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Silver Bull Files Preliminary Economic Assessment Technical Report on SEDAR for the Sierra Mojada Project, Coahuila, Mexico

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Silver Bull Files Preliminary Economic Assessment Technical Report on SEDAR for the Sierra Mojada Project, Coahuila, Mexico

 

 

 

 

 

 

Silver Bull Resources, Inc. (TSX:SVB)(NYSE MKT:SVBL) is pleased to announce, further to its news release dated October 1, 2013, it has filed its Preliminary Economic Assessment Technical Report titled “Preliminary Economic Assessment NI43-101 Technical Report, Sierra Mojada Silver-Zinc Project, Coahuila, Mexico” on SEDAR at www.sedar.com. The PEA was prepared by JDS Energy and Mining Inc. of Vancouver, British Columbia on Silver Bull’s 100% owned Sierra Mojada Project. All amounts are presented in United States dollars.

 

Highlights from the base case study estimates of $23.50 per silver ounce and $0.95 per zinc pound include:

 



--  Pre-tax Net Present Value ("NPV") at a 5% discount rate of $641.1
    million and an Internal Rate of Return ("IRR") of 26.9%;
--  After-tax NPV at a 5% discount rate of $463.9 million and IRR of 23.1%;
--  After-tax payback of 2.9 years after plant start-up;
--  Pre-production capital cost ("CAPEX") of $297.2 million including a 15%
    contingency;
--  Sustaining Capital and closure costs of $79.6 million over life of mine
    ("LOM") including a 15% contingency;
--  An 18 year mine life, mining and processing 55.9 million tonnes of ore
    at 8,500 tpd, averaging 73.4 grams per tonne ("g/t") silver and 2.79%
    zinc, and producing 98.4 million ounces of silver dore, and 982,000
    tonnes of a high quality zinc concentrate (64% zinc concentrate grade);
--  An overall strip on the open pit of 5.6:1, with the first 5 years of
    production of the Phase 1 pit having a lower strip of 3.6:1 (see Figure
    1);
--  An average payable silver production of 5.5 million ounces of silver per
    year with a LOM cash cost of $6.58 per ounce of silver, net of by-
    product credits;
--  Years 2 to 6 are planned to produce an average of 7 million ounces a
    year with a peak production of 9.3 million ounces of silver in Year 2;
--  The JDS PEA does not take into account the potential mining of an
    additional 37 million tonnes of "lower" grade ore which is included in
    the resource cited below and lies immediately outside of the pit and has
    the potential to extend the current projected mine life.
 

 

 

Tim Barry, President and CEO of Silver Bull, states, “We are very pleased with this Preliminary Economic Assessment. It shows the Sierra Mojada project as a robust, long life, low cost mining operation that will put it within the top quartile of global silver producing mines. We are fortunate to have a near surface high grade zone which will act as our starter pit and is expected to initially produce an average of 7 million ounces per year allowing for a fast payback on initial capital expenditures. It is also important to remember the significant upside on this project. A mineralized “lower” grade halo surrounds the core of the ore body that may be mined and could be brought into a pit at a time in which we anticipate will be a higher metal price environment. This combined with obvious extensions of mineralization to the east, west and north coupled with the numerous regional showings suggest Sierra Mojada is part of a much larger mineralizing system.

 

A sensitivity table showing the NPV and IRR is shown below at different silver prices.

 



Table 1: NPV and IRR Sensitivity Table to Ag Prices

---------------------------------------------------------------------------
                                                         Pre-Tax  After-Tax
Ag Price     Pre-Tax  After-Tax    Pre-Tax      After-   Payback    Payback
Per Ounce    NPV ($M)   NPV ($M)       IRR    Tax IRR     (Years)    (Years)
---------------------------------------------------------------------------
$16            190.9      135.3      11.7%      10.4%        7.0        7.0
---------------------------------------------------------------------------
$18            310.9      225.7      15.9%      14.1%        4.9        4.9
---------------------------------------------------------------------------
$20            431.0      312.4      20.0%      17.5%        3.6        3.7
---------------------------------------------------------------------------
$22            551.1      399.0      23.9%      20.7%        2.9        3.1
---------------------------------------------------------------------------
$23.50         641.1      463.9      26.9%      23.1%        2.7        2.9
---------------------------------------------------------------------------
$25            731.2      528.8      29.7%      25.5%        2.6        2.7
---------------------------------------------------------------------------
$28            911.3      658.7      35.3%      30.1%        2.3        2.4
---------------------------------------------------------------------------
$30          1,031.4      745.2      38.8%      33.0%        2.1        2.2
---------------------------------------------------------------------------
Assumed zinc price of $0.95 per pound zinc.




