Mr. Graham Hill reports
SILVER BEAR ANNOUNCES COMPLETION OF POSITIVE FEASIBILITY STUDY AT THE MANGAZEISKY SILVER PROJECT, YAKUTIA, RUSSIA
Silver Bear Resources Inc. has released the results of a National Instrument 43-101 feasibility study for the Vertikalny Central deposit of its Mangazeisky silver project in the Republic of Sakha (Yakutia), Russia (all amounts are in U.S. dollars). An NI 43-101 technical report in respect of the study and the project will be filed on SEDAR within 45 days of this release.
Graham Hill, president and chief executive officer, commented: "I am very proud to announce the study confirms that the exploitation of the Vertikalny Central deposit at our Mangazeisky silver project remains very robust even under the current silver price and economic conditions. The positive study results validate our objective of fast-tracking the development process and increase our confidence in assertively moving forward with the first phase of mining. I firmly believe that our team has designed a mine plan that optimizes profitability, and that the processing technology will maximize recovery and minimize technical risks at the lowest cost. I am also extremely proud of our construction and operational team at site and in Yakutsk for the tremendous accomplishments in mobilizing around 7,500 tons of equipment and construction materials to site along this year's winter road, thus enabling us to proceed with construction plans this year.
"Our recent mineral resource update at Mangazeisky North deposit (press release April 13, 2016) supports our medium-term objective of increasing mine life and further improving project economic performance by establishing a multipit single plant mining operation on the Mangazeisky property. Our near-term objective is to plan the work that would be necessary to bring Mangazeisky North into production. In addition, we will continue to look at the development of Vertikalny to exploit the deeper level resources.
"Last year we successfully drilled 6,656 metres of core in addition to approximately 13,000 cubic metres of trenching. The data is being compiled from this work that should allow us to update our resource statement and provide further positive information on future developments in the second half of 2016."
Feasibility study highlights:
- The pretax net present value at a 5-per-cent discount rate is $79.7-million, the pretax
internal rate of return is 43.6 per cent and the payback period is 2.1 years;
- With the Far East tax incentives, the posttax NPV at a 5-per-cent discount rate
is $70.7-million, the IRR is 40.2 per cent and the payback period is 2.2
years;
- Assumptions include a variable silver price of $16.00/ounce, $17.25/ounce and $18.00/ounce during the first year of production, second year of
production and the remaining project life, respectively, with a life-of-mine weighted average silver price of $17.74/ounce; the exchange rate
applied is 66 rubles/$1;
- Initial capital costs of $48.6-million;
- Total proven and probable mineral reserves of 801,000 tonnes at a
diluted average grade of 772 grams per tonne silver for 19.9 million troy ounces of
silver;
- Total Vertikalny Central indicated mineral resources of 23.4 million
troy ounces of silver at an average grade of 909 g/t Ag, in addition to
inferred mineral resources of 13.4 million ounces of silver at an
average grade of 615 g/t Ag;
- Processing an average of 110,000 tonnes of ore per annum;
- Production of 16,787,000 ounces of silver over a 7.3-year LOM;
- Average metallurgical recovery of 84.4 per cent silver.
Project execution
The company intends to take advantage of the favourable outcome of the feasibility study and the positive outlook on the silver price by implementing an aggressive fast-track execution plan to complete construction by the end of 2016, with steady-state production starting in first quarter 2017. In anticipation of this, and in compliance with the Russian regulatory approval process, a licensed Russian design institute (EMC Mining LLC in St. Petersburg) was commissioned in 2015 to complete the detailed design of the processing facility and associated mine site infrastructure. The company procured all major equipment for delivery during the 2015/2016 winter road season and began construction. The company has proceeded with construction in advance of regulatory approval for the project and expects that all of the permits needed for construction and operation will be in place prior to the start of production.
More favourable weather between March and November will facilitate the completion of the construction of major infrastructure with specific focus on completing the buildings to provide shelter during mechanical and electrical installation and the start of commissioning planned for fourth quarter 2016.
The detailed study results can be found in the tables.
Qualified persons
Study consultants were led by Tetra Tech (U.K.) and comprised an independent, multidisciplinary team including SRK Consulting (UK) Ltd. and Environmental Resource Management Consultants Inc. (ERM).
Each of the qualified persons shown in the table is independent within the meaning of NI 43-101, and has reviewed and approved the information in this release relevant to the portion of the study for which they are responsible. Each has verified the underlying data relevant to the portions of the study for which they are responsible.
