Sierra Metals Inc. (TSX: SMT) (BVL: SMT) (NYSE AMERICAN:
SMTS) ("Sierra Metals" or "the Company") is pleased to report the
results of the updated Preliminary Economic Analysis ("PEA") for
the expansion at its Yauricocha Mine operation, located in Yauyos
Province in Peru. This updated PEA is based on the last reported
resource, prepared by SRK and dated March 31st, 2021, and includes
revised PFS level CAPEX and opex estimations.
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Image 1: Yauricocha Mine, Chumpe Plant
Flotation Cells (Photo: Business Wire)
This PEA report was prepared as a National Instrument 43-101
Technical Report for Sierra Metals Inc. ("Sierra Metals") by SRK
Consulting (Canada) Inc. ("SRK") and Redco Global Peru S.A.C.
(“Redco”). The full technical report will be filed on SEDAR within
45 days of this news release.
Highlights of the updated PEA include:
- Updated Mine plan based on the last reported resource,
prepared by SRK and dated March 31st, 2021
- PFS level CAPEX and OPEX estimation for expansion
- Mine plan includes updated mineral resources, including
inferred resources
- Expansion Development Capital (Years 1-3): US$102.2
Million
- Life of Mine (LOM) after-tax Net Present Value (NPV):
US$273.1 Million at an 8% discount rate
- LOM Net After-tax Cash Flow: US$407.7 Million
- LOM & Sustaining Capital Cost: US$312.1 Million
- Average LOM Operating Unit Cost: US$44.01/tonne and
US$1.30/lb copper equivalent
- Mine Life: 11 years based on existing Mineralized material
estimate of 17.4 Mt.
- Average LOM Grades of Copper 1.2%, Zinc 1.4% Silver 31.12
g/t (1.00 oz/t), Lead 0.4% and Gold 0.398 g/t (0.013 oz/t)
- LOM Payable Production: Copper 332.9 million pounds, Zinc
399.9 million pounds, Silver 10.9 million troy ounces, Lead 131.2
million pounds and Gold 19.9 thousand troy ounces
- Metal Price Assumptions: Copper US$3.39/lb, Zinc US$1.10/lb,
Silver US$21.02/oz, Lead US$0.91/lb, Gold US$1,598/oz.
The PEA is preliminary in nature and includes inferred 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. Mineral resources that are
not mineral reserves do not have demonstrated economic viability.
There is no certainty that inferred resources can be converted to
indicated or measured resources or mineral reserves and, as such,
there is no certainty that the results of the PEA will be
realised.
Instances of the word ‘economic’ are intended to be conceptual
only, and prospects for economic extraction have not been
demonstrated.
Luis Marchese, CEO of Sierra Metals commented: “I am pleased
with the results of this updated PEA which continues to support the
Company’s organic growth strategy to profitably develop and grow
the Yauricocha Mine production rate to 5,500 TPD in 2024 from
today’s permitted capacity of 3,600 TPD.”
He continued, “The updated positive PEA study demonstrates an
economical expansion that supports the goal of maximizing
shareholder returns. This result underpins the strategy of
incremental organic expansions at our operations, supported by
their resource endowment, and our focus on base metals going
forward. With the consistent addition of resources through our
highly successful exploration initiatives, as well as added
efficiencies on the productivity of the mine due to our focus on
continuous improvement, Yauricocha confirms itself as a sustainable
mine with a profitable and valuable outlook for many years to
come.”
Updated PEA Highlights
Mining Methodology
The Yauricocha Mine is a producing underground mining operation
with a long production history using well-established, proven
mining methods. The majority of the mining is executed through
mechanized sub-level caving with a relatively small portion of the
mining using overhand cut and fill.
PEA Production Profile
Developed mine plan for Yauricocha is based on the last reported
resource, prepared by SRK and dated March 31st, 2021. Many of the
assumptions used in the PEA mine plan are based on actual
production figures. The economic envelope used to develop the mine
plan is based on current operating costs. The economic envelope
blocks by Net Smelter Return (NSR) value; blocks with an NSR value
greater than US$ 32.48/t are considered marginal and blocks with an
NSR value greater than US$ 42.94/t are considered potentially
economic. Marginal blocks are only included in the mine plan when
they are adjacent to potentially economic blocks and their recovery
does not require additional mine development. NSR values considered
planned and unplanned dilution (variable dilution between 10% and
25% respectively) and historical performance achieving mine
recoveries of 80%.