Table 2: Capital Costs and Economic Highlights

---------------------------------------------------------------------------
Summary of Results                                            Unit    Value
---------------------------------------------------------------------------
Silver Cash Cost (Net of By-Products)                         $/oz     6.58
---------------------------------------------------------------------------
Avg Operating Cash Flow during Production                       $M     92.0
---------------------------------------------------------------------------

---------------------------------------------------------------------------
LOM Operating Costs                                             $M    1,483
---------------------------------------------------------------------------
LOM Operating Costs / tonne milled                  $/tonne milled    26.54
---------------------------------------------------------------------------

---------------------------------------------------------------------------
Capital Costs
---------------------------------------------------------------------------
  Pre-Production Capital                                        $M    260.7
---------------------------------------------------------------------------
  Pre-Production Contingency (15%)                              $M     36.5
---------------------------------------------------------------------------
Total Pre-Production Capital Costs                              $M    297.2
---------------------------------------------------------------------------
                                                    $/tonne milled     5.31
---------------------------------------------------------------------------
  Sustaining & Closure Capital                                  $M     67.7
---------------------------------------------------------------------------
  Sustaining & Closure Contingency (15%)                        $M     11.9
---------------------------------------------------------------------------
Total Sustaining & Closure Capital Costs                        $M     79.6
---------------------------------------------------------------------------
                                                    $/tonne milled     1.43
---------------------------------------------------------------------------
Total Capital Costs (incl. contingency)                         $M    376.8
---------------------------------------------------------------------------
                                                    $/tonne milled     6.74
---------------------------------------------------------------------------
Based on $23.50 per ounce silver and $0.95 per pound zinc prices, and
silver and zinc production as outlined in Table 3.




Table 3: Mine Plan Highlights

---------------------------------------------------------------------------
Summary of Results                                            Unit    Value
---------------------------------------------------------------------------
Mine Plan
---------------------------------------------------------------------------
Mine Life                                                    Years     18.0
---------------------------------------------------------------------------
Total Milled                                              M tonnes     55.9
---------------------------------------------------------------------------
Total Waste                                               M tonnes    310.8
---------------------------------------------------------------------------
Strip Ratio                                        w:tonnes milled      5.6
---------------------------------------------------------------------------
Average Plant Throughput                                       tpd    8,500
---------------------------------------------------------------------------
Average Head Grades
---------------------------------------------------------------------------
Zn                                                               %    2.79%
---------------------------------------------------------------------------
Ag                                                             g/t    73.39
---------------------------------------------------------------------------
Production
---------------------------------------------------------------------------
Total Zn Concentrate Produced                                  dmt  982,354
---------------------------------------------------------------------------
Average Zn Concentrate Produced                             dmt/yr   54,559
---------------------------------------------------------------------------
Total Zn production                                          M lbs  1,178.1
---------------------------------------------------------------------------
Average Zn produced                                       M lbs/yr     65.4
---------------------------------------------------------------------------
Total Ag Dore Produced                                        M oz     98.4
---------------------------------------------------------------------------
Average Ag Dore Produced                                   M oz/yr      5.5
---------------------------------------------------------------------------
Based on Zn price of US $0.95/lb.
 

 

 

Resources

 

The initial mineral resource estimate was developed using MineSight(TM) software to create a partial block-model, with blocks sized 5 m x 5 m x 4 m. For the purpose of resource estimation, all assay intervals within the mineralized units were composited to two metres and grades were capped prior to estimation. All resources identified in the Lerchs Grossman optimized pit fell into the Indicated category and were reported in Silver Bull’s NI43-101 resource report published on May 2, 2013.

