VANCOUVER, Sept. 15, 2017 /CNW/ - Bear Creek Mining
Corporation (TSX Venture: BCM) ("Bear Creek" or the "Company")
announces that GMI Ingenieros Consultores S.A. ("GMI"), a
subsidiary of Peruvian engineering and construction firm Graña y
Montero Group, has provided the Company with the results of the
Phase 1 Detailed Engineering work at the Corani silver-lead-zinc
project in Peru that commenced in
November 2016 (see Bear Creek news
release dated November 14, 2016).
The Phase 1 Detailed Engineering incorporates further
optimizations and trade-offs to the Corani mine plan described in
the feasibility study entitled "Optimized and Final Feasibility
Study, Corani Project, Puno, Peru,
Form 43-101F1 Technical Report" dated effective May 30, 2015 (the "2015 Corani Feasibility
Study") and filed on SEDAR on July 17,
2015. Specifically, it establishes final processing flow
sheets and equipment lists, optimizes mine sequencing, and refines
capital expenditure ("CapEx") and operational expenditure ("OpEx")
cost estimates for the Corani project. GMI's Phase 1 Detailed
Engineering report will form the backbone of the Company's
application for a Construction Permit for the Corani project,
submission of which is anticipated during Q4 2017. Approval
of the Construction Permit is expected during Q1 2018.
With the completion of the Phase 1 Detailed Engineering, Bear
Creek's evolution toward becoming an emerging producer is
progressing. In order that this corporate transition be steered at
the executive level by an experienced and successful mine builder,
Andrew Swarthout has elected to step
down from his position as President and CEO of Bear Creek to assume
the role of Executive Chairman, effective October 1, 2017. Catherine McLeod-Seltzer, current Chairman of
the Company, will continue to serve as a director.
A warm welcome is extended to Mr. Anthony Hawkshaw, who was selected by the
Company's Board of Directors to replace Mr. Swarthout in the
position of President and CEO of Bear Creek Mining. Mr. Hawkshaw
has over 30 years' senior executive experience in the mining
industry and a proven track record of successfully executing the
transformation of a mineral exploration company into a mid-tier
producer. Additional details are provided below.
Key Updates and Project Metrics (all dollar amounts are
expressed in US dollars unless otherwise noted)
- The Phase 1 Detailed Engineering utilizes a contract mining
fleet to operate the Corani mine, rather than an owner-operated
fleet as provided for in the 2015 Corani Feasibility Study. As a
result, initial CapEx is reduced to $585
million and sustaining CapEx is reduced to $0.4 million (from $625
million and $39 million,
respectively, as estimated in the 2015 Corani Feasibility Study).
While this trade-off transfers capital to operating expenses, the
Company believes it is an improved approach at this time as it
mitigates the level of project financing risk associated with the
Corani project and provides the project with immediate skilled
mining operators and staff. However, the decision to use a contract
mining fleet for all or part of the anticipated Corani mine life is
fluid and subject to future reconsideration if warranted by ongoing
economic analysis or other factors.
- Treatment and refining charges, tailings disposal costs,
electrical power costs, administrative expenses, labor costs,
working capital, and corporate tax rate were updated in alignment
with current estimates and rates.
- Metal prices used to calculate the Corani project economics
were revised in accordance with NI 43-101 guidelines to
$18.00/oz silver, $0.95/lb lead and $1.10/lb zinc.
- At the metal prices quoted above, the optimizations, tradeoffs
and revised cost inputs considered in the Phase 1 Detailed
Engineering result in an after-tax net present value ("NPV") (at a
5% discount rate) of $402 million, an
internal rate of return ("IRR") of 15.4% and a payback period of
3.5 years.
- The key factors affecting the NPV and IRR are:
-
- the shift from an owner-operated mining fleet to contract
mining;
- revised metal prices;
- increased labor, maintenance and mobile equipment costs;
- a decrease in zinc and lead treatment charges and refining
charges offset by a significant increase in per ounce silver
refining charges;
- a roughly 10% increase in projected power costs; and,
- an increase in the Peruvian income tax rate from 26% to
29.5%.
- The Corani project retains its exceptional leverage to metal
prices, with an approximate $112
million difference in Corani NPV (after tax, at a 5%
discount rate) for every $1 movement
in the silver price, with proportional changes in lead and zinc
prices.
