of the mine life and +50% of the net smelter return over the life of mine, in-line with the senior/mid-tier silver producer group.

Taj Singh, President and CEO, states: “With annual AgEq production averaging more than 26 Moz over a +15-year mine life we believe this PEA clearly positions Cordero as a Tier 1 silver asset. This impressive scale of production is achieved through modest development capex of $368 M and returns excellent margins with AISC averaging less than $12.50/AgEq oz over the life of the mine. These costs highlight the benefits of existing local infrastructure, excellent metallurgy, and a straight-forward open pit mine with excellent grades and a low strip ratio.

“Importantly, the outstanding metrics demonstrated in the PEA are supported by a mine plan with more than 99% of tonnes in the Measured and Indicated category, and a simple and conventional process design based on our detailed metallurgical testwork program completed earlier this year. This provides us with a huge head start as we look ahead to the delivery of a Prefeasibility Study on Cordero in 2022.

 

 

PEA SUMMARY:

Study support:

  • The Study is based on the updated Mineral Resource Estimate (“Resource”) press released on October 20, 2021 (see Appendices for Resource details), and the Company’s comprehensive metallurgical testwork program described in our press release dated September 7, 2021.
  • The PEA project team was led by Ausenco Engineering Canada Inc. (“Ausenco”), an industry leader in cost-effective design and construction. Ausenco was supported by AGP Mining Consultants Inc. (“AGP”) and Knight Piésold and Co. (USA) (“Knight Piésold”).

 

Project Economics:

Sensitivity of the Project’s expected after-tax NPV, IRR and payback at different commodity price assumptions is outlined in the table below:

Units

Base Case

Upside Case

Base Case +15%

Base Case     -15%

After-Tax NPV (5% discount rate)

(US$ M)

$1,160

$1,889

$1,692

$622

Internal Rate of Return

(%)

38.2%

54.6%

49.9%

25.2%

Payback

(yrs)

2.0

1.4

1.6

3.5

  • Base Case price assumptions: Ag = $22.00/oz, Au = $1,600/oz, Pb = $1.00/lb, Zn = $1.20/lb
  • Upside Case price assumptions: Ag = $27.50/oz, Au = $1,880/oz, Pb = $1.10/lb, Zn = $1.45/lb based on one-year trailing 90th percentile prices

 

After-Tax Free Cash Flow:

A chart summarizing the expected annual and cumulative after-tax free cash flow (“FCF”) over the life-of-mine (“LOM”) is provided below:

Payback Threshold

Production & Costs:

Annual production over the LOM is expected to average 26 Moz AgEq with production averaging over 33 Moz AgEq when fully ramped up (Years 5 – 12); this positions Cordero as one of the largest silver mines globally.

Units

Year 1 – 4

Year 5 - 12

Year 13 -16

LOM

AgEq Produced - Average

(Moz)

29

33

9

26

AgEq Payable - Average

(Moz)

26

29

8

23

AgEq Produced - Total

(Moz)

117

265

37

426

AgEq Payable - Total

(Moz)

104

230

32

372

All-In Sustaining Cost (AISC)

(US$/AgEq oz)

$11.64

$11.77

$18.88

$12.35

Note – LOM production/payable totals include production from Year -1. AgEq Produced is metal recovered in doré/concentrate. AgEq Payable is metal payable from doré/concentrate and incorporates metal payment terms outlined in the Concentrate Terms section below. See Technical Disclosure section for AgEq and AISC calculation methodology.

 

LOM Production & AISC:

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


OPERATIONS:

Mining:

The mine plan incorporates accelerated stripping as well as stockpiling of low-grade material in order to optimize the grade profile over the LOM.

  • The mine plan was completed by AGP and is based on a detailed mine design that incorporates mining dilution, safety berms and haul roads.
  • Mining rates over the life of the mine are relatively steady at 60 to 70 Mtpa.
  • The ultimate pit contains 719 Mt in total consisting of 228 Mt of mill feed and 491 Mt of waste for an average strip ratio of 2.2:1. The strip ratio is relatively even over the LOM.
  • Pit slope designs were based on an assessment by Knight Piésold that was supported by two geotechnical coreholes in the North Corridor and logging of core from two exploration coreholes in the South Corridor.

Processing:

Processing was broken into two phases to optimize the capital efficiency of the project.

  • Phase 1 throughput (Year -1 to Year 4)
  • Oxides: mined during the preproduction period and are crushed through the Phase 1 crushing plant and stacked on the heap leach from Year -1 to Year 3 at a throughput rate of 5 Mtpa. After Year 3 the Phase 1 crushing plant is dedicated to processing higher-value sulphide material with remaining oxide material processed as uncrushed ‘run-of-mine’ (“ROM”) material via heap leaching.
  • Sulphides: crushing, grinding and flotation circuit is constructed in Year -1 and processing occurs at a nameplate rate of 7.2 Mtpa from Year 1 to Year 4. During this period the mine plan focuses on high-grade material from the Pozo de Plata zone.
  • Phase 2 throughput (Year 5+)
  • Sulphides: two identical crushing, grinding and flotation circuits from Y5 onwards with total throughput of 14.4 Mtpa

Annual Throughput (Mt/a)

PHASE 1

PHASE 2

Year -1

Year 1

Year 2

Year 3

Year 4

Year 5+

Oxides / Heap Leach (Crushed)

5.0

5.0

5.0

5.0

-

-

Sulphides / Milling

-

5.8

7.2

7.2

10.8

14.4

Total Tonnes

5.0

10.8

12.2

12.2

10.8

14.4

  • Process design
  • Oxides: three-stage crushing (targeted crush size of 8 mm), agglomeration, heap leaching and refining in Year -1 to Year 3 and ROM dump leaching and refining in Year 4 to Year 6 to produce Ag-Au doré bars
  • Sulphides: three-stage crushing, grinding (targeted grind size of 200 micron) and flotation to produce Pb and Zn concentrates

