Coeur's La Preciosa Project PEA Indicates 17-Year Initial Mine Life; Average Annual Silver Production of 9.1 Million Ounces over the First 14 Years
CHICAGO--(BUSINESS WIRE)--Jul. 8, 2013-- Coeur Mining, Inc. (the "Company" or "Coeur") (NYSE: CDE, TSX: CDM) announced results from a Preliminary Economic Assessment (PEA) for its wholly-owned La Preciosa silver-gold project located in Durango state, Mexico. The PEA indicates an initial estimated mine life of 17 years recovering an estimated 134.5 million ounces of silver and generating a 17% after-tax internal rate of return (IRR) using price assumptions of $25 per silver ounce and $1,500 per gold ounce.
Over the first 14 years of production, La Preciosa is expected to produce an average 9.1 million ounces of silver per year at anticipated average cash operating costs1 of $13.86 per silver ounce, and is expected to average approximately $93 million in operating cash flow1 per year. At forecast production rates, La Preciosa would be one of the top 10 primary silver mines in the world. The references herein are in U.S. dollars and U.S. customary units.
Table 1: PEA (Base Case) Highlights and Assumptions
|Silver/gold price assumptions||$25/$1,500|
|Initial capital expenditures||$348 million|
|Estimated initial mine life||17 years|
|Average daily processing rate||~11,000 tons per day|
|Years 1-14 average grade||2.65 ounces silver per ton|
|Total silver ounces recovered (% of current resource)||73% of 184 million ounces|
|Years 1-14 average annual silver production||9.1 million ounces|
|Years 1-14 average annual cash operating cost per ounce1||$13.86|
|Years 1-14 average annual operating cash flow1||$93 million|
|After-tax NPV (5% discount)||$314 million|
Mitchell J. Krebs, Coeur's President and Chief Executive Officer, said, "The results of this initial PEA demonstrate the viability of the La Preciosa open pit project at higher silver and gold prices and provide a solid foundation from which we believe we will enhance the project's economics over time. Subject to Board authorization, the Company intends to proceed with a feasibility study, which is expected to be completed in mid-2014. Upon completion of the feasibility study, the Company and its Board will evaluate the economics of the project, assess the silver market and determine whether to proceed with construction."
Mr. Krebs commented, "Over the next 12 months, we will pursue an exploration and infill drilling program focused on expanding the deposit, upgrading inferred mineral resources and drilling on several of the smaller veins and mineralized intercepts which fall within the designed pits to increase confidence levels, evaluate mineability and determine whether they can be incorporated into future mine plans.
"La Preciosa is located in mining-friendly Mexico, just 45 minutes from the city of Durango, with many local mines and a readily available workforce. It has easy access to power and transportation and we believe we now have the water supply necessary to support future mining activities."
La Preciosa PEA Highlights and Assumptions
- Measured and indicated resources of 57.2 million tons containing 146.2 million silver ounces and 277,700 gold ounces, and inferred resources of 19.5 million tons containing 37.7 million silver ounces and 60,300 gold ounces at June 26, 2013. (Please refer to the Appendix Table for related grades for the updated mineral resource estimate.)
- Expected average recovery rates of 86% for silver and 82% for gold at a throughput rate of 11,023 tons per day (10,000 tonnes per day) for average annual production of 9.1 million silver ounces and 15,100 gold ounces over the initial 14 years of mine life.
- Coeur's open pit mine plan estimates production of 59.1 million tons at average grades of 2.40 ounces of silver per ton and 0.004 ounce of gold per ton. The project envisions surface mine operation for the first 14 years and continued operation of the processing plant from stockpiled lower-grade ore for the final three years.
- Capital expenditures are estimated to be $347.9 million for commercial start-up and an additional $84.2 million of sustaining capital over the initial estimated 17-year mine life.
- After-tax IRR of 17% and a NPV of $314 million at a base case using a 5% discount rate, $25 per ounce silver price and $1,500 per ounce gold price, represents a payback period of 5.3 years.
- Located in a mining-friendly jurisdiction with infrastructure in place, including anticipated access to power and transportation and available water supply.
The La Preciosa PEA demonstrates leverage to a rising silver price as shown in the Economic Sensitivity Analysis below.
Table 2: Economic Sensitivity Analysis - After-tax IRR, NPV and Payback Period
(Base case at $25 silver price is shown in bold below.)
|NPV @ 5%||NPV @ 10%||IRR %||Payback|
Estimated capital expenditures are shown in the table below. Mobile mining equipment valued at $84 million is assumed to be leased and is not included in the estimated capital expenditures. The cost of leasing is $2.88 per ton ore processed and is included in operating costs. Sustaining capital expenditures are estimated to total $84.2 million over the initial 17-year mine life. The Company used a high level of design and engineering rigor for this PEA-level study with more than 50% of the capital equipment estimates supported by current price quotations.