 

At Silver Bull’s request, JDS combined the partial model resource estimate into one standard block model compatible with Silver Bull’s GEMS(TM) software. A small underground void was added in an area that had an overlap of solids within the silver ore body and resulted in a minor change in reportable silver grade and tonnes. JDS does not consider this change significant but it does support the recommendation for tighter geologic modeling.

 

The combined GEMS block model resources have been compared to the original LG optimized pit and are restated in Table 4 at the same 25g/t silver cut-off.

 



Table 4: Sierra Mojada Resources as of September 30, 2013, Silver and Zinc

---------------------------------------------------------------------------
                                          Silver Silver  Zinc
                       Cut-Off             Grade Ounces Grade   Pounds Zinc
                       (Ag g/t)   Tonnage   (g/t)  (Moz)   (%)         (lbs)
          -----------------------------------------------------------------
          greater than 100 g/t 13,500,000  170.2   74.1  1.57   466,900,000
          -----------------------------------------------------------------
           greater than 80 g/t 19,200,000  146.3   90.3  1.54   651,800,000
          -----------------------------------------------------------------
           greater than 65 g/t 25,300,000  128.4  104.4  1.52   846,000,000
INDICATED -----------------------------------------------------------------
           greater than 55 g/t 31,300,000  115.3  115.9  1.48 1,017,500,000
          -----------------------------------------------------------------
           greater than 45 g/t 39,900,000  101.1  129.6  1.42 1,243,800,000
          -----------------------------------------------------------------
           greater than 35 g/t 52,400,000   86.4  145.6  1.37 1,577,900,000
          -----------------------------------------------------------------
           greater than 25 g/t 71,100,000   71.5  163.4  1.34 2,106,800,000
          -----------------------------------------------------------------
           greater than 15 g/t 94,500,000   58.7  178.4  1.27 2,644,700,000
---------------------------------------------------------------------------
 

 

 

The methodology used is consistent with the Canadian Institute of Mining and Metallurgy definitions referred to in National Instrument 43-101. Note however that the assumptions for the LG pit were based on different parameters than those of the PEA which is now an NSR-based block model.

 

The NSR-based block model used for the PEA captured additional zinc resources not reflected in the above table due to different parameters applied to the block model based on the silver recovery circuit and SART process used for the PEA. This explains the difference in zinc grades shown in

 

Table 4 above and average zinc grades shown in Table 3, Mine Plan Highlights.

 

In addition to silver and zinc resources, lead and copper resources were estimated although lead and copper were not considered in the PEA. Results of on-going testwork focused on the economic recovery of lead were not available at the time the PEA was completed.

 

Mineral resources that are not mineral reserves do not have demonstrated economic viability.

 

NSR/Mining Model Construction

 

Once sufficient work was completed on metallurgical testing for the Sulphidization-Acidification-Recycle-Thickening process, updated silver and zinc recoveries and operating cost estimates were collated for the PEA analyses to follow. The Net Smelter Return model is based on the in situ resources for these two metals.

 

Results of on-going test work which focused on the economic recovery of lead were not available at the time the PEA was completed, and copper added no significant value anywhere in the envisioned process stream. Lead and copper have been excluded from the NSR model.

 

JDS constructed a block model from the combined block model described above. The NSR model equates the block value to US$ to allow a Whittle(TM) economic optimization of the resource. The defining variables used for this work are summarized in Table 5 below.




Table 5: Parameters used to create the NSR model for the Sierra Mojada
         Deposit

