BEAR CREEK ANNOUNCES ROBUST SANTA ANA FEASIBILITY STUDY; OVER 63 MILLION
OUNCES OF SILVER CONVERTED TO RESERVES
VANCOUVER, Oct. 7 /CNW/ - Bear Creek Mining Corporation (TSX Venture: BCM) ("Bear Creek" or the "Company") is very pleased to announce the results of a positive feasibility study ("the "Feasibility Study" or FS"), as defined by National Instrument 43-101 ("NI 43-101"), for its 100% owned Santa Ana silver deposit located in southern Peru. Highlights of this study include (all figures in this news release are in US dollars):
- The planned development of Santa Ana by 2012 is an important step
towards Bear Creek becoming a 20 million ounce a year silver producer
with the addition of production from the planned Corani deposit in
2014.
- Proven and Probable Mineral Reserves containing 63.2 million ounces
of silver at Santa Ana bringing the Company's total reserves to over
321 million ounces.
- Santa Ana Project pre-tax NPV of $85.3 million at a 5% discount rate
and IRR of 25.3% at $14.50 per ounce silver. After tax net present
value of $66.5 million and IRR 21.8%.
- 11 year mine life producing 44.2 million ounces of silver.
- Average annual saleable silver production of 4.6 million ounces per
year for the first 6 years.
- Cash cost of $9.02 per ounce silver for the 11 years LOM.
- Capital costs of $68.8 million with Capital Payback in 3.4 years at
$14.50/oz Ag.
- At $22.92 per ounce silver the project would have a pre-tax IRR of
70.2% and an NPV at 5% of $341 million. On an after tax basis the IRR
would be 52.6% and NPV $232 million.
- At current silver prices of $22.92 per ounce, free cash flow
estimated at $46 million per year for the first 6 years with a
1.4 year pay back.
- Numerous upside opportunities being explored including increase of
silver recovery, reductions in cash costs, and an extended mine life
plan to include an additional 35.7 million ounces silver.
- The Santa Ana deposit remains open, mainly at depth and to the north
where the northernmost holes contain up to 22 meters @ 124 g/t Ag
from surface.
Andrew Swarthout, President and CEO, states, "We are very pleased with the results of the Santa Ana Feasibility Study as this is the next major step in Bear Creek becoming a preeminent silver mining company. With the development of Santa Ana followed by the larger Corani project, Bear Creek has the assets to become a 20 million ounce per year silver mining company by 2014, which would place the Company within the top five pure silver mining companies in the world. As Santa Ana moves towards final permitting and detailed engineering, we will be investigating the opportunities we have identified with regard to improved metal recovery and mine expansions to maximize the value of this very robust project."
Bear Creek will host a conference call and webcast on Thursday October 7th, 2010 at 8:00 a.m. (Pacific) or 11:00 a.m. (Eastern) to discuss the results. Call-in and webcast information is provided at the bottom of this release.
Project summary - The project has a pre-tax internal rate of return ("IRR") of 25.3%, a net present value of $85.3 million at a 5% discount rate and earnings before interest, taxes, depreciation and amortization ("EBITDA") of $144 million over the 11 year life based upon $14.50 per ounce silver. Recovered silver production in the first six years averages 4.6 million ounces per year and the project is expected to produce an average of 4.0 million payable ounces of silver per year over the 11 year mine-life. Pre-production capital investment in the project is estimated to be $68.8 million and sustaining capital expenditures are estimated at an average $1.4 million per year over the 11-year life of the mine. Based upon a $14.50 silver price, the project achieves payback of capital in approximately 3.4 years. The Feasibility Study has been prepared using cost bids and estimates and production forecasts provided by qualified engineering consulting groups.
Project Upside - Considerable opportunities are available to enhance the results described in the Feasibility Study, especially in the light of currently high silver prices. Preliminary mine plans show that the mine life could be extended on the order of 50%, potentially adding 35.7 million contained silver ounces (30MT @ 37g/t Measured + Indicated Resources) to the current 63 million contained silver ounces of reserve. Additionally, column leach tests indicate that slightly finer crushing of the ore down to 3/8 inch from 3/4 of an inch would likely improve the recoveries from 70% to 75%. Importantly, column leach tests (in progress) utilizing 3/8 inch material indicate that the silver recovery is significantly accelerated at the finer crush size presenting further opportunities to bring cash flow forward as well as increase silver recoveries.
