Southern Silver Announces Updated PEA on Cerro Las Minitas: US$501M After-Tax NPV5%; 21% IRR; 48 Month Payback
Southern Silver announced an updated Preliminary Economic Assessment (PEA) for its Cerro Las Minitas project, highlighting a robust after-tax NPV5% of $501M and an IRR of 21.2%, with a payback period of 48 months. Increased metal prices could boost NPV5% to $876M and IRR to 30.1%.
The project spans a 17-year mine life with annual plant feed averaging 14.3 Moz AgEq, leading to gross revenues of $4.47B. Initial CapEx is estimated at $388M. The mine is located in southeast Durango, Mexico, a favorable mining jurisdiction.
Compared to the 2022 model, production, capacity, and revenue have increased by 20%, 18%, and 17% respectively. The project sees improved mine life, production schedules, and cost optimizations. The mine will use a longhole stoping method and conventional sulphide flotation for processing.
PEA assumes base metal prices of Ag $23/oz, Au $1850/oz, Cu $4.00/lb, Pb $1.00/lb, and Zn $1.25/lb. The study is preliminary, with potential risks from mining, environmental, and financial factors.
- After-tax NPV5% of $501M and IRR of 21.2%
- Payback period of 48 months
- Gross revenues of $4.47B over 17 years
- Initial CapEx of $388M
- Located in a mining-friendly jurisdiction
- Annual plant feed averaging 14.3 Moz AgEq
- Mine life increased to 17 years
- Production capacity increased by 18%
- Revenue increased by 17%
- After-tax NPV5% could reach $876M with higher metal prices
- Annual average After-tax Free-cashflow of $107M in the first 8 years
- Total CapEx of $565M including $177M in sustaining and closure capital
- Operating costs of $61.37/t ore processed
- Potential risks from mining, environmental, processing, permitting, taxation, and socio-economic factors
- Sensitivity to metal prices shows significant impact on NPV and IRR
- High initial capital requirements may pose financing challenges
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
PEA Highlights (all figures in $US unless otherwise noted):
Robust Project Economics - Base Case1: after-tax NPV5% of
$501M (C$682M ) and IRR of21.2% with a 48-month payback;Excellent Silver and Zinc Price Leverage - Base-case +
20% Metal Prices2: after-tax NPV5% of$876M (C$1,193M ) and IRR of30.1% with a 37-month payback;
Base Case Metal Prices: Ag-
$23.00 /oz, Au -$185 0/oz, Cu -$4.00 /lb, Pb -$1.00 /lb and Zn -$1.25 /lbBase Case +
20% metal prices: Ag-$27.60 /oz, Au -$222 0/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 AgEq3 (inc. 5.8 Mozs Ag) and life-of-mine (LOM) feed totalling 243.2 Mozs AgEq3; (inc. 98.6 Mozs Ag). LOM product sales total 194.3Mozs AgEq3 at an AISC of
$13.23 /oz AgEq3 sold;A High-Revenue Project with gross revenues totalling
$4.47B with silver and gold representing45% of revenues, and zinc representing35% 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; andA Well-Located Project in a mining friendly jurisdiction with excellent infrastructure in southeast Durango state, Mexico;
- 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 approximate17% increase in revenues. - Increases the after-tax NPV5% by
45% to$501M ; and - Similarly, increases the post-tax IRR by
3.3% to21.2%
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
PEA SUMMARY:
Study support
- The study is based on an updated Mineral Resource ("Resource") by KGL, as of March 20th 2024, using a
$60 NSR/t cut-off:- Indicated - 13.3Mt averaging 102g/t Ag, 0.07g/t Au,
0.17% Cu1.3% Pb, and3.1% 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 and2.1% Zn totaling 83.4Moz Ag, 104koz Au, 111Mlb Cu, 582Mlb Pb and 1,106Mlb Zn.
(see Appendices for Resource details, price and recovery assumptions)
- Indicated - 13.3Mt averaging 102g/t Ag, 0.07g/t Au,
- 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 =$185 0, 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
Table 1: CLM Project Economics
| Item | Units | Base Case |
| Revenue | US $M | |
| EBITDA | US $M | |
| LOM pre-tax cash flow | US $M | |
| LOM after-tax cash flow | US $M | |
| NPV pre-tax ( | US $M | |
| NPV pre-tax ( | US $M | |
| NPV pre-tax ( | US $M | |
| IRR pre-tax | % | |
| NPV after-tax ( | US $M | |
| NPV after-tax ( | US $M | |
| NPV after-tax ( | US $M | |
| IRR After Tax | % | |
| Initial Capital Expenditures | US $M | |
| Payback (discounted, after-tax) | months | 48 |
After-Tax, Free Cash Flow
Figure 1 illustrates the estimated annual and cumulative after-tax cash flow over the life-of-mine for both the Base Case (blue) and the Base Case +
Figure 1: Annual and LOM cashflow
To view an enhanced version of this graphic, please visit:
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Economic Sensitivities
The Project's gross revenues, NPV5% and IRR shows greatest sensitivity to metal prices.