QUALIFIED PERSONS
Tetra Tech (U.K.) Dr. Arunasalam Vathavooran, PhD, CEng, MIMMM
Damian Hicks, MIEAust CPEng
Guy Roemer, PE
Jacques du Toit, CEng, PrEng, MScEng, PMP
Laszlo Bodi, MSc, CEng, PEng
Robert Davies, BSc (honours), CGeol, EurGeol, FGS
Dr. Sabry Abdel Hafez, PhD, PEng
Saunjay Duggal, MSc, PEng
SRK Consulting (U.K.) Dr. Houcyne El Idrysy, PhD, CGeol, FGS
Krysztof Czajewski, BSc, PEng
Max Brown, BSc, MSc, CEng, MIMMM
Michael Beare, BEng, CEng, MIMMM
Dr. Sergey Sabanov, BSc, MSc, PhD, CEng, MIMMM
Environmental Resource Derek Chubb, PEng
Management ConsultantsFiling of technical report -- Mangazeisky North mineral resource update
The company is also pleased to announce that on May 30, 2016, it filed the NI 43-101 technical report for the mineral resource estimate update of its Mangazeisky North deposit, located within its wholly owned Mangazeisky project. Tetra Tech (U.K.) prepared the technical report and it supports the company's announcement of April 13, 2016.
To view and download the technical report, please visit SEDAR under the company's profile. The report will also be available on the company's website.
PROJECT PERFORMANCE SUMMARY
Item Units Value
Silver price (LOM weighted average) $/troy oz 17.74
Exchange rate ruble/$ 66.00
Net revenue
Quantity of ore (LOM) kt 801.01
Silver head grade g/t 772
Recovered silver koz (troy) 16,787
Unit operating costs $/t processed 154.38
Pretax results
Pretax net cash flow $ million 107.7
Pretax NPV at a 5% discount rate $ million 79.7
Pretax IRR % 43.6
Pretax payback years 2.1
Without the Far East tax incentives
Posttax net cash flow $ million 65.9
Posttax NPV at a 5% discount rate $ million 45.5
Posttax IRR % 28.3
Posttax payback years 2.6
With the Far East tax incentives
Posttax net cash flow $ million 96.2
Posttax NPV at a 5% discount rate $ million 70.7
Posttax IRR % 40.2
Posttax payback years 2.2
Production cost
Cash cost $/troy oz Ag 7.97
recovered
Capital cost (excluding contingency) $/troy oz Ag 3.35
recovered
Total cost $/troy oz Ag 11.32
recovered
The Far East tax incentives (Russian federal law No. 267-FZ) allow the use of
a reduced tax rate for profit tax purposes -- zero rate for federal tax and a
reduced rate for regional tax based on a prescribed time frame.
Cash costs include all on-site operating costs (mining, processing, and
general and administrative) and off-site costs (refining costs, silver
transportation and insurance). Capital costs include all the initial
sustaining capital requirements.Geology and mineral resource
The Vertikalny Central deposit is a steeply dipping structurally controlled epithermal vein system that crosscuts the sedimentary host rocks. The mineralization is expressed as breccias comprising siderite-sphalerite-galena and silver sulphosalts. Mineralization is usually associated with the presence of vertical dikes of intermediate to basic composition.
At Vertikalny Central a total of 237 holes have been drilled and 42 trenches excavated over a strike length of two kilometres since 2007. In total, 34,384 m have been drilled, and trench excavations extend to 1,689 m.
Mineral resources for a series of satellite deposits included in the Mangazeisky property are summarized in the table. The satellite deposits include Vertikalny Northwest located one kilometre to the north of Vertikalny Central, Nizhny Endybal, situated approximately 2.5 km east of Vertikalny Central and the Mangazeisky North deposits located seven km to the north of Vertikalny Central.
The table provides a summary of all of the current mineral resources within the Mangazeisky property. The indicated mineral resource at Vertikalny Central is inclusive of the stated mineral reserves.
TOTAL RESOURCES FOR THE MANGAZEISKY PROPERTY
Indicated resource Inferred resource
Resource
cut-off Grade Contained Grade Contained
Deposit grade Ag Tonnes Ag metal Ag Tonnes Ag metal Ag
(g/t) (g/t) (troy oz) (g/t) (troy oz)
Vertikalny
Central 335 800,000 909 23,400,000 680,000 615 13,400,000
Vertikalny
Northwest 335 310,000 458 4,600,000
Nizhny
Endybal 150 710,000 316 7,200,000
Mangazeisky
North 150 304,000 626 6,100,000 98,000 671 2,100,000
Mangazeisky
South 150 60,000 246 500,000
Total - 1,104,000 831 29,500,000 1,858,000 466 27,800,000
The effective date of the Vertikalny Central and Northwest Resource is Feb.
10, 2015. The effective date of the original Nizhny Endybal resource
estimate was Sept. 11, 2012; this resource was restated with a higher
cut-off grade on June 10, 2015. The effective date of the Mangazeisky South
resource is June 10, 2015. The effective date of the Mangazeisky North
resource is March 31, 2016.Mineral resource estimation parameters:
- Resource estimates were completed in Geovia Surpac Version 6.7, using 3-D
block models.
- Silver grades were estimated using ordinary kriging.
- Density was estimated using inverse distance weighting. The density at
Nizhny Endybal, Vertikalny Northwest and Mangazeisky South was assigned
based upon arithmetic mean sample results for relevant domains.
- Grade interpolations were constrained within appropriate wireframe
models representing mineralization and lithologies.
- Overall silver recoveries of 90 per cent were assumed at Vertikalny Central and
Northwest, and 80-per-cent recoveries were assumed at satellite deposits.