- At recent metal prices of $17.81/oz silver, $1.02/lb lead and $1.40/lb zinc, the Phase 1 Detailed Engineering
optimizations result in an NPV (after-tax, at a 5% discount rate)
of $540 million, an IRR (after tax)
of 18.0% and a payback period of 3.1 years, highlighting Corani's
leverage to increasing zinc and lead prices in addition to
silver.
- Utilizing contract mining and current cost estimates as noted
above increases the estimated all-in sustaining cost ("AISC") per
ounce of silver (net of by-products) to $1.80 in the first six years of operation and
$5.00 life of mine (from $0.36 and $4.09,
respectively, as estimated in the 2015 Corani Feasibility
Study).
- Recovery rates for silver, lead and zinc were revised as a
result of a new mine sequence plan. In comparison to the 2015
Corani Feasibility Study, the recovery rates for silver and lead
decreased 2% each, while the recovery rate for zinc increased
7%.
- Revisions to the design of the Corani open pits result in a
decrease in the stripping ratio to 1.49:1 from 1.68:1 in the 2015
Corani Feasibility.
- Proven and Probable Mineral Reserves are substantially
unchanged from the 2015 Corani Feasibility Study.
KEY CORANI PROJECT METRICS
|
2017
PHASE 1
DETAILED
ENGINEERING
|
2015
CORANI
FEASIBILITY
STUDY
|
CAPITAL
|
|
|
Initial
Capital
|
$585
M
|
$625 M
|
Sustaining
Capital
|
$0.4
M
|
$39 M
|
Total
Capital
|
$586
M
|
$664 M
|
PROCESSING
|
|
|
Ore Milled (k
t)
|
139,073
|
137,698
|
Silver
Recovery
|
69.9%
|
71.9%
|
Lead
Recovery
|
61.1%
|
62.8%
|
Zinc
Recovery
|
67.1%
|
60.1%
|
Payable Silver (from
zinc concentrate) (k oz)
|
7,096
|
5,473
|
Payable Silver (from
lead concentrate) (k oz)
|
137,343
|
145,575
|
Payable Lead (k
lbs)
|
1,578,154
|
1,651,849
|
Payable Zinc (k
lbs)
|
1,030,503
|
909,579
|
OPERATING
|
|
|
Total Production
Costs (1)
|
$3,347
M
|
$3,050 M
|
AISC (2)
per oz Silver (by-product basis) Years 1-6
|
$1.80
|
$0.36
|
AISC (2)
per oz Silver (by-product basis) Life of Mine
|
$5.00
|
$4.09
|
AISC (2)
per oz Silver (co-product basis) Life of Mine
|
$11.54
|
$11.26
|
Avg. Annual Silver
Production Years 1-6
|
12.0 M
oz/year
|
12.9 M
oz/year
|
Avg. Annual Silver
Production Life of Mine
|
8.0 M
oz/year
|
8.4 M
oz/year
|
Stripping
Ratio
|
1.49
|
1.68
|
Mine Life
(extraction)
|
18
years
|
18 years
|
Mine Life
(processing)
|
18
years
|
18 years
|
Mill
Capacity
|
22,500
tpd
|
22,500 tpd
|
ECONOMICS
(after tax)
|
|
|
Net Present
Value
|
$402 M
(3)
|
$544 M
(4)
|
$643 M
(5)
|
Internal Rate of
Return
|
15.4%
(3)
|
18.5%
(4)
|
20.9%
(5)
|
Payback period
(years)
|
3.5
(3)
|
3.8
(4)
|
3.6
(5)
|
(1)
|
Total Production
Costs are calculated as total cash operating costs + sustaining
capital costs + reclamation and closure costs + social
costs
|
(2)
|
AISC are per payable
oz, and are calculated as cash operating costs + sustaining capital
costs + reclamation and closure costs + social costs
|
(3)
|
NPV (at 5% discount
rate, after tax), IRR (after tax) and payback period using 2017
Detailed Engineering report base case metal prices ($18/ounce
silver, $0.95/pound lead and $1.10/pound zinc)
|
(4)
|
NPV (at 5% discount
rate, after tax), IRR (after tax) and payback period using 2017
Detailed Engineering report base case metal prices ($18/ounce
silver, $0.95/pound lead and $1.10/pound zinc) applied to 2015
Corani Feasibility Study
|
(5)
|
NPV (at 5% discount
rate, after tax), IRR (after tax) and payback period per 2015
Corani Feasibility Study using base case metal prices used therein
($20/ounce silver, $0.95/pound lead and $1.00/pound
zinc)
|
Andrew Swarthout, President and
CEO of Bear Creek Mining states "The modifications, optimizations
and tradeoffs to the Corani mine plan envisioned in GMI's Phase 1
Detailed Engineering report substantially de-risk the Corani mine
plan and provide a current and more detailed picture of the scope
of the project and the costs of constructing and operating the
proposed Corani mine. The use of a contract mining fleet rather
than an owner-operated fleet to operate the Corani mine is more
closely aligned with conventional practices in Peru and mitigates the financing risk by
decreasing the upfront capital required to build the project.