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 oxide material from the South Corridor and sulphide material predominantly from the Pozo de Plata zone
  • Year 5 – 12: processing of higher-grade sulphides from the NE Extension and the South Corridor
  • Year 13 – 16: processing of lower-grade material stockpiled during Year 1 to Year 12

HEAD GRADES

UNIT

PHASE 1

PHASE 2

LOM

Year 1 – 4

Year 5 – 12

Year 13 – 16

Oxides

 

 

 

 

 

Tonnes processed

(Mt)

25

4

29

Ag

(g/t)

37

29

-

36

Au

(g/t)

0.08

0.05

-

0.08

AgEq

(g/t)

43

33

-

42

Sulphides

 

    

Tonnes processed

(Mt)

31

115

52

199

   Ag

(g/t)

57

32

13

31

   Au

(g/t)

0.26

0.07

0.04

0.09

   Pb

(%)

0.80

0.50

0.17

0.46

   Zn

(%)

0.80

0.92

0.34

0.75

AgEq

(g/t)

118

88

34

80

Note – Phase 1 and LOM Oxide tonnes/grades include tonnes processed on the heap leach in Year -1

 

Recoveries:

  • Oxides: recoveries were based on coarse bottle roll tests and preliminary results from column leach tests completed in 2021. Recoveries average 56% for Ag and 63% for Au for crushed feed and 36% for Ag and 35% for Au for uncrushed ROM feed.
  • Sulphides: recoveries were based on the 2021 metallurgical test program which included lock-cycle tests and examined metal recoveries to the silver-lead concentrate and the silver-zinc concentrate at varying head grades for each of the major geological rock types at Cordero. Metal recoveries to the two concentrates are summarized below:

SULPHIDE RECOVERIES (weighted average)

PHASE 1

PHASE 2

LOM

Year 1 – 4

Year 5 – 12

Year 13 – 16

Ag

92%

83%

67%

84%

Au

19%

19%

19%

19%

Pb

90%

86%

69%

86%

Zn

85%

86%

74%

85%

 

Tailings Management Facility (TMF):

  • The TMF design was completed by Knight Piésold and is based on a conventional thickened tailings dam facility of downstream construction type.
  • The TMF is located directly west of the open pit. The design incorporates five dam lifts over the LOM.
  • Total capacity of the TMF is 179M m3 (252 Mt); this is significantly greater than the estimated volume requirement of 142M m3 based on the PEA mine plan.
  • An evaluation of using a dry-stacked tailings facility will be completed as part of pre-feasibility work.

CONCENTRATE TERMS:

Metal Payable:

  • Cordero is expected to produce clean, highly saleable concentrates with minimal penalty elements as established in the 2021 metallurgical test program.
  • Industry standard payables and deductions were applied to the Pb and Zn concentrates as per the table below. A metallurgical balance summary is included in the Appendices.
  • Approximately 85% of the Ag reports to the Pb concentrate where higher payabilities are received.

 

Ag

Au

Pb

Zn

Pb Concentrate

 

 

 

 

   Average concentrate grade LOM

2,900 g/t

1.6 g/t

52%

-

   Payable metal

95%

95%

95%

-

   Minimum deduction

50 g/t

1 g/t

3 units

-

Zn Concentrate

    

   Average concentrate grade LOM

300 g/t

0.5 g/t

-

51%

   Payable metal

70%

70%

-

85%

   Deduction

3 oz/t

1 g/t

-

-

Treatment/Refining Charges:

  • Treatment and refining charges were based on a review of spot and recent benchmark pricing and are summarized as follows:

PARAMETER

UNITS

PEA COST

SPOT

2021 BENCHMARK

TREATMENT/REFINING CHARGES

 

   

   Treatment charge – Pb con

$/dmt

$100

~$60

$140

   Treatment charge – Zn con

$/dmt

$200

~$80

$160

   Ag refining charge – Pb con

$/oz

$1.00

~$0.75

$1.50

Concentrate Transportation:

  • Transportation costs assume trucking of the concentrate via containers to the international port at Guaymas, Sonora, and then shipping via ocean freight to Asia.
  • Estimated transportation costs (trucking, port handling and ocean freight) are $128/wmt for Pb concentrate and $116/wmt for Zn concentrate.

CAPITAL EXPENDITURES:

Initial Capital (for parallel processing of crushed oxides and sulphides)

  • Year -2: construction of on-site infrastructure, power line and the heap leach circuit with capacity of 5 Mtpa to process oxide/transition material (includes a three-stage oxide crushing circuit, heap leach pad/ponds and Merrill Crowe plant).
  • Year -1: first sulphide circuit with a capacity of 7.2 Mtpa (includes sulphide crushing circuit, ball mill and flotation plant) and construction of the TMF including the initial dam lift.

 

Expansion Capital (to expand plant to 14.4 Mtpa sulphides only)

  • Year 3: addition of second sulphide circuit to expand processing rate to 14.4 Mtpa by the addition of a ball mill and flotation circuit creating two parallel sulphide circuits. The crushing circuit previously used for oxides will be dedicated to sulphides from Year 4 onwards and will not require repurposing.
  • Year 8: expand flotation circuit with additional flotation cells, cyclones, filters and thickeners to accommodate the higher zinc grades from Year 9 to Year 11.

 

Sustaining Capital

  • TMF: the tailings dam will be completed in five lifts over the LOM at a total capital cost of $110 M ($15 M initial capex plus $95 M of sustaining capex).
  • Other: additional sustaining capex totals $113 M over the LOM and includes sustaining capital for the process plant and mobile equipment and replacements/refurbishments of infrastructure assets.

