Discovery Silver (TSXV:DSV) has reported results from the 100%-owned Cordero silver project’s Preliminary Feasibility Study (PFS) in Chihuahua State, Mexico. The project team was led by Ausenco Engineering Canada, AGP Mining Consultants, and Knight Piesold.
Tony Makuch, CEO, commented in a press release: “We are extremely pleased with the results from our Pre-Feasibility Study. The PFS positions Cordero uniquely in the silver developer space with a long mine life of 18 years and production averaging over 35 Moz AgEq in the first 12 years of the mine life. This represents an approximate 40% increase in total ounces produced compared to our 2021 PEA. Despite significant industry-wide cost escalation over the last year, cost savings from a streamlined process design and improved metallurgical performance have resulted in a highly capital efficient project with excellent margins.
“The Study also outlines the significant economic contribution the Project will have through employment, taxes and the purchases of local goods and services in the Municipality of Parral, in Chihuahua State and in Mexico. We now look forward to advancing the Project toward a Feasibility Study and surfacing additional value through numerous optimization opportunities we have already identified.”
Highlights from the Preliminary Feasibility Study are as follows:
PRE-FEASIBILITY STUDY SUMMARY
The economics for the PFS were based on the following metal prices: Ag – $22.00/oz, Au – $1,600/oz, Pb – $1.00/lb and Zn – $1.20/lb. Sensitivity of the Project’s expected after-tax NPV, IRR and payback at different commodity price assumptions is outlined in the table below:
|Units||Base Case||Spot Price||Base Case
|After-Tax NPV (5% discount rate)||(US$ M)||$1,153||$1,723||$1,797||$508|
|Internal Rate of Return||(%)||28.0%||35.9%||37.5%||16.9%|
Production & Costs
Annual production over the life-of-mine (“LOM”) is expected to average 33 Moz AgEq. In Years 5 – Year 12 production averages 40 Moz AgEq with peak production in Year 11 of 52 Moz AgEq. These production levels position Cordero as one of the largest primary silver mines globally.
All-In Sustaining Costs (“AISC”) average $12.80/oz AgEq in Year 1 – Year 12 and $13.62/oz AgEq over the LOM. This represents an approximate increase of 10% versus the PEA. This increase is primarily due to higher treatment and refining charges and industry wide cost escalation including higher assumed prices for consumables, diesel ($1.10/L vs $1.00/L in PEA) and power ($0.068/kWh vs $0.062/kWh). These increases were offset to a large extent by cost reductions from lower reagent consumptions and unit cost reductions attributable to higher throughput rates in the PFS compared to the PEA.
A summary of AgEq production and AISC is provided in the table below. A breakdown of the production proportions of each individual metal and AISC over the LOM is provided in the graph below the table.
|Units||Year 1 – 4||Year 5 – 12||Year 13 -18||LOM|
|AgEq Produced – Average/yr||(Moz)||30||40||25||33|
|AgEq Payable – Average/yr||(Moz)||25||34||21||27|
|AgEq Produced – Total||(Moz)||118||322||151||591|
|AgEq Payable – Total||(Moz)||102||268||124||494|
|All-In Sustaining Cost (AISC)||(US$/AgEq oz)||$12.29||$12.99||$16.05||$13.62|
Note – AgEq Produced is metal recovered in concentrate. AgEq Payable is metal payable from concentrate and incorporates metal payment terms outlined in the Concentrate Terms section below. AgEq is calculated as Ag + (Au x 72.7) + (Pb x 45.5) + (Zn x 54.6); these factors are based on metal prices of Ag – $22/oz, Au – $1,600/oz, Pb – $1.00/lb and Zn – $1.20/lb. AISC is a non-GAAP measure; refer to the Non-GAAP Measures section of the release for further information on this measure. See Technical Disclosure section for AISC calculation methodology.
LOM Production & AISC
Note – Au/Pb/Zn production is shown on an AgEq basis based on: Ag = $22/oz, Au = $1,600/oz, Pb = $1.00/lb and Zn = $1.20/lb
2023 PFS vs 2021 PEA Summary
The PFS incorporates numerous significant positive developments in comparison to the PEA. Based on drilling success at depth and in the northeast of the deposit the size of the open pit has increased by over 30% and the strip ratio has improved to 2.1:1. This additional drilling has also significantly increased the confidence level of the underlying resource with the PFS supported by Reserves of which 54% are in the Proven category.
The PFS incorporates throughput rates of 25,500 tpd in Phase 1 and 51,000 tpd in Phase 2, ~25% higher than the PEA. This has resulted in average annual production increasing by 27% over an extended mine life of 18 years. The process design has been streamlined based on the excellent results from the 2022 metallurgical testwork program with the co-processing of oxides and sulphides via flotation allowing for the elimination of the heap leach circuit.
The payback period has increased to 4.2 years. This is due to the delay in processing oxide material from eliminating the heap leach and given the mill expansion occurs in Year 3 of the mine life (deferral of the expansion would reduce the payback period to 3.0 years). The payback period has been significantly de-risked with more than 70% of the mill feed in Years 1 to Year 5 in the Proven category and the removal of the elevated risk typically associated with heap leach ramp ups.
Initial capital increased by 24% to $455 M. This was primarily due to the 25% increase in the initial size of the plant, a switch to owner-operated mining (assuming lease finance of mine equipment) driven by the growth in size of the open pit (the PEA assumed contractor mining) and cost inflation.
|PARAMETER||UNITS||2023 PFS||2021 PEA|
|After-Tax NPV (5% discount rate)||(US$ M)||$1,153||$1,160|
|Internal Rate of Return||(%)||28.0%||38.2%|
|Initial Capital||(US$ M)||$455||$368|
|Tonnes Processed (LOM – Total)||(Mt)||302||228|
|Strip ratio (LOM)||(w:o)||2.1||2.2|
|PRODUCTION & COSTS|
|AgEq Produced (LOM – Annual Average)||(Moz)||33||26|
|AgEq Produced (LOM – Total)||(Moz)||591||426|
|All-In Sustaining Cost (Y1 – Y12)||(US$/AgEq oz)||$12.82||$11.73|
|All-In Sustaining Cost (LOM)||(US$/AgEq oz)||$13.62||$12.35|
Project Economics are based on Ag = $22.00/oz, Au = $1,600/oz, Pb = $1.00/lb, Zn = $1.20/lb. See Technical Disclosure section for AgEq and AISC calculation methodology.
Feasibility Study Opportunities
The Feasibility Study (“FS”) is already being advanced and is expected to be completed in 1Q 2024. Key areas for optimization in the FS include:
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