Furthermore, as is typical when undertaking detailed
engineering-level work, GMI utilized current and project-specific
cost quotes that are accurate to +/- 10% (compared to the +/- 20%
accuracy standard as used in the 2015 Corani Feasibility Study).
The net result of this rigorous work is a realistic, economically
robust project that remains highly leveraged to rising metal
prices."
Leverage to Metal Prices
The Corani project remains highly leveraged to metal prices,
with a difference in NPV of $112
million for every $1 movement
in silver price (with proportional changes in lead and zinc
prices). The following table shows the NPV, IRR and payback period
at recent spot metal prices.
|
Base
Case
(3)
|
Recent
Metal
Prices
(4)
|
NPV
(1)
|
$402 M
|
$540 M
|
IRR
(2)
|
$15.4%
|
18.0%
|
Payback period
(years)
|
3.5
|
3.1
|
(1)
|
After tax, at a 5%
discount rate
|
(2)
|
After tax
|
(3)
|
$18.00/oz silver,
$0.95/lb lead and $1.10/lb zinc
|
(4)
|
$17.81/oz
silver, $1.02/lb lead and $1.40/lb zinc (spot prices at September
11,
2017)
|
Management Changes
As announced above, in order that Bear Creek's future evolution
be steered at the executive level by an experienced and successful
mine builder, Andrew Swarthout has
elected to step down from his position as President and CEO to
assume the role of Executive Chairman. Bear Creek's Board of
Directors is pleased to announce the appointment of Mr.
Anthony Hawkshaw to the position of
President and CEO and as a director of the Company. Both
appointments will be effective October 1,
2017.
Mr. Swarthout co-founded Bear Creek Mining in 2003 and was a
critical and integral contributor to the acquisition, discovery and
development of the Corani deposit and the architect of the
Company's exceptional technical and management teams. He will
continue to lend his expertise and oversight to Bear Creek as he
guides the Company's vision and execution of its goals in his new
role as Executive Chairman.
Mr. Hawkshaw has over 30 years' global experience in the mining
sector. He was a founding shareholder, director and CFO of Rio Alto
Mining from 2007 to 2014. Tony was a key contributor to the
vision, strategy and growth of Rio
Alto, which under his tenure grew from a TSXV-listed
exploration company to a TSX- and NYSE-listed intermediate gold
producer on the basis of its acquisition, development and
successful execution of the La Arena project and subsequent
acquisition and development of the Shahuindo deposit, both of which
are located in Peru. Rio Alto
Mining was acquired for these outstanding assets by Tahoe Resources
Inc. in 2015 in a deal worth US $1.12
billion. Prior to Rio Alto,
Tony held senior executive positions at numerous resource firms
including Pan American Silver, Chariot Resources and Grove Energy.
In addition to his track record of successfully executing the
transformation of a mineral exploration company into a mid-tier
producer, Mr. Hawkshaw has arranged numerous debt, equity and
convertible debt financings with institutional investors,
commercial banks and multilateral lending agencies, and has
experience in the concentrate off-take and metals trading markets.
Mr. Hawkshaw is currently a director of Regulus Resources Inc.
Catherine McLeod-Seltzer,
Chairman of Bear Creek Mining, states, "Tony Hawkshaw is an extremely talented mining
executive with a proven track record of creating shareholder value
by successfully steering Latin
America-focused mining companies through the transition from
developer to profitable multi-mine producer. Tony is a leader with
the experience, technical proficiency, and ability to communicate
with and inspire the financial markets and represent the Company to
its many stakeholders. We feel privileged that Tony has agreed to
lead our company through this next very exciting phase."