DESCRIPTION (all in US$ millions)

INITIAL CAPITAL

EXPANSION CAPITAL

SUSTAINING LOM CAPEX

TOTAL

LOM CAPEX

Year -2

Year -1

Year 3

Year 8

CAPITAL EXPENDITURES

      

   Mining

$26

$1

  

$7

$33

   Infrastructure

$34

$9

$10

 

$16

$69

   Heap Leach + Oxide Plant

$71

$1

  

$4

$76

   Sulphide Processing Plant

 

$95

$51

$23

$30

$199

   Tailings Facility (TMF)

 

$15

  

$95

$110

   Indirects

$22

$30

$17

$6

$4

$78

Owners Costs

$6

    

$6

Closure (net of Salvage Value)

    

$22

$22

Contingency

$28

$30

$16

$6

$29

$110

Capital Expenditures - Subtotals

$187

$181

$94

$35

$208

$704

$368

       

PRE-SULPHIDE OPERATIONS

      

   Revenue

 

$121

    

      Mining Costs

 

($110)

    

      Process + G&A Costs

 

($27)

    

Operating Cash Flow for Year -1

 

($16)

    
       

NET FUNDING REQUIREMENT

$384

    

 

 

    

OPERATING COST ASSUMPTIONS:

Mining:

  • Mining is assumed to be completed by contract mining; estimated mining costs were based on contractor quotes for Cordero received by AGP

Processing and G&A Costs:

  • Processing costs for the heap leach and mill/flotation, and G&A costs were developed by Ausenco from first principles.
  • Sulphide processing costs benefit from a conventional flotation process design and low power costs. The targeted coarse grind size of 200 micron alleviates the need for a SAG mill.
  • G&A costs estimates are based on a small camp and administration office at site. The majority of the work force will be Mexican nationals commuting daily from the local town of Parral. Parral is 25 km south of Cordero and has a population of approximately 100,000. It is the regional government centre in the southern part of Chihuahua State and has a well-established service industry that supports numerous local mining operations.

PARAMETER

UNITS

PEA COST

OPERATING COSTS

 

 

   Mining – Mill Feed

$/t mined

$2.16

   Mining – Waste

$/t mined

$2.04

   Processing – Heap leach crushed

$/t stacked

$3.84

   Processing – Heap leach ROM

$/t stacked

$1.39

   Processing – Milling (7.2 Mtpa)

$/t milled

$7.01

   Processing – Milling (14.4 Mtpa)

$/t milled

$6.57

   Site G&A (14.4 Mtpa)

$/t milled

$0.86

 

OPPORTUNITIES:

Work completed during the preparation of the PEA outlined a number of opportunities that have the potential to improve the economic and ESG performance of the project:

  • Mine life extension: there are over 300 Mt of Sulphide Resource that sit outside the PEA design pit but within the Resource pit shell. These resources as summarized below have the potential to extend the mine life and/or increase production levels at higher commodity prices.

Class

Tonnes

Grade

Contained Metal

Ag

Au

Pb

Zn

AgEq

Ag

Au

Pb

Zn

AgEq

 

(Mt)

(g/t)

(g/t)

(%)

(%)

(g/t)

(Moz)

(koz)

(Mlb)

(Mlb)

(Moz)

 

Measured

33

15

0.06

0.21

0.42

38

16

63

151

306

40

 

Indicated

187

16

0.04

0.23

0.45

40

94

221

952

1,869

238

 

M&I

220

16

0.04

0.23

0.45

39

110

284

1,103

2,175

278

 

Inferred

106

14

0.03

0.19

0.38

34

48

97

445

897

117

 

   Note – the full Resource is provided in the Appendix; further details can be found in the Company’s October 21, 2021, press release.

 

  • Coarser grind size: metallurgical test work suggests higher recoveries may be achieved at coarse grind sizes (greater than the 200 micron used in the PEA). An evaluation of coarse particle flotation will be completed as part of the 2022 Prefeasibility Study (“PFS”). Coarse particle flotation has the potential to further reduce operating costs and water consumption.
  • Dry stack tailings: an evaluation of using dry stacked tailings to improve ESG performance will be completed as part of the PFS.


TECHNICAL DISCLOSURE:

APPENDIX:

An appendix with the following supporting information can be found at the end of the release or the following link: Appendices

Appendix A - Mineral Resource Estimate

Appendix B – After-Tax NPV/IRR/Payback Sensitivities

Appendix C - Pit Optimisation Parameters

Appendix D - LOM Mine Plan Summary

Appendix E - LOM Process Throughput Summary

Appendix F - Simplified Process Flowsheets

Appendix G – Metallurgical Balance Summary

Appendix H - Long Sections / Cross Sections

Appendix I - Site Layout

Appendix J - LOM Production & Cash Flow Schedule

About Discovery:

Discovery’s flagship project is its 100%-owned Cordero project, one of the world’s largest silver deposits. The PEA completed in November 2021 demonstrates that Cordero has the potential to be developed into a highly capital efficient mine that offers the combination of margin, size and scaleability. Cordero is located close to infrastructure in a prolific mining belt in Chihuahua State, Mexico. Continued exploration and project development at Cordero is supported by an industry leading balance sheet with cash of over C$75 million. Discovery was a recipient of the 2020 TSX Venture 50 award and the 2021 OTCQX Best 50 award.

On Behalf of the Board of Directors,

Taj Singh, M.Eng, P.Eng, CPA,

President, Chief Executive Officer and Director

For further information contact:

Forbes Gemmell, CFA

VP Corporate Development & Investor Relations

Phone: 416-613-9410

Email: [email protected]

Website: www.discoverysilver.com

In Europe:

Swiss Resource Capital AG

Jochen Staiger

[email protected]

www.resource-capital.ch

 

QualifiedPerson

The PEA for the Company’s Cordero project as summarized in this release was completed by Ausenco with support from by AGP and Knight Piésold. A full technical report supporting the PEA will be prepared in accordance with NI 43-101 and will be filed on SEDAR within 45 days of this press release. The scientific and technical content of this press release was reviewed and approved by Taj Singh, P Eng., President & CEO, who is a "Qualified Person" as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101").