FEASIBILITY STUDY
The reserve and resource estimates were updated for the FS by Independent Mining Consultants ("IMC"), Tucson, AZ and Ausenco Vector, Lima, Peru co-led the study with support from Resource Development Inc. ("RDI") (processing), and McClelland Labs, Sparks, NV (metallurgical testing). All are independent preeminent engineering and metallurgical testing firms with recent mine development and operating experience in Peru. Within the next 45 days the Company will be posting on SEDAR an updated 43-101 compliant Technical Report for the Santa Ana Project to support the disclosure in this news release.
The FS is based upon mining assumptions derived from mine planning sequences completed by IMC and metallurgical test work performed by McClelland Labs. The mining sequence derives ore from the pit for 9.5 years and during the operation of the mine a 3 million tonne stock pile of ore is built up which is used as leach feed after mining has stopped. The mine will utilize conventional open pit methods with a waste to ore stripping ratio of 2:1. The crushing operation will run for 10.3 years with feed coming directly from the mine followed by crushing of the stock pile. Leaching of the ore and drain-down of the leach pad will continue for approximately one year after the addition of new ore has been stopped. The ultimate leach pad recoveries are expected to be at least 70% with 50% of the silver being recovered in the first month of leaching. The mine will produce a high purity silver doré bar that will be shipped off site for refining.
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Key Assumptions for the Santa Ana Project - Base Case
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Item
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Annual ore production - years 1 to end of life (tonnes) 3,600,000
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Overall Process Recovery - Silver 70%
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Total Processed Tonnes 37,077,000
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Average Silver Grade (g/t) 53.0 g/t
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Recovered ounces of silver 44.2 million
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Overall stripping ratio 1.96 to 1
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Life of mine (mining only) years 9.5
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Life of mine (processing) years 11.2
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The silver price selected for the FS is $14.50 per ounce.
PROJECT ECONOMICS
Sensitivities to various parameters are summarized below:
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Case IRR NPV @ 5% NPV @ 0%
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Base Case 25% $85.3M $143.6M
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Recovery +10% 34% $127.4M $203.5M
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Recovery -10% 16% $43.1M $83.5M
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Metal Price +10% 34% $129.4M $206.5M
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Metal Price -10% 16% $41.0M $80.5M
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Initial Capital Cost +10% 23% $79.0M $136.7M
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Initial Capital Cost -10% 28% $91.6M $150.5M
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Operating Cost +10% 20% $59.1M $106.6M
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Operating Cost -10% 31% $111.5M $180.5M
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Metal Prices Oct. 6, 2010 70% $341.1M $508.0M
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Note: Base case price is $14.50/oz Silver; London Silver spot price fix
from October 6, 2010 = $22.92/oz Ag. All values are pre-tax
RESERVE and RESOURCE ESTIMATE
Bear Creek Mining, Santa Ana Project Silver Zone
Mineral Reserves and Resources
October 7, 2010
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Mineral Reserves, Cutoff Grade, Variable 27 to 24 g/t Silver by Year
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Contained
Silver
Category Ktonnes Silver Lead Zinc Million
g/t % % Ozs
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Proven 8,951 57.6 0.37 0.66 16.6
Prob 28,126 51.5 0.33 0.55 46.6
Prov+Prob 37,077 53.0 0.34 0.58 63.2
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Note: no lead and zinc will be recovered
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Mineral Resources in Addition to Reserves,
Cutoff Grade = 15 g/t Silver
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Contained
Silver
Category Ktonnes Silver Lead Zinc Million
g/t % % Ozs
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Measured 13,386 34.6 0.30 0.51 14.9
Indicated 51,337 35.1 0.30 0.50 57.9
Meas+Ind 64,723 35.0 0.30 0.50 72.8
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Inferred 21,632 40.6 0.32 0.49 28.2
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The FS is based upon an updated resource estimation described in the press release dated 12 July 2010. The mine sequencing performed in September 2010 by IMC is based upon 60,458 meters of drilling and assays in 348 diamond drill holes and trenches completed through August 2009. Measured and Indicated Resources contained within the Feasibility Study design pit were used to determine final pit limits and thus converted respectively into Proven and Probable Reserves. In addition to reserves, 72.8 million ounces of silver remain in measured and indicated resources occurring outside of the Feasibility Study pit.
