South America-focused miner Sierra Metals (TSX: SMT; NYSE-AM: SMTS) has released a preliminary economic assessment (PEA) on an expansion of its Yauricocha polymetallic mine in Peru’s Yauyos province. The early-stage study suggests a throughput increase to 5,500 tonnes per day, up from 3,150 tonnes per day currently. The site is already scheduled to see an intermediate scale-up to 3,600 tonnes per day next year.
Based on the PEA, the incremental benefit of upping throughputs to 5,500 tonnes per day, up from the 3,600 tonne per day range, brings an additional net present value pegged at US$27.1 million, at an 8% discount rate, with a 29.5% internal rate of return, based on US$3.05 per lb. copper.
According to chief executive Luis Marchese, this latest study supports Sierra’s growth plans.
“I am very encouraged by the results of this PEA, which support the company’s organic growth strategy and plan to profitably develop and grow the Yauricocha mine production rate to 5,500 tonnes per day in 2024 from today’s permitted capacity of 3,150 tonnes per day,” the mining executive said in a news release.
Marchese added that the company plans to complete a prefeasibility (PFS) study for the expansion.
Along with the PEA, Sierra also released an updated resource for the mine, which forms the basis of the PEA mine plan.
With a 12-year mine life, the expanded operation would generate a payable total of 419 million lb. copper, 13.7 million oz. silver, 43,000 gold oz., 541 million lb. zinc and 167 million lb. lead over its mine life, at a total operating cost of US$1.28 per lb. copper-equivalent. The associated life-of-mine and sustaining capital stands at US$268.5 million.
With the resource update, measured and indicated resources at Yauricocha now stand at 15.9 million tonnes, at 43.8 grams silver per tonne, 0.5 gram gold per tonne, 1.2% copper, 0.6% lead and 2.2% zinc. Inferred resources stand at 11.6 million tonnes, grading 27.5 grams silver, 0.5 gram gold, 1.4% copper, 0.3% lead and 1% zinc, which is a 79% increase in inferred resource tonnes.
The Yauricocha mine has been operating since 1948. The material extracted is processed at the Chumpe plant, 1 km away, to produce copper, zinc and lead concentrates with gold and silver by-products.
Mexico resource growth ahead of PEA
For its Cusi silver mine in Mexico’s Chihuahua state, Sierra has also presented an updated resource, which accounts for exploration drilling completed between January 2018 and August 2020. Sierra sees additional potential to extend the high-grade zones at the Santa Rosa de Lima and Northeast-Southwest zones and plans to start a PEA on an expansion of Cusi.
Measured and indicated resources have increased by 18% to 5.4 million tonnes, grading 182 grams silver, 0.12 gram gold, 0.49% lead and 0.58% zinc (or 215 grams per tonne silver-equivalent). Inferred resources grew by 200% to 4.9 million tonnes, at 146 grams silver, 0.18 gram gold, 0.43% lead and 0.69% zinc (or 183 grams silver-equivalent).
“These increases represent a significant amount of additional drilling and mine exploration development work completed at the Cusi mine,” Marchese said. “This updated mineral resource estimate is the foundation of our upcoming preliminary economic assessment update that will help us to determine the most capital-efficient expansion scope for the Cusi mine, in a similar way that we have evaluated the Yauricocha mine in Peru and Bolivar mine in Mexico.”
This year, from its three mines, Sierra expects to produce 110.1-122.3 million lb. copper-equivalent.
— This article first appeared in the Canadian Mining Journal, part of Glacier Resource Innovation Group.