Andrew Swarthout adds. "I have
known Tony for seven years and had the opportunity to follow his
involvement as he played a crucial role taking Rio Alto from exploration through development
and production. Tony's Peruvian experience, contacts and
track record will benefit our Company as we turn the corner towards
project execution. I look forward to joining Tony in assuming
our new roles at Bear Creek as we work with our extremely capable
Peruvian team headed by Elsiario Antunez de Mayolo, who will
continue in his role as Chief Operating Officer of Bear Creek and
General Manager, Peruvian subsidiaries. Elsiario's hands-on
technical expertise in developing and operating large mines in
Peru coupled with Tony's
leadership and financial experience will create a remarkably strong
team with the right balance of proficiencies to advance Corani
through to production."
"I am excited to be joining Bear Creek and the superb team they
have in place to advance the Corani deposit to development," states
Anthony Hawkshaw. "Peruvian
legislation regulating mine development and operation is clearly
defined and impartial, and the Corani deposit is located near
infrastructure and mining friendly communities. Combined, these
factors make the path to realizing value predictable and
achievable. The opportunity to be involved in the development of a
world-class mine is a rare privilege that I am looking forward
to."
Catherine McLeod-Seltzer, current
Chairman of the Company, will continue her role as a director of
the Company upon Mr. Swarthout's appointment to Executive Chairman
and will continue to provide Bear Creek and its Board of Directors
with her unparalleled market savvy and experience garnered from
shepherding companies from infancy through to maturity.
Next Steps
An updated feasibility-level technical report for the Corani
project (the "2017 Corani Feasibility Study") that incorporates the
results of the Phase 1 Detailed Engineering and reflects the impact
of these mine plan modifications and revised metal prices on the
project economics, will be filed on SEDAR within 45 days of the
date of this news release.
GMI's final report on the Corani Phase 1 Detailed Engineering
results will form the basis of the Company's application for a
Construction Permit for the Corani project, submission of which is
anticipated to occur during Q4 2017. Additional permits underlying
the Construction Permit include the Environmental Permit, which the
Company received in 2013, the Water Permit, which is currently in
process, and a number of secondary, prescriptive permits that are
either in hand or in process.
Concurrent with completion of the Phase 1 Detailed Engineering
and ongoing permitting, the Company has engaged financial
consultants to assess project financing alternatives and gauge
interest amongst prospective participants in a project finance
structure for the Corani mine. Feedback received by the Company and
its consultants during this assessment phase has been positive and
with the Phase 1 Detailed Engineering now completed, the Company
expects these efforts to escalate in the coming months.
Pending receipt of the Construction Permit, Bear Creek's Board
of Directors anticipates consideration of a production decision for
the Corani project in H1 2018, which decision will be dependent on
favorable market conditions and firm interest from project finance
participants.
Since discovering the Corani deposit a decade ago, Bear Creek
has worked hard to establish the trust and support of the
communities in the project vicinity and the individuals who call
this area home. As a result of conducting itself in an open,
honest, and transparent manner and adopting a community-driven and
culturally-respectful approach to community initiatives, the
Company enjoys an unrivaled level of community support. As the
Corani project advances, the full impacts and benefits of
development and construction initiatives will be more keenly felt
by neighboring communities. Bear Creek recognizes this evolving
dynamic and is continuing to work hard to maintain its social
licence throughout the life of the project.
On behalf of the Board of Directors,
Andrew Swarthout
President and CEO
NI 43-101 Disclosure
Bear Creek's exploration programs
are overseen by, and pertinent disclosure of a technical or
scientific nature has been reviewed and approved by, Andrew Swarthout, AIPG Certified Professional
Geologist, President and CEO of the Company and a Qualified Person
("QP") as defined in NI 43-101. Mr. Swarthout has read, verified
and approves such information disclosed in this release.
The Corani Phase 1 Detailed Engineering work was conducted by
GMI SA Ingenieros Consultores. GMI's final Phase 1 Detailed
Engineering report and the information therefrom included in this
news release will be incorporated in the 2017 Corani Feasibility
Study, which is being prepared by a team of independent engineering
consultants and will be filed on SEDAR (www.sedar.com) within 45
days of the date of this news release. Kevin Gunesch, PE, Principal
Mining Engineer of GRE, is the QP responsible for the Project
Description and History, Market Studies and Mining Methods.
