Prefeasibility Study & Project EconomicsThe reserve and resource estimates were updated for the Pre-Feasibility Study ("PFS") by Independent Mining Consultants (IMC), Tucson, AZ. Samuel Engineering, Denver, Colorado and Vector Engineering, Lima, Peru co-lead the study with support from Resource Development Inc.(RDI) (Metallurgy), and SGS Vancouver (Metallurgical Testing). All are independent preeminent engineering and metallurgical testing firms with recent mine development and operating experience in Peru.The PFS, which is dated effective Monday September 14th, 2009, is based upon mining assumptions derived from mine planning sequences completed by IMC and metallurgical test work performed by SGS Laboratories and G&T Metallurgical. The mining sequence primarily derives ore from the higher-grade starter pits in the early years and moves to lower-grade areas in the later years of production. Operations are to be 27 years based on current reserves. Only measured and indicated resources were used when defining the operations plan when converting resource to reserves. Note that in the mine sequence, only 258 million ounces contained within 139.6M tonnes have been used as reserve in this plan. An additional 110.4M additional tonnes of measured and indicated resource (containing 71.8 million ounces of silver) and 34.2 million tonnes of inferred resource (containing 35.6 million ounces of silver) remain that could be included in later plans of operations should metals prices and/or operating parameters (recoveries) improve.
Resource prices determined in the resource model of August 2009 utilizing three-year backward and two-year forward metals prices weighted 60:40 were maintained for the PFS as is consistent with the Company's policy and industry standards. The Pre-Feasibility Study is based upon an updated resource estimation and mine sequencing performed in August 2009 by IMC based upon 93,577 meters of drilling and sampling in 544 diamond drill holes and trenches completed through August 2009. The Company employs a Net Smelter Return (NSR) method to determine the break between ore and waste, with the cutoff NSR being $9.10 per tonne. Measured and Indicated Resources contained within the pre-feasibility study design pit were used to determine final pit limits and thus converted respectively into Proven and Probable Reserves. Importantly, 71% of the previously reported ounces of silver in resources were converted to reserves in this study. The additional resource material is mostly measured and indicated resource that occurs outside of the pre-feasibility study pit but which meets the CIM definition of mineral resource. PROJECT ECONOMICS Sensitivities to various parameters are summarized below:
Regulatory Footnotes The PFS was prepared by a team of independent engineering consultants. The mining and block model portion was prepared by Independent Mining Consultants of Tucson Arizona, John Marek, PE acting as QP. The process plant design was prepared by Samuel Engineering, Kathy Altman, PE acting as QP. Metallurgy and Process design criteria developed by Resource Development Inc. Deepak Malhotra, Ph.D acting as QP. And geotechnical, environmental, infrastructure, waste stockpile and tailings designs were prepared by Vector Peru, Scott Elfen, PE acting as the QP. Each of these individuals has read and approves the respective scientific and technical disclosure contained in this news release. Silver Equivalency calculation represents the contained equivalent silver ounces sent to concentrate and is based on the resource metal prices assumptions of $13.00/oz Ag, 0.70/lb Pb and 0.65/lb Zn and recoveries to concentrate of 74.5% for silver and 71.7% for lead and 71.3% for zinc. The calculation does not take into account the net smelter payment terms for the different metals in the two separate concentrates. The resulting equivalency is 1 oz Ag = 19.3 lb Pb and 1 oz Ag = 20.9 lb Zn. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||