---------------------------------------------------------------------------
Parameter                                                  Unit      Values
---------------------------------------------------------------------------
Ag price                                                 US$/oz       23.50
---------------------------------------------------------------------------
Zn price                                                 US$/lb        1.10
---------------------------------------------------------------------------
Exchange rate                                          US$:CDN$        1.00
---------------------------------------------------------------------------
Ag recovery                                                   %          75
---------------------------------------------------------------------------
Overall Zn recovery from Ore                                  %          41
---------------------------------------------------------------------------
Zn recovery from SART                                         %          99
---------------------------------------------------------------------------
Zn concentrate grade                                          %          64
---------------------------------------------------------------------------
Ag payable                                                    %        99.5
---------------------------------------------------------------------------
Zn payable                                                    %          85
---------------------------------------------------------------------------
Zn smelting cost                                      US$/tonne      212.00
---------------------------------------------------------------------------
Zn concentrate transportation cost                    US$/tonne       20.00
---------------------------------------------------------------------------
Zn concentrate transportation insurance                 US$/dmt    0.02/100
---------------------------------------------------------------------------
Zn concentrate transportation losses                 30% of NIV     0.5/100
---------------------------------------------------------------------------
Zn Price Participation(i)                               US$/dmt        5.66
---------------------------------------------------------------------------
Ag refining                                      US$/payable oz       0.225
---------------------------------------------------------------------------
Ag dore transportation                          US$/ payable oz        0.15
---------------------------------------------------------------------------
Ag transportation insurance                     US$/ payable oz        0.12
---------------------------------------------------------------------------
Zn dilution factor                                                     1.00
---------------------------------------------------------------------------
Ag dilution factor                                                     1.00
---------------------------------------------------------------------------
Short tons to pounds                                                   2000
---------------------------------------------------------------------------
Lbs to metric tonnes                                                 2204.6
---------------------------------------------------------------------------
 

 

 

Mining

 

The mine plan developed for the PEA mines the Sierra Mojada deposit in a series of five phases which have been scheduled targeting ore of the highest value early in mine life. This is done to accelerate capital payback and maximize cash flow.

 

Standard open pit mining methods are utilized in the mine plan involving typical drilling, blasting, and material movement using shovels and trucks. The fleet required to mine all potential ore-grade material and associated waste has been identified with the primary fleet and ancillary/support equipment prices obtained from recent quotes. The primary fleet quoted consists of Caterpillar 777G trucks, 992K wheel loaders, D10T and D9T track dozers, MD6290 and MD6540 rotary drills, and Komatsu PC2000 front shovels.

 

The Base Case economics utilizes a leased mining fleet over the life of mine with realistic market terms expected from equipment dealers in Mexico at a 7% interest rate. Mining costs per tonne are based solely on fleet operating costs. Leasing costs are applied separately and included in overall operational costs.

 

In Year 2 of mine operations, a contractor fleet would be used to supplement pre-stripping of Phase 3. The additional waste stripping required in Year 2 is short-lived and does not justify the purchase of additional equipment. This schedule also creates the ability to backfill Phase 1 beginning in Year 5 and Phase 2 in Year 13 without affecting ore delivery to the plant – effectively maximizing backfill potential and minimizing surface area required for waste rock storage and also minimizing haulage costs. Mining Phases 3, 4, and 5 during Years 15 through 17 would also require assistance by contractor mining. Contractor costs have been assumed to be equal to owner mining costs plus 20% and have been incorporated into the economic model based on projected contractor unit requirements.

 

Processing

 

A planned Sierra Mojada process plant is designed to process polymetallic mineralization at a rate of 8,500 tonnes per day. The process facility design consists of a primary crushing plant, grinding circuit, agitation leaching for silver recovery and a Bio-SART plant that not only produces a high-grade zinc concentrate but also recovers an estimated 95% of cyanide used in leaching for re-use. The process plant is planned to operate two shifts per day and 365 days per year with an overall availability of 92%. The process plant would produce silver dore and zinc concentrate as separate saleable products.

 

Infrastructure

 

The Sierra Mojada project is accessible by paved highway and there is a rail line in use nearby that could be extended to the conceptual plant site location for delivery of bulk supplies and transport of zinc concentrates. Power can be provided either through the national grid which would require extending main transmission lines to the site, or generators located at site or off site. Diesel and natural gas generation were considered, and the choice of natural gas generators located proximal to an existing natural gas supply line in combination with lower-voltage transmission lines to site was deemed a reliable, lowest cost option among the alternatives considered. Make-up water supply is planned to be sourced from regional groundwater sources.

 

Capital Costs

 

The initial capital requirement for the Project is estimated to be US$297.2 M, as detailed in Table 6.




