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PEA values Sierra Metals' Cusi mine expansion at US$92.2M

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PEA values Sierra Metals' Cusi mine expansion at US$92.2M

A preliminary economic assessment on Sierra Metals Inc.'s plans to increase production at its Cusi mine defined a net present value of at US$92.2 million, at an 8% discount rate and after taxes, with a 75% internal rate of return.

Sierra Metals aims to increase production by 315% at the polymetallic mine in Chihuahua, Mexico, after mechanized bench and fill mining was shown to be able to achieve sustainable production of 2,700 tonnes per day.

"The company is very encouraged by the results of this PEA as they support the plan to profitably develop and grow the Cusi mine in sustainable and staged steps from 650 t/d currently, to 1,200 t/d by the first quarter of 2019, and further, to 2,700 t/d in 2021 based on consensus metal pricing," President and CEO Igor Gonzales said in the statement.

Life-of-mine CapEx is estimated at US$104.5 million, including costs to mechanize the operation, while after-tax cash flow is anticipated at US$150.6 million. The payback period is pegged at 4.6 years.

The Mal Paso plant 44 kilometers away is processing 650 t/d, which will be increased to 1,200 t/d in 2019 with new equipment. Sierra Metals expects a new 1,500-t/d plant to come online in mid-2021 at Cusihuariachi and the operation will require a new tailings facility.

The analysis defined a nine-year operation, based on current resources, with production to total 30 million ounces of silver, 19,706 ounces of gold, 28,256 tonnes of lead and 19,160 tonnes of zinc.

Cusi hosts measured resources of 362,000 tonnes grading 225 g/t of silver, 0.13 g/t of gold, 0.55% lead and 0.68% zinc; indicated resources of 4.2 million tonnes grading 217 g/t of silver, 0.21 g/t of gold, 0.64% lead and 0.66% zinc; and inferred resources of 1.6 million tonnes grading 158 g/t of silver, 0.16 g/t of gold, 0.54% lead and 0.84% zinc. The estimate uses a silver equivalent cutoff grade of 105 g/t.

Sierra Metals noted that the estimate is effective as of August 2017 and does not incorporate data from subsequent drilling or mining depletion.