The mine schedule includes measured, indicated and inferred
resources. Inferred resources to be mined in the LOM production
plan include 7.6 M tonnes or 43.7% of total tonnes. The schedule
establishes a LOM at Yauricocha of 11 years, with a maximum
production rate of 5,500 tpd. This LOM considers mine development
between 2022-2023, ramping up to 5,500 tpd in 2024 until 2029,
where production would reduce until the end of the LOM.
Item
Total
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Tonnage (kt)
17,428
1,033
1,405
1,360
2,062
1,918
2,033
1,939
1,889
1,872
1,550
365
Cu (%)
1.16
0.93
0.92
1.11
1.11
0.96
0.94
1.02
1.43
1.69
1.41
1.16
Pb (%)
0.41
0.86
1.01
0.52
0.57
0.53
0.49
0.14
0.12
0.11
0.12
0.07
Zn (%)
1.41
2.23
2.69
1.82
2.24
2.14
1.79
0.52
0.40
0.44
0.57
0.57
Ag (g/t)
31.12
54.62
53.29
41.04
38.84
35.97
33.23
20.95
18.40
17.62
15.86
15.55
Au (g/t)
0.40
0.51
0.45
0.40
0.34
0.36
0.40
0.37
0.40
0.45
0.38
0.35
NSR (USD/t)
74.2
84.5
88.2
79.9
82.8
74.5
69.8
55.3
69.9
80.1
69.3
58.5
Mineral Processing
The Chumpe plant is located approximately one kilometer from the
Yauricocha Mine and mineralized material is transported from the
mine to the plant by rail. Mineralized material is processed using
conventional two-stage crushing followed by grinding-classification
and differential flotation circuit to produce commercial quality
lead/silver and copper.
SRK is of the opinion that Yauricocha’s operations are
reasonably well operated and shows flexibility to treat multiple
mineralized material sources. The metallurgical performance, i.e.,
metal recovery and concentrate grade have been consistent
throughout the period evaluated allowing them to produce commercial
quality copper concentrate, copper concentrate, and zinc
concentrate.
Mineral processing and the recovery of the mineral are
demonstrated, and copper, silver, gold, lead and zinc recoveries
are established at 75.0%, 68.4%, 19.5%, 88.5% and 88.0%,
respectively.
The Chumpe Plant's current throughput capacity is 3,600 TPD. In
2020, the average daily production was 3,038 tonnes per day and in
Q1 2021, the average increased to 3,532 tonnes per day. In line
with proposed increases in mine output, the processing capacity at
Chumpe would increase to 5,500 TPD in 2024.
The overall supporting infrastructure exists already and is
functioning and adequate to support the mine and mill.
Economic Analysis
This PEA indicates an after-tax NPV of US$273.1 million (using a
discount rate of 8%) at 5,500 TPD (in 2024). The total operating
cost for the LOM is US$766.9 million, equating to a total operating
cost of US$44.01 per tonne milled and US$1.30 per pound copper
equivalent. Highlights of the PEA are provided below.
PEA Highlights
Base case of US$1,598/oz Gold,
US$21.02/oz
Silver, US$3.39/lb Copper,
US$0.91/lb Lead and
US$1.10/lb Zinc.
Unit
Value
Net Present Value (After Tax 8%
Discount Rate)
US$ M
273.1
LOM Mill Feed (ROM mineralized
material)
Tonnes (Mt)
17.4
Mining Production Rate (360 days
per annum)
t/year
1,980,000
LOM Project Operating Period
Years
11.0
Total LOM Capital Costs
US$ M
312.1
Net After – Tax Cashflow
US$ M
407.7
EBITDA
US$ M
1,007.4
Average LOM total Operating Unit
Costs
US$/t
44.01
LOM Copper Production (Payable –
in copper conc)
M Lb
320.3
LOM Copper Production (Payable –
in lead conc)
M Lb
12.6
LOM Gold Production (Payable)
koz
19.9
LOM Silver Production
(Payable)
Moz
10.9
LOM Lead Production (Payable)
M Lb
131.2
LOM Zinc Production (Payable)
M Lb
399.9
Capital and Operating Costs
Breakdown
The total initial development capital for the Yauricocha Mine
Expansion is estimated to be approximately US$102.0 million, which
includes a contingency of US$10.8 million. A break down of costs is
shown in the table below.