Table 3: Capital Expenditures
|Mine capital and pre-strip||$||22.1|
|Coeur (owner's cost)||$||32.0|
|Total start-up capital expenditures||$||347.9|
|Total sustaining capital expenditures||$||84.2|
Mining and Processing
The PEA envisions using hydraulic shovels, loaders and a fleet of 195-ton haul trucks for the open pit operations. The processing plant incorporates an 11,000 ton per day mill with agitated leach, counter current decantation clarification and a Merrill-Crowe plant to produce silver-gold doré.
Table 4: Cost Parameters
PEA Production Cost Assumptions
|Average mine costs||$1.38/ton material mined|
|Total mining cost||$16.25/ton ore processed|
|Equipment lease cost||$2.88/ton ore processed|
|Processing costs||$13.04/ton ore processed|
|Site G&A||$1.59/ton ore processed|
|Treatment, refining, transportation||$0.60/ton ore processed|
Total operating cost
$34.36/ton ore processed
Opportunities for Optimization
Recommendations in the PEA for cost saving opportunities range from optimizing the mine design and conducting infill and exploration drilling to expanding reserves and optimizing metallurgical recoveries. Coeur also expects to further evaluate in-pit waste disposal sites, grinding, power consumption and the tailings storage method.
Feasibility Study Phase
The feasibility study phase will focus primarily on the open pit mine optimization and metallurgical testing to maximize plant operating efficiency and recoveries. Geomechanical studies will evaluate rock strength and fracture characteristics to provide information for slope design. The evaluation will also include tradeoff analyses comparing dry stack versus conventional tailing storage, tailing locations, and alternate cyanide destruction methods. The feasibility study will also investigate the potential to supplement or extend mine production through the inclusion of underground mining of resources that lie beyond the boundary of the currently designed surface pit.
In parallel with the feasibility process, Coeur will complete baseline environmental work and prepare an Environmental Impact Statement as a part of an application for construction and operating permits.
Coeur anticipates total 2013 expenditures of $12 million, including $6 million for the PEA and $5 million for exploration and feasibility work, and an additional $18 million of expenditures in 2014, including $5 million for exploration. All such costs will be expensed.
La Preciosa is situated within a contiguous block of concessions totaling more than 125 square miles (32,400 hectares). The La Preciosa deposit and the majority of prior exploration work are contained within a smaller core of concessions covering approximately 4.2 square miles (1,100 hectares), or 3% of the total land package. Coeur believes the surrounding, larger land package contains similar host rocks and structural features to those in the core concessions but these have not yet been explored in a systematic manner.
The Company's exploration priorities will be to (i) upgrade key inferred mineral resources included in the current PEA mineral resource results to at least indicated status, (ii) commence exploration near the current mineral resources for extensions and new mineral occurrences and, (iii) conduct a full district compilation of all historic data to assist with regional exploration.
A construction decision will be made following completion of the feasibility study in the second half of 2014. Assuming a positive decision, construction is expected to take two years, with potential initial production beginning in the second half of 2016.
The PEA was completed by M3 Engineering & Technology Corporation (M3) of Tucson, Arizona, with the support of Independent Mining Consultants, Inc. (IMC) and Resource Evaluation, Inc. (REI) of Tucson, Arizona. Coeur selected M3 to conduct the PEA due to their extensive experience in Mexico, having designed and constructed over 16 mining projects in the country, including Goldcorp's Peñasquito mine.
The PEA is preliminary in nature and it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves and there is no certainty that the results reflected in the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution. There is no certainty that the inferred mineral resources will be converted to the measured and indicated categories or that the measured and indicated mineral resources will be converted to the proven and probable mineral reserve categories.
Coeur Mining, Inc. is the largest U.S.-based primary silver producer and a growing gold producer. The Company has four precious metals mines in the Americas generating strong production, sales and cash flow. Coeur produces from its wholly owned operations: the Palmarejo silver-gold mine in Mexico, the San Bartolomé silver mine in Bolivia, the Rochester silver-gold mine in Nevada and the Kensington gold mine in Alaska. The Company also has a non-operating interest in the Endeavor mine in Australia. In addition, the Company has two silver-gold feasibility stage projects - the La Preciosa project in Mexico and the Joaquin project in Argentina. The Company also conducts ongoing exploration activities in Mexico, Argentina, Nevada, Alaska and Bolivia. The Company owns strategic investment positions in eight silver and gold development companies with projects in North and South America.
Posted: July 8, 2013