FORWARD-LOOKING STATEMENTS:

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

This news release is not for distribution to United States newswire services or for dissemination in the United States.

 

This news release does not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of any of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful, including any of the securities in the United States of America. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933 Act”) or any state securities laws and may not be offered or sold within the United States or to, or for account or benefit of, U.S. Persons (as defined in Regulation S under the 1933 Act) unless registered under the 1933 Act and applicable state securities laws, or an exemption from such registration requirements is available.

Cautionary Note Regarding Forward-Looking Statements

This news release may include forward-looking statements that are subject to inherent risks and uncertainties. All statements within this news release, other than statements of historical fact, are to be considered forward looking. Although Discovery believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those described in forward-looking statements. Factors that could cause actual results to differ materially from those described in forward-looking statements include fluctuations in market prices, including metal prices, continued availability of capital and financing, and general economic, market or business conditions. There can be no assurances that such statements will prove accurate and, therefore, readers are advised to rely on their own evaluation of such uncertainties. Discovery does not assume any obligation to update any forward-looking statements except as required under applicable laws.

APPENDIX A – MINERAL RESOURCE ESTIMATE

SULPHIDE RESOURCE(assumed to be processed via mill/flotation)

NSR $/t cut-off

Class

Tonnes

Grade

Contained Metal

Ag

Au

Pb

Zn

AgEq

Ag

Au

Pb

Zn

AgEq

(Mt)

(g/t)

(g/t)

(%)

(%)

(g/t)

(Moz)

(koz)

(Mlb)

(Mlb)

(Moz)

$7.25/t

Measured

128

22

0.08

0.31

0.52

52

89

328

881

1,470

212

Indicated

413

19

0.05

0.28

0.51

47

255

707

2,543

4,663

625

M&I

541

20

0.06

0.29

0.51

48

344

1,035

3,424

6,132

837

Inferred

108

14

0.03

0.19

0.38

34

49

99

451

909

119

OXIDE/TRANSITION RESOURCE(assumed to be processed by heap leaching)

NSR $/t cut-off

Class

Tonnes

Grade

Contained Metal

% Oxide / % Trans

Ag

Au

AgEq

Ag

Au

AgEq

(Mt)

(g/t)

(g/t)

(g/t)

(Moz)

(koz)

(Moz)

$4.78/t

Measured

23

20

0.06

25

15

43

19

92% / 8%

Indicated

75

19

0.05

23

45

125

56

87% / 13%

M&I

98

19

0.05

23

60

168

74

88% / 12%

Inferred

35

16

0.04

20

18

44

22

63% / 37%

SUPPORTING TECHNICAL DISCLOSURE FOR RESOURCE:

  • Mineral resources that are not mineral reserves do not have demonstrated economic viability.
  • AgEq for the Sulphide Resource is calculated as Ag + (Au x 16.07) + (Pb x 32.55) + (Zn x 35.10); these factors are based on commodity prices of Ag - $24.00/oz, Au - $1,800/oz, Pb - $1.10/lb, Zn - $1.20/lb and assumed recoveries of Ag – 84%, Au – 18%, Pb – 87% and Zn – 88%.
  • AgEq for the Oxide/Transition Resource is calculated as Ag + (Au x 87.5); this factor is based on commodity prices of Ag - $24.00/oz and Au - $1,800/oz and assumed recoveries of Ag – 60% and Au – 70%.
  • The Resource is constrained by a pit optimisation based on the following commodity prices: Ag - $24.00/oz, Au - $1,800/oz, Pb - $1.10/lb, Zn - $1.20/lb. Additional parameters for the pit constraint are provided in the Company’s October 20, 2021, press release.
  • Individual metals are reported at 100% of in-situ grade.
  • The effective date of the Resource is October 20, 2021, and is based on drilling through July 2021.
  • There are no known legal, political, environmental or other risks that could materially affect the potential development of the Resource.
  • A full technical report supporting the Resource will be prepared in accordance with NI 43-101 and will be filed on SEDAR within 45 days of the October 20, 2021, Resource press release.


APPENDIX B: AFTER-TAX NPV / IRR / PAYBACK SENSITIVITIES

Sensitivity of the Project’s NPV, IRR and payback at different Ag and Zn price assumptions is outlined in the table below. For these sensitivities the Au and Pb prices have been fixed at $1,600/oz and $1.00/lb respectively. The Base Case scenario for the PEA is highlighted in grey below and assumes Ag - $22.00/oz, Au - $1,600/oz, Pb - $1.00/lb and Zn - $1.20/lb.

 

Ag ($/oz)

$18.00

$20.00

$22.00

$25.00

$30.00

 

 

NPV (5%)

IRR

Payback

NPV (5%)

IRR

Payback

NPV (5%)

IRR

Payback

NPV (5%)

IRR

Payback

NPV (5%)

IRR

Payback

 

 

(US$M)

(%)

(yrs)

(US$M)

(%)

(yrs)

(US$M)

(%)

(yrs)

(US$M)

(%)

(yrs)

(US$M)

(%)

(yrs)

Zn ($/lb)