Metallurgical testing - The Company has completed six column leach test at McClelland Labs and over one-hundred leach amenability tests. The results have consistently demonstrated that the Santa Ana ore responds well to conventional heap leaching techniques. The overall recovery is expected to be 70% silver for minus 3/4 inch crushed material. More recent column tests indicate that further improvements in recovery to 75% silver can be achieved by crushing the ore to minus 3/8 of an inch. McClelland Laboratories is currently performing a column test on minus 3/8 inch crushed material and the Company will release the results when this long-term test is finished. Initial results strongly indicate an improvement in recovery and acceleration of the silver leaching.
OPPORTUNITIES
The study has identified areas of opportunities that will be analyzed immediately in detailed engineering and column leach test work:
- Organic growth - The Feasibility Study leaves 36 million ounces of
measured and indicated silver resources in either stockpiles or pit
walls that can lead to expanded mine life on the order of 50%.
Relatively minor additional capital will be required in order to
increase the size of the heap leach pad and waste dump sites for
which there is ample area for expansions.
- Exploration upside - The deposit is still open at depth, to the north
and northwest, and the "North" anomaly is under-explored.
- Enhanced Silver Recovery - Analysis of the recently completed column
leach studies indicates that higher recoveries are likely with a
slightly finer crush size. At 80% passing 3/8 inch crush size the
anticipated recovery is 75% of the silver and initial results from
test work indicate the speed of silver recovery is greatly improved.
- Operating Cost Reductions - The project is sensitive to operating
costs. The Company and its consultants believe that, once the project
is in operation, many of the reagent consumption levels used in the
Feasibility Study will be reduced with a beneficial effect on the
operating costs. Additionally, once a finer crush size is chosen,
there is potential to reduce the cash costs by $0.30 to $0.40 per
ounce resulting from accelerated silver leaching rates and increased
recoveries.
MINING AND PROCESSING
Mining will be performed using conventional open pit methods using 63t trucks and 8.6m(3) wheel loaders mining on 5 meter high benches. The mine requires minimal pre-production waste stripping of 2.97 million tonnes.
Processing of the ore will be by conventional crushing followed by placement of the crushed ore on a heap leach pad using haul trucks. The ore will be crushed close to the leach pad to 80% passing 3/4 inch, loaded in haul trucks and placed in cells in the leach pad where weak cyanide solution will be applied to the crushed ore. The leach solution will be collected at the base of the pad and will flow by gravity to the silver recovery plant. The silver recovery plant will be a conventional Merrill Crowe plant producing a high purity silver doré bar. In addition to the silver, a small amount of gold will also be produced; averaging 700 ounces gold per year. The doré will be transported to an international silver refinery for final processing into pure silver.
CAPITAL COSTS
The project capital cost estimate has been prepared by two independent engineering companies. The mining costs were prepared by Independent Mining Consultants of Tucson, Arizona, and the process heap leach and infrastructure costs have been prepared by Ausenco-Vector of Peru. The initial startup capital is estimated to be $68.8 million and the total life of mine capital cost is estimated to be $83.8 million. The initial capital equates to $1.56 per ounce of silver recovered. The life of mine capital costs used in the financial model include detailed long-term plans for heap leach expansions as well as ongoing mine closure and monitoring.
OPERATING COSTS
Mining costs were prepared on a year-by-year basis with costs varying mostly due to changing haulage distances. The life-of-mine average mining costs will be $1.68 per tonne of the total material moved. The cost for hauling and placing ore on the pad will be $0.71 per tonne. The process costs are estimated to be $3.19 per tonne of process ore and the G&A is estimated to be $1.17 per process tonne or $4.2 million per year. The average life-of-mine on site operating cost per ounce will be $8.35. Including refining charges, doré transport and Peruvian production royalties, the average cash cost per ounce will be $9.02.