Table 6: Sierra Mojada Pre-production Capital Cost Estimate as of September
         30, 2013

---------------------------------------------------------------------------
Pre-Production Capital Costs                                   Estimate (M$)
---------------------------------------------------------------------------
  Pre-Stripping                                                        10.9
---------------------------------------------------------------------------
  Mining Equipment                                                     10.5
---------------------------------------------------------------------------
  Site Development                                                      4.8
---------------------------------------------------------------------------
  Crushing & Coarse Ore Stockpile                                      14.2
---------------------------------------------------------------------------
  Processing Plant                                                     69.2
---------------------------------------------------------------------------
  Tailings                                                              9.4
---------------------------------------------------------------------------
  On-Site Infrastructure                                               24.3
---------------------------------------------------------------------------
  Off Site Infrastructure                                              39.2
---------------------------------------------------------------------------
  Project Indirects                                                    38.4
---------------------------------------------------------------------------
  Engineering & EPCM                                                   29.9
---------------------------------------------------------------------------
  Owner's Costs                                                         5.6
---------------------------------------------------------------------------
  Pre-Production Lease Payments                                         4.3
---------------------------------------------------------------------------
Total Pre-Contingency Initial Capital Costs                           260.7
---------------------------------------------------------------------------
  Contingency                                                          36.5
---------------------------------------------------------------------------
Total Pre-Production Capital Costs                                    297.2
---------------------------------------------------------------------------
 

 

 

The Project has a total sustaining capital requirement of $60.9M. Closure costs amount to $6.8M. Contingency for sustaining and closure capital amounts to $11.9M.

 

Operating Costs

 

Total operating costs per tonne ore milled for the Project are outlined in Table 7.




Table 7: Sierra Mojada Estimated Unit Operating Costs

---------------------------------------------------------------------------
Operating Cost                                               $/tonne milled
---------------------------------------------------------------------------
  Mining ($1.68 per tonne mined)                                      11.03
---------------------------------------------------------------------------
  Processing                                                          11.55
---------------------------------------------------------------------------
  G&A                                                                  1.39
---------------------------------------------------------------------------
  Leasing                                                              2.57
---------------------------------------------------------------------------
Total Operating Cost                                                  26.54
---------------------------------------------------------------------------
 

 

 

Financial Analysis and Sensitivities

 

Using a silver price of $23.50/oz and a zinc price of $0.95/lb, the study yields a pre-tax NPV5% of $641.1 million and IRR of 26.9% with a payback period of 2.7 years. After-tax NPV5% amounts to $463.9 million and an IRR of 23.1% with a payback of 2.9 years.

 

It must be noted that all economic results reported in a PEA are preliminary in nature and as such may vary considerably from actual results. The project does not currently have any mineral reserves as the declaration of reserves requires at least a pre-feasibility study to be completed.




Table 8: Project NPV Sensitivity to Discount Rate

---------------------------------------------------------------------------
Discount Rate                         Pre-Tax NPV (M$)    After-Tax NPV (M$)
---------------------------------------------------------------------------
0%                                            1,280.5                 945.4
---------------------------------------------------------------------------
5%                                              641.1                 463.9
---------------------------------------------------------------------------
7%                                              491.1                 350.3
---------------------------------------------------------------------------
8%                                              430.2                 304.0
---------------------------------------------------------------------------
10%                                             329.9                 227.7
---------------------------------------------------------------------------
 

 

 

The figures in the above news release do not take into account the proposed Mexico tax reforms which are expected to be finalized before December 31, 2013.

Qualified Persons

 

The PEA was conducted under the overall review of Gordon Doerksen, P.Eng., of JDS Energy and Mining Inc. of Vancouver, British Columbia with the following Qualified Persons contributing to their respective sections:



Gordon Doerksen  P.Eng., Project Director, JDS Energy and Mining Inc.
Greg Blaylock    P.Eng., Associate, JDS Energy & Mining Inc.
Richard Boehnke  P.Eng., Engineering Manager, JDS Energy & Mining Inc.
Allan Reeves     P.Geo., Senior Geologist, JDS Energy & Mining Inc.
Bill Pennstrom   QP Metallurgy, President Pennstrom Consulting Inc. -
                 Process Flow Sheet Development and Operating Costs

Ken Embree       P.Eng., Knight Piesold Ltd., Tailings Facility
 

 

 

The foregoing Qualified Persons have verified that the data from the PEA is fairly and accurately disclosed in this news release. Scientific and technical information not directly summarized from the contents of the PEA was reviewed and approved by Greg Blaylock, a Qualified Person as defined by NI 43-101.

Posted November 15, 2013

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