$1.05

$715

27.2%

3.3

$866

31.5%

2.7

$1,016

35.8%

2.2

$1,238

42.0%

1.8

$1,607

52.5%

1.4

$1.10

$765

28.2%

3.2

$915

32.4%

2.6

$1,064

36.6%

2.1

$1,286

42.8%

1.8

$1,655

53.2%

1.4

$1.20

$863

30.0%

3.1

$1,013

34.1%

2.5

$1,160

38.2%

2.0

$1,382

44.3%

1.7

$1,751

54.5%

1.4

$1.30

$961

31.7%

2.9

$1,109

35.8%

2.3

$1,257

39.7%

2.0

$1,478

45.7%

1.7

$1,848

55.8%

1.4

$1.45

$1,105

34.2%

2.7

$1,253

38.1%

2.2

$1,401

42.0%

1.9

$1,622

47.8%

1.6

$1,992

57.8%

1.3



APPENDIX C - PIT OPTIMISATION PARAMETERS:

The PEA mine plan was based on a pit optimization that utilised the following parameters:

PARAMETER

UNITS

Ag

Au

Pb

Zn

COMMODITY PRICES

$/oz or $/lb

$20.00

$1,600

$0.95

$1.05

ROYALTY

%

0.5%

0.5%

-

-

PIT SLOPE ASSUMPTIONS

Five sectors were modeled based on core logging and two geotechnical holes with inter-ramp angles ranging from 40o to 59o

PROCESS RECOVERIES

 

    

Heap Leach (Oxide/Transition)

%

60%

70%

-

-

Flotation (Sulphide)

 

    

   Breccia – Volcanic

 

    

     Recovery to Pb concentrate

%

79%

13%

91%

-

     Recovery to Zn concentrate

%

11%

7%

-

88%

   Breccia – Sedimentary

 

 

 

 

 

     Recovery to Pb concentrate

%

75%

12%

89%

-

     Recovery to Zn concentrate

%

9%

4%

-

86%

   Volcanic

 

 

 

 

 

     Recovery to Pb concentrate

%

70%

13%

85%

-

     Recovery to Zn concentrate

%

13%

6%

-

81%

   Sedimentary

 

 

 

 

 

     Recovery to Pb concentrate

%

70%

13%

83%

-

     Recovery to Zn concentrate

%

10%

5%

-

89%

METAL PAYABLE

 

    

     Dore (Heap Leach)

 

98%

99.9%

-

-

   Concentrate (Flotation)

 

 

 

 

 

     Pb concentrate

 

95%

95%

95%

-

     Zn concentrate

 

70%

70%

-

85%

 

 

    

OPERATING COSTS

 

Base

Per 10m below 1550m elev.

 

   Mining cost – Mill Feed

$/t mined

$1.54

+$0.024

1550

 

   Mining cost - Waste

$/t mined

$1.64

+$0.024

1550

 

   Processing cost – Heap leach (14,000 tpd)

$/t stacked

$3.92

   

   Processing cost – Flotation (40,000 tpd)

$/t milled

$6.39

   

   G&A (40,000 tpd)

$/t milled

$0.86

   
 

 

    

TREATMENT/REFINING CHARGES

 

    

   Treatment charge – Pb con

$/dmt

$100

   

   Treatment charge – Zn con

$/dmt

$200

   

   Ag refining charge – Pb con

$/oz

$1.00

   



APPENDIX D - LOM MINE PLAN SUMMARY

APPENDIX E - LOM PROCESS THROUGHPUT SUMMARY


APPENDIX F - SIMPLIFIED PROCESS FLOWSHEETS

PHASE 1:


PHASE 2:


APPENDIX G – METALLURGICAL BALANCE SUMMARY

 

UNITS

PHASE 1

PHASE 2

LOM

Years 1 - 4

Years 5 - 12

Years 13 - 16

Ag

Au

Pb

Zn

Ag

Au

Pb

Zn

Ag

Au

Pb

Zn

Ag

Au

Pb

Zn

MET BALANCE

               

Average head grade

g/t or %

57

0.26

0.80

0.80

32

0.07

0.50

0.92

13

0.04

0.17

0.34

31

0.09

0.46

0.75

Recovered to Pb Con

%

81%

13%

90%

6%

71%

13%

86%

6%

56%

13%

69%

3%

73%

13%

86%

5%

Recovered to Zn Con

%

12%

6%

3%

85%

12%

6%

3%

86%

11%

6%

3%

74%

12%

6%

3%

85%

Tailings

%

7%

81%

7%

9%

17%

81%

11%

8%

33%

81%

28%

22%

16%

81%

11%

10%

Total

%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

                  

CONCENTRATE GRADES

                 

Pb Concentrate

g/t or %

3,490

2.5

54%

-

2,802

1.1

52%

-

2,657

2.1

43%

-

2,939

1.6

52%

-

Zn Concentrate

g/t or %

524

1.3

-

52%

254

0.3

-

51%

285

0.5

-

50%

298

0.5

-

51%

                  


APPENDIX H - LONG SECTIONS / CROSS SECTIONS:

LONG SECTION A-A’ (looking NW)

LONG SECTION B-B’ (looking NW)


CROSS SECTION C-C’ (looking NE)


 

CROSS SECTION D-D’ (looking NE)


 

CROSS SECTION E-E’ (looking NE)

APPENDIX I - SITE LAYOUT:


APPENDIX J – PRODUCTION & CASH FLOW SCHEDULE:

 

Units

Total/Avg

Y-2

Y-1

Y1

Y2

Y3

Y4

Y5

Y6

Y7

Y8

Y9

Y10

Y11

Y12

Y13

Y14

Y15

Y16

Y17+

MINING

 

 

                    

   Mineralized Material Mined

mt

228

1

14

23

18

18

24

18

19

19

19

21

16

12

5

0

--

--

--

--

   Waste Mined

mt

491

6

41

49

49

47

41

47

46

41

44

40

26

10

3

0

--

--

--

--

Total Material Mined

mt

719

8

55

72

67

65

65

65

65

60

63

61

42

22

8

0

--

--

--

--

Mining Rate

ktpd

 

