One of the world’s largest silver projects
The Cordero project is one of Mexico’s premier porphyry targets for silver, gold, zinc and lead. Following completion of a successful PEA in April 2018, the current indicated and inferred resources, combined with the project’s eight large-scale mineral targets on more than 370 square kilometers, have established Cordero as a world-class property and a district-scale discovery ready for pre-feasibility studies. Cordero’s host rocks, geology, metal assemblage and size are all analogous to some of Mexico’s largest world-class, bulk-tonnage silver deposits including Penasquito (Goldcorp), Camino Rojo (Goldcorp) and Pitarilla (Silver Standard). These deposits are all situated within the same emerging Chihuahua-Zacatecas silver-gold belt in northern Mexico.
Through more than 133,000 meters of drilling, Cordero currently has a resource with:
- Silver: 407.8 M oz indicated, 187.5 M oz inferred
- Gold: 1.27 M oz indicated, 363,000 oz inferred
- Zinc: 8.03 B lbs indicated, 4.66 B lbs inferred
- Lead: 3.77 B lbs indicated, 1.86 B lbs inferred
Below are the Base Case tonnage and grade details based on a 15 g/t AgEq cut-off grade (Net Smelter Return cut-off of US$6/t), as announced in 2018 PEA:
|Cut off grade AgEq g/t||Resource Class||Million Tonnes||AgEq g/t||Ag g/t||Ag g/t||Zn %||Pb %|
Notes: *Resource by IMC Inc., March 1, 2018; The resource is within an open pit geometry generated by a floating cone algorithm using metal prices of: ($US) $17.14 Ag, $1.11/lb Zn, $0.96/lb Pb, $1,262/oz Au; and recoveries of 85% Ag, 80% Zn, 81% Pb, 33% Au.
Significant and near-term opportunity exists at Cordero to optimize the cut-off grade and obtain a resource that is much more well-suited to current silver prices, while still leaving the optionality of the lower cut-off grade Base Case shown above for when silver prices rise. Below is a table outlining the resource cut-off grade sensitivity:
Tonnage & Grade within Mineral Resources Pit Shell
Ag ozs x 1000
Notes: *same as table above
Preliminary Economic Assessment**
A successful Preliminary Economic Assessment (PEA), updated in April 2018, has established Cordero’s potential economic viability. As noted in the PEA: “The project, as it is currently scoped, is taking shape as a major open pittable project with projected mineral resources supporting 29 years of production at 40,000 tpd. Below are highlights of of the Base Case from the 2018 PEA (conducted by Independent Mining Consultants and M3 Engineering):
- Silver Price: US$20
- Internal Rate of Return (IRR): 16.5%
- Mill Capacity: 40,000 tpd
- Strip Ratio: 0.98/1
- Payback: 4.8 years
- Net Annual Cash Flow: $77.4M
Other key points summarizing the PEA are listed below:
- A sub-set of the indicated and inferred mineral resource was used to develop an open pit mining plan at a rate of 40,000 tonnes of mill feed per day, with flotation processing to create high-quality lead and zinc concentrates. This mining rate is identical to the mining rate in the 2013 PEA update (news release of May 15, 2013). Mineral concentrates will be sold to offshore smelters.
- Average annual production of 8 million ounces of silver, 44,788 tonnes of zinc (99 million lbs) in concentrate, 31,158 tonnes of lead (69 million lbs) in concentrate and 11,900 ounces of gold. The economic analysis for the updated study are based on $20/oz silver, $1.30/lb zinc, $1.00 lead, and $1,300/ oz gold.
- The updated mine plan for the updated 2018 PEA, which is scheduled over a 29 year mine life includes total mineralized material of 417.5 million tonnes at a 46.5 g/t silver equivalent, producing concentrates containing a total of 231 million ounces silver, 2,863 million pounds of zinc, 1,992 million pounds of lead, and 0.35 million ounces of gold.
- The waste to mill feed tonnage ratio is 0.98:1 since the resource crops out at the surface. The resource has not been drill delineated on its perimeter, and the modeled strip ratio includes undrilled areas in the modeled open pit as waste. The modeled open pit for the PEA measures –2000 m long x 1300 m wide x 380 maximum depth.
- Metallurgy is simple (side by side lead and zinc conventional floatation mills) with 88% overall recoveries after three rounds of bench-scale testing.
- Economic analysis for the updated study are based on $20/oz silver, $1.30/lb zinc, $1.00 lead, and $1,300/ oz gold.
- Capital costs estimated at $570 million for initial project capital including mine, plant, TSF, and Owners Costs, and $271 million for sustaining capital over the mine life.
- Average annual after-tax cash flow of $77.4 million over 29 years.
- Average operating mining cost of $2.34 per tonne of mill feed, a plant operating cost of $5.08 per tonne of mill feed, and a G&A cost of $1.12 per tonne of mill feed. Average annual cash operating costs are $193 million including royalties.
- The base case economic estimate is an after tax net present value of $438 million, using a 7.5% discount rate, and an after-tax internal rate of return of 16.5% with a payback period of 4.8 years.
- An upside silver price of $25/oz yields an after tax net present value of $713 million, using a 7.5% discount rate, and an after-tax internal rate of return of 21.9% with a payback period of 3.9 years.
- Project infrastructure includes a good road network between Hidalgo del Parral and the mine site. Power transmission will require a 232 kV extension of 75 km to the mine site substation. Skilled mine labor is available from Hidalgo del Parral and other nearby communities in southern Chihuahua.
- Discovery Metals (through its subsidiary Levon Resources) owns all claims that cover the Cordero district, which total 37,000 hectares.
**A Preliminary Economic Assessment should not be considered to be a prefeasibility or feasibility study, as the economics and technical viability of the Project have not been demonstrated at this time. The preliminary economic assessment is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Furthermore, there is no certainty that the preliminary economic assessment will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The Technical Report: Cordero Project, Preliminary Economic Assessment was authored and approved by Daniel H. Neff, P.E., who is the Qualified Person for purposes of this Preliminary Economic Assessment and the associated updated resource calculation. The revised PEA is available for viewing at SEDAR.
Cordero hosts at least eight large-scale targets on two distinct porphyry belts and a third mineralized volcanic center. The current resource is open to expansion on strike and at depth beyond the 2.8km x 2km conceptual open pit.