Mineral resources that are not mineral reserves to not have demonstrated economic viability. There are no known legal, political, environmental or other risks that could materially affect the potential development of the mineral resources.
Mineral reserve
Mining will comprise two sequential phases: open pit and underground. The open pit (the first four years of production) will consist of a conventional drill, blast, load and haul operation, using the current fleet on-site, supplemented with leased equipment. Capital for the open pit will only be spent on trucks, lighting units, pumps, site office facility and light vehicles.
As Vertikalny is a steeply dipping
orebody in the range of 60 to 90 degrees, for underground mining the shrinkage stoping method using a modern, trackless-style operation where electrical-powered jumbos will be employed. Mining will advance from the bottom upward in horizontal slices, with a portion of the broken ore left in place from which miners can work. Three areas were identified for the mine design: the North, Central and South zones. The North and Central zones will be accessed by ramp and the South zone by adit.
In accordance with Russian standard practice, the open-pit design includes 30-per-cent dilution and 95-per-cent mining recovery. Given the selectivity of the underground mining method and equipment, the dilution was limited to 15 centimetres on each of the hangingwall and footwall (30 cm total) and integrated into the stope optimization process. It is assumed that 95 per cent of the diluted material, including pillar material, will be recovered. The open-pit and underground cut-off grades are 250 grams per tonne and 405 g/t, respectively. The mineral reserve statement is as of Sept. 30, 2015, and is shown in the table.
TOTAL RESERVES FOR VERTIKALNY CENTRAL DEPOSIT
Quantity Ag grade Ag metal content
Category (kt) (g/t) (koz)
Proven -- open pit - - -
Proven -- underground - - -
Probable -- open pit 413 875 11,625
Probable -- underground 388 663 8,261
Total mineral reserves 801 772 19,886Processing
The feasibility study process plant design is based on a 110,000-tonne-per-annum capacity, with an LOM average silver grade of 772 g/t, and is expected to provide an average silver recovery from oxide ore of 85.0 per cent. The average silver recovery of the primary (unoxidized) ore (a small portion of the plant feed scheduled at the end of mine life) is expected to be 69.6 per cent.
The process flowsheet consists of a standard crushing and grinding circuit, followed by gravity concentration and cyanide tank leach of the gravity tails. The gravity concentrates will be processed by intensive cyanidation. The leached slurry from the tank leach and intensive cyanidation will go through a simple countercurrent decantation washing system and the pregnant solution will be processed by direct electrowinning to recover silver metal in powder form with a purity exceeding 99.9 per cent Ag.
Tailings
The tailings management facility (TMF) will consist of a dry-stack facility, contained within a fully lined pad, surrounded by a series of containment bunds. A clarification pond to store all process affected fluids before retreatment is included in the design. The TMF will be constructed 0.2 kilometre northeast of the plant site and will cover an area of 7.69 hectares. Approximately 800,000 tonnes of tailings material will require storage over the 7.3-year LOM.
Capital and operating costs
The total estimated initial capital cost for the design, construction, installation and commissioning of all facilities and equipment is $48.6-million.
CAPITAL COST SUMMARY
Area Initial Sustaining Total
Mining $2,200,117 $4,681,011 $6,881,128
Processing 12,841,010 700,000 13,541,010
Infrastructure 4,425,111 - 4,425,111
Utilities 1,774,145 - 1,774,145
TMF 1,311,541 1,325,776 2,637,317
Site facilities 4,918,917 - 4,918,917
Off-site facilities 101.454 - 101,454
Project indirects 9,288,107 70,867 9,358,974
EPCM 3,167,264 20,248 3,187,512
Owner's cost 2,579,552 100,000 2,679,552
Allowances (including contingency) 5,965,010 831,232 6,796,242
Total 48,572,228 7,729,134 56,301,362
The LOM operating cost estimate for the project consists of mining, processing, and general and administrative costs (which include TMF and site water management costs), and is estimated at $154.38/tonne processed.
LOM AVERAGED OPERATING COST SUMMARY
Unit cost
Area ($/t processed)
Mining $61.83
Processing 51.96
G&A 40.58
Total 154.38Tetra Tech investigated the sensitivity of NPV and IRR to the key project variables of silver price, exchange rate, capital costs and operating costs.
Sensitivities
The project's pretax NPV, calculated at a 5-per-cent discount rate, is most sensitive to silver price, followed by exchange rate, on-site operating costs and capital costs.
The project's pretax IRR is most sensitive to silver price followed by exchange rate, capital costs and on-site operating costs.
Approval process
The company plans to complete the Russian design documentation required for the state review by the end of second quarter 2016. Following regulatory review and approval of the project, which the company estimates could be granted in third quarter 2016, the company will be in a position to apply for a permit for construction, followed by the balance of construction and operating permits shortly thereafter.
The company acknowledges that there is a risk associated with undertaking construction in advance of obtaining the necessary regulatory approvals. It is possible that the regulatory approvals process may result in production delays and/or mandated design changes that may lead to modification of constructed site components.
We seek Safe Harbor.
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