137

22

157

206

192

186

186

186

186

171

181

175

121

62

22

1

--

--

--

--

Strip Ratio

w:o

2.2

5.2

2.8

2.2

2.7

2.7

1.8

2.5

2.5

2.2

2.3

1.9

1.6

0.8

0.6

0.1

--

--

--

--

 

 

                    

PROCESSING

 

                    

CRUSHED OXIDES / HEAP LEACH:

 

                    

   Heap Leach Crushed Tonnes

mt

20

--

5

5

5

5

--

--

--

--

--

--

--

--

--

--

--

--

--

--

   Stacked Grades:

 

                    

       Ag

g/t

42

--

58

38

35

35

--

--

--

--

--

--

--

--

--

--

--

--

--

--

       Au

g/t

0.09

--

0.08

0.10

0.09

0.08

--

--

--

--

--

--

--

--

--

--

--

--

--

--

   AgEq

g/t

48

--

64

46

41

41

--

--

--

--

--

--

--

--

--

--

--

--

--

--

ROM OXIDES / HEAP LEACH:

 

                    

   Heap Leach ROM Tonnes

mt

9

--

--

--

--

--

5

4

0

--

--

--

--

--

--

--

--

--

--

--

   Stacked Grades:

 

                    

       Ag

g/t

24

--

--

--

--

--

18

28

44

--

--

--

--

--

--

--

--

--

--

--

       Au

g/t

0.06

--

--

--

--

--

0.07

0.05

0.08

--

--

--

--

--

--

--

--

--

--

--

   AgEq

g/t

28

--

--

--

--

--

23

32

50

--

--

--

--

--

--

--

--

--

--

--

SULPHIDES / FLOTATION:

 

                    

   Milling Rate

ktpd

36

--

--

16

21

21

31

41

41

41

41

41

41

41

41

41

41

41

26

--

   Sulphide Tonnes Processed

mt

199

--

--

6

7

7

11

14

14

14

14

14

14

14

14

14

14

14

9

--

   Mill Head Grade:

 

                    

       Ag

g/t

31

--

--

62

63

61

48

35

34

31

30

43

37

29

23

13

13

13

12.6

--

       Au

g/t

0.09

--

--

0.19

0.41

0.36

0.15

0.07

0.08

0.07

0.07

0.08

0.07

0.07

0.06

0.04

0.04

0.04

0.04

--

       Pb  

%

0.46%

--

--

0.74%

1.04%

0.91%

0.62%

0.46%

0.52%

0.39%

0.39%

0.66%

0.67%

0.53%

0.37%

0.17%

0.16%

0.16%

0.16%

--

       Zn

%

0.75%

--

--

0.92%

0.79%

0.74%

0.77%

0.86%

0.92%

0.79%

0.81%

1.33%

1.15%

0.90%

0.62%

0.36%

0.34%

0.34%

0.34%

--

   AgEq

g/t

80

--

--

132

155

143

107

87

90

78

78

119

106

84

62

35

33

33

33

--

   Lead Concentrate – Recovery:

 

                    

       Ag

%

73%

--

--

81%

82%

82%

77%

71%

71%

70%

70%

79%

72%

67%

66%

56%

56%

56%

56%

--

       Au

%

13%

--

--

13%

13%

13%

13%

13%

13%

13%

13%

13%

13%

13%

13%

13%

13%

13%

13%

--

       Pb

%

86%

--

--

90%

91%

90%

90%

85%

87%

85%

85%

89%

88%

87%

84%

69%

69%

69%

69%

--

   Zinc Concentrate – Recovery:

 

                    

       Ag

%

12%

--

--

12%

11%

12%

12%

12%

12%

12%

12%

12%

12%

12%

12%

11%

11%

11%

11%

--

       Au

%

6%

--

--

6%

6%

6%

6%

6%

6%

6%

6%

6%

6%

6%

6%

6%

6%

6%

6%

--

       Zn

%

85%

--

--

86%

86%

85%

84%

86%

86%

86%

86%

88%

88%

87%

81%

74%

74%

74%

74%

--

 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    

PRODUCTION PROFILE

 

                    

METAL PRODUCED:

 

                    

     Ag – Oxides

moz

17

--

5

3

3

3

1

1

0

--

--

--

--

--

--

--

--

--

--

--

     Au – Oxides

koz

42

--

8

10

9

8

3

2

0

--

--

--

--

--

--

--

--

--

--

--

   AgEq – Oxides Metal Produced

moz

20

--

6

4

4

4

1

2

0

--

--

--

--

--

--

--

--

--

--

--

     Ag – Sulphides

moz

167

--

--

11

14

13

15

13

13

12

11

18

14

10

8

4

4

4

2.5

--

     Au – Sulphides

koz

113

--

--

6

18

15

10

6

7

6

6

7

6

6

6

4

4

4

2

--

     Pb – Sulphides

mlbs

1,727

--

--

84

149

130

132

123

145

106

105

187

187

145

100

38

36

36

23

--

     Zn – Sulphides

mlbs

2,773

--

--

100

108

100

154

235

251

215

221

369

320

248

159

84

79

79

51

--

   AgEq – Sulphides Metal Produced

moz

405

--

--

20

28

26

30

32

34

29

29

47

41

31

22

11

10

10

6.5

--

     Ag – Total

moz

185

--

5

14

17

16

16

15

13

12

11

18

14

10

8

4

4

4

2.5

--

     Au – Total

koz

155

--

8

17

26

23

13

9

7

6

6

7

6

6

6

4

4

4

2

--

     Pb – Total

mlbs

1,727

--

--

84

149

130

132

123

145

106

105

187

187

145

100

38

36

36

23

--

     Zn – Total

mlbs

2,773

--

--

100

108

100

154

235

251

215

221

369

320

248

159

84

79

79

51

--

   AgEq – Total Metal Produced

moz

426

--

6

25

32

29

31

34

34

29

29

47

41

31

22

11

10

10

6.5

--

METAL PAYABLE:

 

                    

     Ag – Oxides

moz

17

--

5

3

3

3

1

1

0

--

--

--

--

--

--

--

--

--

--

--

     Au – Oxides

koz

42

--

8

10

9

8

3

2

0

--

--

--

--

--

--

--

--

--

--

--

   AgEq – Oxides Metal Payable

moz

20

--

6

4

4

4

1

2

0

--

--

--

--

--

--

--

--

--

--

--

     Ag – Sulphides

moz

148

--

--

10

12

12

13

12

11

10

10

16

12

9

7

4

3

3

2

--

     Au – Sulphides

koz

41

--

--

2

10

9

3

1

0

1

1

5

4

0

1

1

1

1

1

--

     Pb – Sulphides

mlbs

1,626

--

--

80

141

123

124

116

136

100

99

176

177

136

94

36

33

33

21

--

     Zn – Sulphides

mlbs

2,340

--

--

84

91

84

130

198

212

181

186

312

271

209

134

70

67

67

43

--

   AgEq – Sulphides Metal Payable

moz

352

--

--

18

25

23

26

28

29

25

25

41

36

27

19

9

9

9

6

--

     Ag – Total

moz

165

--

5

13

16

15

14

13

11

10

10

16

12

9

7

4

3

3

2

--

     Au – Total

koz

83

--

8

12

19

16

6

3

1

1

1

5

4

0

1

1

1

1

1

--

     Pb – Total

mlbs

1,626

--

--

80

141

123

124

116

136

100

99

176

177

136

94

36

33

33

21

--

     Zn – Total

mlbs

2,340

--

--

84

91

84

130

198

212

181

186

312

271

209

134

70

67

67

43

--

   AgEq – Total Metal Payable

moz

372

--

6

22

28

27

27

30

29

25

25

41

36

27

19

9

9

9

6

--

 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    

REVENUE

 

                    

   OXIDE REVENUES:

 

                    

     Ag Revenue

US$mm

$376

--

$112

$74

$67

$68

$22

$29

$3

--

--

--

--

--

--

--

--

--

--

--

     Au Revenue

US$mm

$67

--

$13

$17

$14

$13

$6

$4

$0

--

--

--

--

--

--

--

--

--

--

--

   Gross Revenue – Oxides

US$mm

$443

--

$126

$91

$82

$81

$27

$33

$3

--

--

--

--

--

--

--

--

--

--

--

     Treatment & Refining Charges

US$mm

$18

--

$5

$3

$3

$3

$1

$1

$0

--

--

--

--

--

--

--

--

--

--

--

   Net Revenue - Oxides

US$mm

$425

--

$121

$87

$78

$78

$26

$32

$3

--

--

--

--

--

--

--

--

--

--

--

   SULPHIDE REVENUES:

 

                    

     Ag Revenue

US$mm

$3,250

--

--

$212

$275

$264

$292

$261

$249

$225

$220

$345

$274

$200

$158

$78

$75

$75

$48

--

     Au Revenue

US$mm

$66

--

--

$3

$16

$14

$5

$1

$1

$2

$2

$7

$6

$0

$1

$2

$2

$2

$1

--

     Pb Revenue

US$mm

$1,626

--

--

$80

$141

$123

$124

$116

$136

$100

$99

$176

$177

$136

$94

$36

$33

$33

$21

--

     Zn Revenue

US$mm

$2,808

--

--

$101

$110

$101

$156

$238

$255

$217

$224

$375

$325

$251

$160

$84

$80

$80

$51

--

   Gross Revenue – Sulphides

US$mm

$7,751

--

--

$396

$541

$502

$577

$616

$641

$544

$544

$903

$782

$588

$414

$200

$191

$191

$122

--

     Treatment & Refining Charges

US$mm

$780

--

--

$33

$43

$39

$51

$64

$68

$57

$58

$96

$84

$65

$44

$22

$21

$21

$14

--

     Total Penalties

US$mm

$33

--

--

$1

$1

$1

$2

$3

$3

$2

$2

$4

$4

$3

$2

$1

$1

$1

$1

--

   Net Revenue - Sulphides

US$mm

$6,938

--

--

$362

$497

$461

$524

$550

$570

$485

$484

$803

$695

$520

$368

$177

$168

$168

$108

--

Net Revenue - Total

US$mm

$7,364

--

$121

$449

$575

$539

$550

$581

$573

$485

$484

$803

$695

$520

$368

$177

$168

$168

$108

--

 

 

                    

OPERATING COSTS

 

                    

   UNIT COSTS:

 

                    

     Mine (Includes Rehandling Costs)

US$/t Moved

$2.23

--

$2.00

$1.92

$1.91

$1.88

$1.90

$1.97

$2.03

$2.06

$2.16

$2.35

$2.45

$2.35

$1.86

$1.16

$1.03

$1.03

$1.23

--

       Processing – Crushed Oxide Heap Leach

US$/t Stacked

$3.84

--

$3.84

$3.84

$3.84

$3.84

--

--

--

--

--

--

--

--

--

--

--

--

--

--

       Processing – ROM Oxide Heap Leach

US$/t Stacked

$1.34

--

--

--

--

--

$1.29

$1.39

$1.44

--

--

--

--

--

--

--

--

--

--

--

       Processing – Sulphide

US$/t Milled

$6.59

--

--

$7.13

$7.01

$7.01

$6.58

$6.47

$6.47

$6.47

$6.47

$6.57

$6.57

$6.57

$6.57

$6.57

$6.57

$6.57

$6.57

--

     Site G&A Costs

US$/t Processed

$0.85

--

$1.45

$0.94

$0.83

$0.83

$1.14

$0.86

$0.86

$0.86

$0.86

$0.86

$0.86

$0.86

$0.86

$0.86

$0.86

$0.86

$0.86

--

   OPERATING COSTS INCURED:

 

                    

     Mine (Includes Rehandling Costs)

US$mm

$1,602

--

$110

$147

$133

$128

$136

$135

$136

$131

$143

$144

$107

$62

$32

$17

$15

$15

$11

--

       Processing – Crushed Oxide Heap Leach

US$mm

$77

--

$19

$19

$19

$19

--

--

--

--

--

--

--

--

--

--

--

--

--

--

       Processing – ROM Oxide Heap Leach

US$mm

$12

--

--

--

--

--

$6

$6

$0

--

--

--

--

--

--

--

--

--

--

--

       Processing – Sulphides

US$mm

$1,309

--

--

$41

$50

$50

$71

$93

$93

$93

$93

$95

$95

$95

$95

$95

$95

$95

$61

--

     Site G&A Costs

US$mm

$194

--

$7

$10

$10

$10

$12

$12

$12

$12

$12

$12

$12

$12

$12

$12

$12

$12

$8

--

   Total Operating Costs

US$mm

$3,193

--

$136

$218

$213

$208

$226

$246

$242

$236

$248

$251

$214

$169

$139

$124

$122

$122

$80

--

     NSR - Government

US$mm

$18

--

$1

$1

$2

$2

$2

$1

$1

$1

$1

$2

$1

$1

$1

$0

$0

$0

$0

--

       Concentrate Transportation

US$mm

$527

--

--

$21

$29

$26

$34

$42

$46

$38

$38

$64

$58

$46

$31

$15

$14

$14

$9

--

   Total Costs

US$mm

$3,738

--

$137

$240

$244

$236

$261

$289

$290

$275

$287

$317

$273

$216

$171

$139

$137

$137

$90

--

   CASH COSTS:

 

                    

   Co-Product

 

                    

     Operating Cash Costs

US$/oz AgEq

$8.34

--

--

$9.82

$7.52

$7.84

$8.22

$8.34

$8.27

$9.56

$10.04

$6.12

$6.01

$6.34

$7.39

$13.61

$14.07

$14.07

$14.40

--

     Total Cash Costs

US$/oz AgEq

$12.07

--

--

$12.57

$10.29

$10.55

$11.47

$12.10

$12.31

$13.52

$14.06

$10.17

$10.13

$10.63

$11.50

$17.91

$18.34

$18.34

$18.67

--

All-in Sustaining Costs

US$/oz AgEq

$12.35

--

--

$12.98

$11.40

$10.76

$11.65

$12.20

$12.64

$13.65

$14.24

$10.27

$10.21

$10.74

$11.66

$18.24

$19.12

$18.69

$19.85

--

 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    
 

 

                    

CAPITAL EXPENDITURES

 

                    

    Initial/Expansion Capex

US$mm

$497

$187

$181

--

--

$94

--

--

--

--

$35

--

--

--

--

--

--

--

--

 

   Sustaining Capex (incl. Closure net of Salvage)

US$mm

$208

--

--

$9

$31

$6

$36

$3

$10

$3

$4

$31

$3

$3

$3

$3

$31

$3

$7

$22

Total Capital Expenditures

US$mm

$704

$187

$181

$9

$31

$99

$36

$3

$10

$3

$39

$31

$3

$3

$3

$3

$31

$3

$7

$22

 

 

                    

FREE CASH FLOW VALUATION

 

                    

   Net Revenue

US$mm

$7,364

--

$121

$449

$575

$539

$550

$581

$573

$485

$484

$803

$695

$520

$368

$177

$168

$168

$108

--

       Operating Expenses

US$mm

($3,193)

--

($136)

($218)

($213)

($208)

($226)

($246)

($242)

($236)

($248)

($251)

($214)

($169)

($139)

($124)

($122)

($122)

($80)

--

       Royalties + Concentrate Transportation

US$mm

($545)

--

($1)

($23)

($31)

($28)

($35)

($43)

($48)

($39)

($39)

($66)

($59)

($47)

($31)

($16)

($15)

($15)

($10)

--

   EBITDA

US$mm

$3,625

--

($16)

$209

$331

$303

$289

$292

$284

$210

$196

$485

$422

$304

$198

$37

$32

$32

$19

--

     Capital Expenditures

US$mm

($704)

($187)

($181)

($9)

($31)

($99)

($36)

($3)

($10)

($3)

($39)

($31)

($3)

($3)

($3)

($3)

($31)

($3)

($7)

($22)

Pre-Tax Free Cash Flow

US$mm

$2,921

($187)

($198)

$200

$300

$204

$253

$289

$274

$207

$157

$455

$419

$301

$195

$34

$1

$29

$12

($22)

     Mining Tax

US$mm

(273)

--

--

($16)

($25)

($23)

($22)

($22)

($21)

($16)

($15)

($36)

($32)

($23)

($15)

($3)

($2)

($2)

($1)

--

     Income Tax Payable

US$mm

(784)

--

--

($9)

($68)

($64)

($51)

($62)

($58)

($46)

($47)

($120)

($110)

($82)

($52)

($8)

--

($4)

($2)

--

Post-Tax Free Cash Flow

US$mm

$1,864

($187)

($198)

$175

$207

$117

$180

$205

$195

$145

$95

$299

$277

$196

$127

$23

($2)

$22

$8

($22)

 

 

                    
 

 

                    

 

Pre-Tax

Post-Tax

                 

NPV (5%)

US$mm

$1,858

$1,160

                 

IRR

%

50.3%

38.2%

                 

Payback

Yrs

1.6

2.0

                 

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