INFRASTRUCTURE
The project has favorable infrastructure. Access will be via a good 8 km gravel road that will be a combination of new and improved roads requiring mostly upgrading. The new road will connect to the existing paved highway connecting the Bolivian border to the port of Ilo. The mine is 42 km from an electrical substation at Pomata and the project includes building a transmission line to the mine. The project has an excellent site for the heap leach pad resulting in a low capital and operating cost as the plant will be located immediately adjacent to the heap leach pad and ponds. The site is close to a very large alluvial aquifer that is replenished by a flowing river in the valley; wells have been drilled in the aquifer and sufficient water is available to provide water for the mine's needs. A 10 km pipeline from the wells to the mine will be built to transport the water.
ENVIRONMENTAL AND SOCIAL
The project has been designed to meet international standards of environmental compliance. The heap leach and solution ponds have been designed to the highest standards of containment and stability. The waste rock storage facilities are designed to capture and manage any flows that may originate from the waste rock. Finally an initial closure plan has been developed that will provide covers for both the heap leach and waste rock facilities that will result in safe and environmentally compliant closure of the mine. The Company has maintained good working relationships with the local communities.
The Company is currently advancing the permitting process and expects to submit the Environmental and Social Impact Assessment to the Peruvian authorities before the end of the year.
CONFERENCE CALL/WEBCAST
Call-in details for the conference call are:
Date: October 7th 2010
Time: 8 a.m. (Pacific)/11 a.m. (Eastern)
Number: (647) 427-7450
Toll Free: (888) 231-8191
To access the webcast: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3248960
A replay of this conference call will be available from October 7th to October 14th, 2010 and will be posted on Bear Creek's website: www.bearcreekmining.com. The replay numbers are:
Number: (416) 849-0833
Toll Free: (800) 642-1687
Passcode: 15424254
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Regulatory footnotes:
All of Bear Creek's exploration programs and pertinent disclosure of a technical or scientific nature, including the scientific and technical information contained in this news release, are prepared by or prepared under the direct supervision of, and reviewed and approved by, Marc Leduc, P. Eng., COO of the Company and Andrew Swarthout, P.Geo., the President and CEO of the Company, who serve as the Qualified Persons under NI 43-101 ("QP"). The block model estimate, mine design and schedules for the Feasibility Study were prepared by Independent Mining Consultants of Tucson Arizona, with John Marek, P.E. acting as the independent QP 43-101. Additionally, the methods used in determining and reporting the mineral reserves and resources are consistent with the CIM Best Practices Guidelines.
Assumptions used in the mineral reserve are consistent with the costs calculated used throughout the Feasibility Study and these are: Silver Price=$14.50/oz; Silver Recovery=70% to a doré bar; Mining Costs per tonne=$1.68; Process cost per tonne=$3.19; G&A per processed tonne=$1.17; Pit Slopes=42 degrees in mineralized tuff and 46 degrees in post-mineralized tuff. A variable reserve cutoff of 24 to 27 g/t was used and this was employed to improve the IRR in the early years of operation. The mineral reserves are contained within a practical mining plan that utilized the "floating-cone" method as an initial guide for design.
The mineral resource portion of the project is contained in a larger pit than the FS design pit. The method used in the resource calculation is equivalent to the method used in the resource calculation shown in the Company's May 26, 2009 Technical Report on the Santa Ana project (available under the Company's profile at www.sedar.com). For this resource estimate we have used metal prices based on a 3-year backward average and a 2-year forward price based on the current metal markets, Assumptions used in the resource model by IMC. Silver Price=$16.00/oz; Silver Recovery=70%; Zinc Recovery=0%; Lead Recovery=0%; Smelter charges: Silver=$0.40 per ounce; Mining Costs per tonne=$1.67; Process plus G&A cost per tonne=$5.30; Pit Slopes=40 degrees in all rock types.
The Feasibility Study was prepared by a team of independent engineering consultants. The mining and block model portion was prepared by Independent Mining Consultants of Tucson Arizona, with John Marek, PE acting as QP. The process plant design was prepared by Ausenco Vector in Peru with the Metallurgy and Process design criteria developed by Resource Development Inc., with Deepak Malhotra, Ph.D acting as QP. Geotechnical, environmental, infrastructure, waste stockpile and heap leach designs and financial modeling were prepared by Ausenco Vector, with Scott Elfen, PE acting as the QP.