Table 2: Gross Revenue, NPV5% and IRR sensitivity at base-case +/-
| All Metal Price (Ag, Au, Cu, Pb, Zn) Sensitivity | ||||
| Metal Price | Revenue (US$M) | NPV, after tax @ | NPV, after tax @ | IRR, after Tax |
| Spot | ||||
| + | ||||
| Base Case | ||||
| - | ||||
Note: Base Case price assumes Ag =
"Spot" assumes May 29 2024 prices: Ag =
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 @ | ||||||
| Sensitivity | Silver Price | Zinc Price | Silver in Pb Recovery | Zinc Recovery | Initial Capital | OPEX |
| - | ||||||
| - | ||||||
| - | ||||||
| - | ||||||
Note: +
Figure 2: After-tax NPV5% sensitivities
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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) | ||
| 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:
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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 approximately88.3% of the Resource value at a$60 /t cut-off value; - Depending on the width of the stope and the strike of continuous sections of wider zones, transverse stoping was selected and mined bottom-up. For predominately narrower zones (typically less than 18m) longitudinal stoping was selected and mined either top-down or bottom-up depending on location and timing of development. Overall, the average stope width by tonnage was 16.5 m;
- Detailed geotechnical analysis including hydrogeological modelling is to be completed in further studies of the deposit, however preliminary investigations have been completed. The preliminary investigations support the selection of longhole stoping as an appropriate method for this Preliminary Economic Assessment. An equivalent linear overbreak slough (ELOS) was assumed to be 1.0m (0.5m from each wall) and additional dilution for mining of backfill was considered. Backfill dilution was varied depending on exposure, with 0.5m considered from the backs (top-down), 0.25m from the floor (bottom-up), 0.5m from the far wall (longitudinal stoping), and 0.5m from one adjacent wall (transverse stoping mined centre-out);
- A stope recovery factor of
93% and development recovery factor of97% was considered.
The grade and average stoping widths are illustrated in Figure 4 and Figure 5 respectively.
Figure 4: US$NSR/t grade distribution of the Cerro Las Minitas MSO model - looking northeast
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Figure 5: Average Stope Width of the Cerro Las Minitas MSO model - looking northeast
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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 |
| Cu | (%) | 0.15 | 0.19 |
| Pb | (%) | 1.37 | 1.06 |
| Zn | (%) | 2.45 | 2.41 |
| AgEq | (g/t) | 290 | 257 |
Recoveries and Tailings:
- A series of Batch/Locked cycle testwork/variability testwork programs conducted between 2018 and 2023 confirmed that the Cu-Pb-Zn sequential flotation flowsheet would be appropriate for processing all the sulphide mineralization from the deposit.
- Testwork conducted in 2023 indicated that gold in oxide was readily leachable at high (>
80% ) recoveries, while approximately70% of the gold present in sulphide material could be concentrated in the pyrite-rich concentrate while20% reported to the copper concentrate. Ultra-fine grinding of the pyrite to80% passing 6 micron improved the extraction of Au by cyanidation from17% to40% while oxidative pre-treatment increased the gold extraction to83% but with very high oxygen and cyanide consumption. An economic evaluation determined that the oxidation step could not be justified. - Circuit design based on 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.
- 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 four saleable concentrates of sufficient quality to be marketable to a variety of global smelters.
Approximately
Table 6: Metal Recoveries established for the PEA
| Item | Pb Conc. | Zn Conc. | Cu Conc. | Dore |
| Pb Recovery | ||||
| Zn Recovery | ||||
| Cu Recovery | ||||
| Ag Recovery | ||||
| Au Recovery | ||||
| Concentrate Grade (Primary Base Metal) |
Refining and Treatment:
Treatment and refining charges were based on consultation with industry professionals and generated the terms indicated below:
Table 7: Refining and Treatment
| Ag | Au | Cu | Pb | Zn | |
| Cu Concentrate | |||||
| Average Concentrate Grade LOM | 1,266g/t | 4.3g/t | - | - | |
| Payable Metal | - | - | |||
| Minimum Deduction | - | - | 1 unit | - | - |
| Pb Concentrate | |||||
| Average Concentrate Grade LOM | 5,641g/t | - | - | - | |
| Payable Metal | - | - | - | ||
| Minimum Deduction | 50g/t | - | - | 3 Units | - |
| Zn Concentrate | |||||
| Average Concentrate Grade LOM | 180g/t | - | - | - | |
| Payable Metal | - | - | - | ||
| Minimum Deduction | 3oz/t | - | - | - | 8 units |
| Dore |
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FAQ
What is the after-tax NPV5% of the Cerro Las Minitas project according to the 2024 PEA?
The after-tax NPV5% of the Cerro Las Minitas project is $501 million.
What is the IRR of the Cerro Las Minitas project?
The IRR of the Cerro Las Minitas project is 21.2%.
What is the payback period for the Cerro Las Minitas project?
The payback period for the Cerro Las Minitas project is 48 months.
What are the base-case metal price assumptions in the PEA?
The base-case metal price assumptions are $23.00/oz for Ag, $1850/oz for Au, $4.00/lb for Cu, $1.00/lb for Pb, and $1.25/lb for Zn.
How much is the initial CapEx for the Cerro Las Minitas project?
The initial CapEx for the Cerro Las Minitas project is $388 million.
What is the total expected gross revenue from the Cerro Las Minitas project?
The total expected gross revenue from the Cerro Las Minitas project is $4.47 billion.
What is the mine life of the Cerro Las Minitas project?
The mine life of the Cerro Las Minitas project is 17 years.
What is the expected annual plant feed for the Cerro Las Minitas project?
The expected annual plant feed is 14.3 Moz AgEq.
How does a 20% increase in metal prices affect the NPV5% and IRR?
A 20% increase in metal prices raises the after-tax NPV5% to $876 million and the IRR to 30.1%.
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