Total Initial Development and
Expansion Capital
(Years 1-3)
US$ Millions
Direct Costs
Mining
$
16.4
Processing Plant
$
48.6
Infrastructure
$
2.1
Ancillaries
$
6.9
Total Direct Costs
$
74.0
Indirect Costs
Indirect Costs
$
13.3
Owners Costs
$
3.9
Total Indirect Costs
$
17.2
Subtotal
$
91.2
Contingency
$
10.8
Total Project
$
102.0
Total Operating Unit Costs from 2021 to 2023 are expected to
average US$ 47.61/t, declining to an LOM average of US$ 43.00/t
starting in 2024 based on the effect of increasing the production
rate from the current 3,780 tpd to 5,500 tpd in 2024. A breakdown
of unit operating costs is presented below:
Unit Operating Cost
US$ per tonne milled
2021 – 2023
2024+
Mining
$
33.32
28.97
Processing
$
8.45
8.78
G&A
$
5.84
5.25
Total
$
47.61
43.00
OPEX and CAPEX Breakdown by
Year
Item
Total
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
OPEX (USD/t)
44.0
50.2
47.5
45.8
43.2
44.4
45.2
44.4
41.7
38.1
40.6
56.2
CAPEX (M USD)*
312.1
42.1
50.3
61.4
24.7
33.4
26.9
19.7
16.3
20.5
5.6
11.2
*Includes Closure Costs
Mineral Resource
Statement
The Yauricocha Mine is located in the Allis district, Yauyos
province, department of Lima, approximately 12 kilometers west of
the Continental Divide and 60 kilometers south of the Pachacayo
railway station. Polymetallic mineralization has been mined at
Yauricocha for more than 50 years. Mineralization is genetically
and spatially related to the Yauricocha stock; six skarn bodies
host mineral resources around the margins of the stock. Near
surface mineral is exhausted but significant mineral resources are
reported at depth.
The PEA is based upon the following updated Mineral Resource
Statement.
Consolidated Yauricocha Mine
Mineral Resource Statement as of 31 March 2021 – SRK Consulting
(Canada), Inc. (1) (2) (3) (4) (5) (6) (7) (8) (9)
Classification
Volume
Tonnes
Density
Ag
Au
Cu
Pb
Zn
As
Fe
NSR
Ag
Au
Cu
Pb
Zn
As
Fe
(m3) '000
(Kt)
(t/m3)
(g/t)
(g/t)
(%)
(%)
(%)
(%)
(%)
(USD/t)
(Moz)
(Koz)
(Mlb)
(Mlb)
(Mlb)
(Kt)
(Mt)
Measured
1,262
4,241
3.36
59.41
0.58
1.08
0.92
2.62
0.19
25.02
131
8.1
79.3
100.8
86.2
245.3
7.9
1.1
Indicated
2,929
10,069
3.44
37.07
0.50
1.17
0.51
1.88
0.13
25.89
109
12.0
161.1
259.9
113.0
417.2
12.9
2.6
Measured + Indicated
4,191
14,310
3.41
43.69
0.52
1.14
0.63
2.10
0.15
25.86
116
20.1
240.4
360.7
199.2
662.5
20.8
3.7
Inferred
3,337
11,566
3.47
29.04
0.44
1.40
0.32
1.03
0.07
26.38
103
10.8
161.8
358.1
82.7
261.9
8.3
3.1
Notes
(1) Mineral Resources have been
classified in accordance with the Canadian Institute of Mining,
Metallurgy and Petroleum ("CIM") Definition Standards on Mineral
Resources and Mineralized material, whose definitions are
incorporated by reference into NI 43-101.
(2) Mineral Resources are
reported inclusive of Mineralized material. Mineral Resources are
not Mineralized material and do not have demonstrated economic
viability. All figures are rounded to reflect the relative accuracy
of the estimates. Silver, gold, silver, copper, lead, zinc, arsenic
(deleterious) and iron assays were capped / cut where
appropriate.
(3) The consolidated Yauricocha
Resource Estimate is comprised of Measured, Indicated and inferred
material in the Mina Central, Cuerpos Pequeños, Cuye, Mascota,
Esperanza and Cachi-Cachi mining areas.
(4) Polymetallic Mineral
Resources are reported at Cut-Off values (COV) based on estimated
5500 tpd operating costs, Net Smelter Returns (NSR) based on
estimated 5500 tpd metallurgical recoveries and 2021 smelter
contracts.