Onsite operating cost per ounce represent the sum of the mining, processing and site G&A divided by the silver ounces produced. Cash costs per ounce are consistent with the Gold Institute's definition, where in addition to the onsite costs; refining, doré transport and royalties are added and by-product credits are subtracted from the numerator of the calculation.
All diamond drilling has been performed using HQ diameter core with recoveries averaging greater than 95%. Core is logged and split on site under the supervision of Bear Creek geologists. Sampling is done on two-meter intervals and samples are transported by Company staff to Juliaca, Peru for direct shipping to ALS Chemex, Laboratories in Lima, Peru. ALS Chemex is an ISO 9001:2000-registered laboratory and is preparing for ISO 17025 certification. Silver, lead, and zinc assays utilize a multi-acid digestion with atomic absorption ("ore-grade assay method"). The QC/QA program includes the insertion every 20th sample of known standards prepared by SGS Laboratories, Lima. A section in Bear Creek's website is dedicated to sampling, assay and quality control procedures.
THIS PRESS RELEASE INCLUDES FORWARD-LOOKING STATEMENTS OR INFORMATION. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACT INCLUDED IN THIS RELEASE, INCLUDING WITHOUT LIMITATION, STATEMENTS REGARDING FUTURE PLANS AND OBJECTIVES OF THE COMPANY IN RELATION TO PLANS FOR DEVELOPMENT OF ITS SANTA ANA AND CORANI PROJECTS, ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE VARIOUS RISKS AND UNCERTAINTIES. THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS WILL PROVE TO BE ACCURATE AND ACTUAL RESULTS AND FUTURE EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S PLANS OR EXPECTATIONS INCLUDE: THE POTENTIAL FOR DELAYS IN DEVELOPMENT ACTIVITIES; THE GEOLOGY, GRADE AND CONTINUITY OF MINERAL DEPOSITS; THE POSSIBILITY THAT FUTURE DEVELOPMENT OR MINING RESULTS WILL NOT BE CONSISTENT WITH THE COMPANY'S EXPECTATIONS; ACCIDENTS, EQUIPMENT BREAKDOWNS, TITLE MATTERS, LABOR DISPUTES OR OTHER UNANTICIPATED DIFFICULTIES WITH OR INTERRUPTIONS IN OPERATIONS; FLUCTUATING METAL PRICES; THE POSSIBILITY OF PROJECT COST OVERRUNS OR UNANTICIPATED COSTS AND EXPENSES; UNCERTAINTIES RELATING TO THE AVAILABILITY AND COSTS OF FINANCING NEEDED TO FUND THE COMPANY'S PLANNED OPERATIONS INCLUDING GENERAL ECONOMIC, MARKET OR BUSINESS CONDITIONS; THE INHERENT UNCERTAINTY OF PRODUCTION AND COST ESTIMATES AND THE POTENTIAL FOR UNEXPECTED COSTS AND EXPENSES; CURRENCY FLUCTUATIONS; REGULATORY RESTRICTIONS, INCLUDING ENVIRONMENTAL RESTRICTIONS AND LIABILITY AND ABILITY TO OBTAIN OR DELAYS IN OBTAINING NECESSARY PERMITS TO CONDUCT PLANNED DEVELOPMENT AND OPERATIONS; COMPETITION AND LOSS OF KEY EMPLOYEES; AND OTHER RELATED RISKS AND UNCERTAINTIES INHERENT IN THE EXPLORATION AND DEVELOPMENT OF MINERAL PROPERTIES DETAILED HEREIN AND FROM TIME TO TIME IN THE CONTINUOUS DISCLOSURE FILINGS MADE BY THE COMPANY. AS A RESULT, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS. THE COMPANY MAKES ALL REASONABLE EFFORTS TO UPDATE ITS CORPORATE MATERIAL, DOCUMENTATION AND FORWARD-LOOKING INFORMATION ON A TIMELY BASIS AS MAY BE REQUIRED BY APPLICABLE CANADIAN SECURITIES LAWS.
For further information: Andrew Swarthout - President and CEO, or Patrick De Witt - Investor Relations, Phone: 604-685-6269, Direct: 604-628-1111, E-mail: [email protected]; For further information, please visit the Company's website (www.bearcreekmining.com)
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