PRESS RELEASE

Sierra Metals announces Bolivar expansion PEA

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Monday, July 9, 2018

PRESS RELEASE

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TORONTO, July 9, 2018 /PRNewswire/ - Sierra Metals Inc. (TSX: SMT) (BVL: SMT) (NYSE AMERICAN: SMTS) ("Sierra Metals" or "the Company") is pleased to report the results of a Preliminary Economic Assessment ("PEA") regarding the Company's Bolivar Mine, located in Chihuahua State, Mexico. The PEA is based on technical inputs from various independent consulting groups, including; SRK, Redco, Anddes and Transmin.

Based on the technical work from the various independent consultants, the PEA was compiled under National Instrument 43-101 standards by Mining Plus Peru SAC. The full technical report will be filed on SEDAR within 45 days of this news release.

Highlights of the PEA include:

  • After-tax Net Present Value (NPV): US$214 Million at an 8% discount rate
  • Return on Investment (ROI): 550%
  • After-tax Payback Period: 3.4 years
  • Life of Mine Capital Cost: US$96 Million
  • Net After-tax Cash Flow: US$303 Million
  • Total Operating Unit Cost: US$21.18/tonne
  • Plant Processing Rate: 5,000 tonnes per day (TPD)
  • Average Copper Recovery Rate 85%
  • Mine Life: 11 years based on existing Mineral Resource Estimate
  • Life of Mine Copper Payable Production: 252,507,942 pounds

Igor Gonzales, President and CEO of Sierra Metals commented: "The Company is very encouraged by the results of this PEA as they support the plan to profitably develop and grow the Bolivar Mine in sustainable and staged steps from 3,000 TPD currently, to 3,600 TPD in Q1-2019, and to 5,000 TPD in mid-2020, based on consensus metal pricing.

The Company is incorporating an aggressive Capex program into the PEA of US$96.0 million over the life of the mine, which includes exploration drilling to increase the mineral resources and convert the existing resources to reserves. Additionally, the PEA reflects an aggressive development program designed to open a mineable reserve at depth and on strike. The Opex reflects yearly production development, definition drilling programs, and other operational costs.

The current study focuses on the current Mineral Resource reported in the 43-101 Technical Report filed on July 5, 2018 and does not include any drilling completed after October 31, 2017. The Company is continuing with its successful brownfield exploration programs and expects to continue to grow the mineral resources at the Bolivar Mine this year. We believe that this expansion not only provides additional value to the company, as the PEA quantifies, but could also leverage the value of future resource additions. Potential new copper pounds discovered could be incorporated into production plans earlier than if the Company maintained current capacity levels."

He concluded, "We are continuing with our strategy to increase shareholder value and grow the reserve and resource base at the Company. We successfully completed brownfield exploration programs at all three mines and increased the mineral reserves and resources during the past two years. Additionally, we implemented a successful operational improvement program in Peru and have completed an effective turn-around program in Mexico, and we have already seen returns on this well-spent capital. Building upon these successes, we have completed a PEA at Cusi and Bolivar, and scoping studies at the Yauricocha Mine expected shortly, which will maximize value and profitability through the implementation of automation and possible throughput increases which will further drive growth and benefit all shareholders in the future."

Mineral Reserve and Resource Estimate

The property is located in the Piedras Verdes District of Chihuahua State, Mexico, approximately 250 kilometers southwest of the city of Chihuahua and consists of 14 mineral concessions (6,800 hectares). The Bolivar deposit is a Cu-Zn skarn and is one of many precious and base metal deposits of the Sierra Madre belt, which trends north-northwest across the states of Chihuahua, Durango and Sonora in northwestern Mexico (Meinert, 2007). Mineralization exhibits strong stratigraphic control and two stratigraphic horizons host the bulk of the mineralization: an upper calcic horizon, which predominantly hosts Zn-rich mineralization, and a lower dolomitic horizon, which predominantly hosts Cu-rich mineralization. In both cases, the highest grades are developed where structures and associated breccia zones cross these favorable horizons near skarn-marble contacts.

This PEA considers depleted measured, indicated and inferred resources reported on 2017 by SRK and effective date as of October 31, 2017. The results of this PEA are indicative of conceptual potential and are not definitive.

Table 1-1: Summary of resource reported by SRK, 2017 (Effective October 31, 2017)

Class

Tonnes

(000's)

Ag

(g/t)

Au

(g/t)

Cu

(%)

Ag

(koz)

Au

(koz)

Cu

(t)

Indicated

13,267

22.5

0.29

1.04

9,616

124

137,537

Inferred

8,012

22.4

0.42

0.96

5,779

109

76,774

(1)

Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures rounded to reflect the relative accuracy of the estimates. Copper, gold and silver assays were capped where appropriate.

(2)

Mineral resources are reported at cut-off values based on metal price assumptions*, metallurgical recovery assumptions**, mining/transport costs (US$17.59/t), processing costs (US$8.33/t), and general and administrative costs (US$2.41/t).

(3)

The metal value cut-off grade for the Bolivar Mine is US$29/t. No mineral resources are reported for the remaining pillars.

*

Metal price assumptions considered for the calculation of metal value are: Copper (Cu): US$/lb 3.00, Silver (Ag): US$/oz 18.25, and Gold (Au): US$/oz 1,291.00.

**

Metallurgical recovery assumptions are 83% Cu, 78% Ag, and 64% Au.

The resources were estimated by David Keller of SRK consulting (Canada) using Ordinary Kriging (OK), and reviewed and validated by Giovanny Ortiz, B.Sc., PGeo, FAusIMM #304612 of SRK, a Qualified Person.

Note: Mining has continued since the publication of this resource and resources have not been subsequently depleted.

Sierra Metals commissioned various specialist groups (Table 1-2) to evaluate how, on a conceptual level, mining, mineral processing, and tailings management could be adapted at the property to achieve a sustainable and staged increase in mine production and mill throughput from 3,000 TPD, to 3,600 TPD in Q1-2019, to 5,000 TPD by mid-2020.