(5) Metal price assumptions used
for polymetallic feed considered CIBC November 2021 long term
consensus pricing (Gold (US$1,598.21/oz), Silver (US$21.02/oz),
Copper (US$3.39/lb), Lead (US$0.91/lb), and Zinc (US$1.10/lb).
(6) Lead Oxide Mineral Resources
are reported at COV’s based on 2016 actual metallurgical recoveries
and 2021 smelter contracts. No mining of Lead Oxide materials has
occurred since 2016.
(7) Metal price assumptions used
for lead oxide feed considered CIBC November 2021 long term
consensus pricing (Gold (US$1,598.21/oz), Silver (US$21.02/oz) and
Lead (US$0.91/lb).
(8) The mining costs are based on
estimated 5500 tpd costs and are variable by mining method.
(9) The unit value COV’s are
variable by mining area and proposed mining method. The marginal
(incremental) COV ranges from US$31.7 to US$36.7 for a 5,500t/d
operation.
Quality Control
All technical data contained in this news release has been
reviewed and approved by:
Americo Zuzunaga, FAusIMM CP (Mining Engineer) and Vice
President of Corporate Planning is a Qualified Person under
National Instrument 43-101 – Standards of Disclosure for Mineral
Projects.
About Sierra Metals
Sierra Metals Inc. is a diversified Canadian mining company
focused on the production and development of precious and base
metals from its polymetallic Yauricocha Mine in Peru, and Bolivar
and Cusi Mines in Mexico. The Company is focused on increasing
production volume and growing mineral resources. Sierra Metals has
recently had several new key discoveries and still has many more
exciting brownfield exploration opportunities at all three Mines in
Peru and Mexico that are within close proximity to the existing
mines. Additionally, the Company also has large land packages at
all three mines with several prospective regional targets providing
longer-term exploration upside and mineral resource growth
potential.
The Company's Common Shares trade on the Bolsa de Valores de
Lima and on the Toronto Stock Exchange under the symbol "SMT" and
on the NYSE American Exchange under the symbol "SMTS".
For further information regarding Sierra Metals, please visit
www.sierrametals.com.
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Sierra Metals Inc
Forward-Looking
Statements
This press release contains "forward-looking information" and
"forward-looking statements" within the meaning of Canadian and
U.S. securities laws (collectively, "forward-looking
information"). Forward-looking information includes, but is not
limited to, statements with respect to the date of the 2020
Shareholders' Meeting and the anticipated filing of the
Compensation Disclosure. Any statements that express or involve
discussions with respect to predictions, expectations, beliefs,
plans, projections, objectives, assumptions or future events or
performance (often, but not always, using words or phrases such as
"expects", "anticipates", "plans", "projects", "estimates",
"assumes", "intends", "strategy", "goals", "objectives",
"potential" or variations thereof, or stating that certain actions,
events or results "may", "could", "would", "might" or "will" be
taken, occur or be achieved, or the negative of any of these terms
and similar expressions) are not statements of historical fact and
may be forward-looking information.
Forward-looking information is subject to a variety of risks and
uncertainties, which could cause actual events or results to differ
from those reflected in the forward-looking information, including,
without limitation, the risks described under the heading "Risk
Factors" in the Company's annual information form dated March 18,
2021 for its fiscal year ended December 31, 2020 and other risks
identified in the Company's filings with Canadian securities
regulators and the United States Securities and Exchange
Commission, which filings are available at www.sedar.com and
www.sec.gov, respectively.
The risk factors referred to above are not an exhaustive list of
the factors that may affect any of the Company's forward-looking
information. Forward-looking information includes statements about
the future and is inherently uncertain, and the Company's actual
achievements or other future events or conditions may differ
materially from those reflected in the forward-looking information
due to a variety of risks, uncertainties and other factors. The
Company's statements containing forward-looking information are
based on the beliefs, expectations and opinions of management on
the date the statements are made, and the Company does not assume
any obligation to update such forward-looking information if
circumstances or management's beliefs, expectations or opinions
should change, other than as required by applicable law. For the
reasons set forth above, one should not place undue reliance on
forward-looking information.
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Investor Relations Sierra Metals Inc. Tel: +1 (416)
366-7777 Email: info@sierrametals.com
Americo Zuzunaga Vice President of Corporate Planning
Sierra Metals Inc. Tel: +1 (416) 366-7777
Luis Marchese CEO Sierra Metals Inc. Tel: +1 (416)
366-7777
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