Arizona Mining Inc. said April 3 that a preliminary economic assessment for the Taylor zinc-lead-silver sulfide deposit, part of its Hermosa project in Arizona, estimated an after-tax net present value of US$1.26 billion, using an 8% discount rate, and internal rate of return of 42%.
The study pegged initial CapEx at US$457 million with payback in 1.7 years.
Annual production will average 287 million pounds of zinc, 286 million pounds of lead and 5.5 million ounces of silver with total operation costs of US$48.08 per ton.
The PEA outlined a 10,000-ton-per-day underground operation, with initial production starting in 2020 and ramping up to full capacity in 2023.
The zinc-lead-silver ores will be hoisted to the surface by a vertical shaft and processed through a 10,000 tpd concentrator located on the Trench patented property.
The initial mine plan is based on an updated mineral resource estimate for the deposit of 60.8 million tons of ore, including 72.5 million tons in the measured and indicated categories, grading 4.4% zinc, 4.3% lead and 1.7 ounces per ton of silver, using a 4% zinc equivalent cutoff.
The deposit also hosts an inferred resource of 38.6 million tons grading 4.4% zinc, 4.2% lead and 3.1 ounces per ton of silver.
"The new mineral estimate has been significantly upgraded and the total resource is now 65% classified in the measured and indicated category as compared to 27% in the Indicated category in the October 2016 resource estimate," company COO Don Taylor said.
The company has approved the project to progress to the feasibility stage and expects to complete this work, initiate state permitting for operations and break ground on the tailings facility by the end of 2017.
Feasibility work will focus on upgrading the current resource to proven and probable reserves and will include additional metallurgical testing, with the goal of further improving recoveries.
Commenting on the study, President and CEO Jim Gowans said, "In light of the project's strong cash flow, we should be able to attract significant conventional debt [US$250 million to US$300 million], offtake financing [US$75 million to US$150 million] and a silver stream [US$200 million to US$350 million]. We will minimize equity dilution wherever we can to benefit all shareholders."