Juan Carlos Tapia, ChE, IMCh is the
QP for the Recovery Methods and Conclusions and Recommendations.
Deepak Malhotra, PhD, MMSA,
Independent Consultant, and Rick
Moritz, Principal Mining Engineer of GRE are the QPs for
Mineral Processing and Metallurgical Testing. Terre Lane, MMSA, Principal Mining Engineer of
GRE, is the QP responsible for the Resource and Reserve Estimations
and Economic Analysis. Larry Breckenridge, PE, Principal
Environmental Engineer of GRE, is the QP for Environmental and
Permitting and Social Community Impact sections. Denys Parra, PE,
Independent Consultant, is the QP for responsible for Geotechnical
studies. Jennifer Brown, PG, SME-RM,
an associate of GRE, is the QP for Geological Setting and
Mineralization, Exploration, Drilling and Data Verification
sections of the study. Each of these individuals has read and
approves the respective scientific and technical disclosure
pertaining to the Corani Phase 1 Detailed Engineering contained in
this news release.
The 2015 Corani Feasibility Study was prepared by a team of
independent engineering consultants. Daniel Neff, PE, of M3 acted
as the Independent QP as defined by NI 43-101 and additionally is
the QP responsible for the market studies, infrastructure, process
plant capital and operating costs, economic analysis, conclusions
and recommendations portions of the study. Tom Shouldice, PEng, independent consultant, is
the QP for the metal recoveries and metallurgical testing sections.
Rick Moritz, MMSA, Principal Mining
and Process Engineer, of GRE is the QP for portions of the
metallurgical analysis. Terre Lane,
MMSA, Principal Mining Engineer, of GRE is the QP for the resource
and reserve estimation and mining methods and mine capital and
operating cost portions of the study. Laurie Tahija, PE, of M3 is
the QP for the plant process engineering portion of the study.
Chris Chapman, PE of GRE is the QP for the geotechnical,
environmental, infrastructure, waste stockpile and tailings designs
were prepared by. Christian Rios,
CPG, independent consultant, is the QP responsible for geology and
mineralization, exploration, drilling, sample preparation, analyses
and security, data verification, mineral resource estimates and
adjacent properties in the study.
Forward Looking Information
This news release contains forward-looking information and
forward-looking statements related to: the Company's application
for the Corani Construction Permit; the proposed Corani mine plan;
economic valuation metrics and metal price sensitivities regarding
the Corani project; the pace and potential outcome of Corani
project financing efforts; the timing, content and authorship of an
updated technical report for the Corani project; and the timing of
a possible Corani Project construction decision. Certain of these
forward-looking statements are contingent upon various assumptions,
including that the Phase 1 Detailed Engineering results will
provide sufficient information for the Construction Permit
application; that cost estimates used in the Phase 1 Detailed
Engineering are reasonably accurate; that all necessary permits
will be secured in a timely manner; that adequate project financing
for the Corani project will be secured at the appropriate time(s)
and on reasonable terms; that all necessary regulatory approvals
and third party consents will be obtained without undue delay; and,
the continuity of the price of silver, lead, zinc and other metals,
as well as economic and political conditions and operations. This
forward-looking information is provided as of the date of this news
release and reflects current estimates, predictions, expectations
or beliefs regarding future events and is based on the Company's or
its consultants' beliefs at the time the statements were made, as
well as various assumptions made by and information currently
available to them. Although management considers these assumptions
to be reasonable based on information available to it, they may
prove to be incorrect. By their very nature, forward-looking
statements involve inherent risks and uncertainties, both general
and specific, and risks exist that estimates, forecasts,
projections and other forward-looking statements will not be
achieved or that assumptions on which they are based do not reflect
future experience. We caution readers not to place undue reliance
on these forward-looking statements as a number of important
factors could cause the actual outcomes to differ materially from
the expectations expressed in them. These risk factors may be
generally stated as the risk that the assumptions and estimates
used to make such forward-looking statements do not occur and the
additional risks described in the Company's most recent Annual
Information Form. When relying on our forward-looking statements,
investors and others should carefully consider the foregoing
factors and other uncertainties and potential events. The Company
does not undertake to update any forward-looking statement, whether
written or oral, that may be made from time to time by the Company
or on behalf of the Company, except as required by law.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE Bear Creek Mining Corporation