Ms. Audra Walsh reports
SIERRA METALS INCREASES RESOURCES BY 86% AT ITS YAURICOCHA MINE IN PERU FOLLOWING A 4-YEAR TRACK RECORD OF RESOURCE GROWTH
Sierra Metals Inc.'s Yauricocha's combined measured and indicated mineral resources have increased by over 5.27 million tonnes, representing an 86-per-cent increase over the previously reported mineral resource. Over the same period, mineral reserves have been reduced by approximately 1,017,000 tonnes following mine depletion, the exclusion of brownfields zones (Victoria and Ipillo mines) and the application of current metal prices and smelter terms.
Press release highlights:
- Total proven and probable mineral reserves for Yauricocha are 5,377,000 tonnes averaging 75.5 grams per tonne silver, 1.41 per cent lead, 0.80 per cent copper, 2.34 per cent zinc and 0.92 g/t gold, down from 6,394,000 tonnes at Oct. 1, 2013.
- Total measured and indicated mineral resources for Yauricocha, inclusive of the mineral reserves, are 11,411,000 tonnes averaging 55.4 g/t silver, 0.85 per cent lead, 0.83 per cent copper, 1.73 per cent zinc and 0.76 g/t gold, up from 6,139,000 tonnes at Oct. 1, 2013.
- The 16-per-cent reduction in reserve tonnage is due to several factors, including the change in modelling methodology, the exclusion of 350,000 tonnes from the Victoria and Ipillo mines, the application of the current metal price and concentrate sales environments, and the elevated depletion of relatively higher-grade reserves from the Mascota orebody since Oct. 1, 2013.
- The 86-per-cent increase in resource tonnage is predominantly in the indicated category of polymetallic mineralization and is the result of the successful exploration programs that have extended orebodies at depth in the Central mine area.
- The updated silver equivalent grade for the proven and probable reserves is 338.6 g/t. Although this cannot be directly compared with the previous AgEq estimate of 360.6 g/t, the reduction is indicative of the change to the current reserves based upon the existing metal prices and concentrate sales terms.
"The latest estimate of resources and reserves for Yauricocha reflects several significant advances for Sierra and continues a four-year track record of resource growth since we bought the Yauricocha mine in 2011," said Audra Walsh, the company's president and chief executive officer. "Resources at the time of the acquisition were less than four million tonnes, and they have increased to 11 million tonnes by the end of 2014. Our investment in exploration drilling has been complemented with investment in technical systems and training of our personnel. Together with our independent consultant, we have improved the resource estimation methodology in line with best industry practice. With this change, we are confident that our model better reflects the reality of the mineralization and that we have a reliable predictive tool for future business evaluation.
"The resource and reserve grades have also been impacted by the focused production from the high-grade Mascota orebody over the last year. Although we have exploration drilling that indicates its extension at depth, sufficient drilling was not performed prior to the cut-off date of this resource estimate. Our expectation is that the Mascota orebody will contribute positively to future resource and reserve estimates.
"The exclusion of the reserve tonnages from Mina Ipillo and Mina Victoria is a conservative measure at this time and is deemed to be temporary, although indicated resources remain at Mina Ipillo. Additional evaluation of their associated operating and capital costs is required to consider them to be at the same level of confidence as our other reserves. We are in the enviable position of not relying on these deposits for business success in the foreseeable future, but will prioritize them relative to the other opportunities currently before us.
"Yauricocha's reserves continue to provide strong cash flow even under the current metal price environment and concentrate sales terms. This provides a great deal of stability to Sierra, enables us to strengthen our balance sheet and beneficially situates us for future growth -- organic or external."
Ms. Walsh added: "As outlined in the recent press release updating exploration activities (Dec. 23, 2014), Yauricocha presents abundant, high-value targets, and many of those would have short lead time to production if warranted. This gives us great confidence in the belief that Yauricocha will continue operating far beyond the life of the current reserve estimate."
Mineral resource estimate
The effective date of this resource estimate is Dec. 31, 2014, and was completed by Gustavson Associates LLC. Thomas Matthews, MMSA, QP, principal resource geologist with Gustavson, is the qualified person responsible for this resource estimate. Gustavson Associates validated the database used for resource estimation, created domain wire frames corresponding to the main mineralized zones, interpolated grade into block models within these mineralized bodies and reviewed the mine-mill reconciliation results. Gustavson considers the resource to meet industry standard practices, and to be Canadian Institute of Mining, Metallurgy and Petroleum and NI 43-101 compliant.
For all mineralization types, resources are presented at a cut-off, which corresponds to the value of recoverable metal of $37 per tonne, this value being the approximate value of direct mining and processing costs at Yauricocha. Metal prices used in this determination were $18.10 per ounce silver, 95 cents per pound lead, $3.02 per pound copper, 91 cents per pound zinc and $1,241 per ounce gold. Metal recovery was set at historical performance for each mineralization type.
The resource estimate effective date is Dec. 31, 2014.
MEASURED RESOURCES
Grades
Mineralization type Tonnes (t) AgEq (g/t) Ag (g/t) Pb (%) Cu (%) Zn (%) Au (g/t)
Polymetallic 1,675,000 330.9 62.2 1.02 0.73 2.77 0.81
Copper 10,000 567.5 102.6 0.70 3.50 1.61 0.73
Copper oxides 16,000 614.5 108.6 2.40 4.99 5.00 0.48
Oxides 67,000 962.7 344.1 10.43 0.67 2.69 2.37
Mina Ipillo (polymetallic) -- -- -- -- -- -- --
Total 1,767,000 359.0 73.6 1.39 0.78 2.78 0.87
Contained metal
Mineralization type Ag koz Pb (t) Cu (t) Zn (t) Au oz
Polymetallic 3,350 17,037 12,211 46,347 43,550
Copper 31 67 334 154 224
Copper oxides 56 385 800 802 247
Oxides 745 7,020 453 1,808 5,135
Mina Ipillo (polymetallic) -- -- -- -- --
Total 4,182 24,509 13,798 49,110 49,156
INDICATED RESOURCES
Grades
Mineralization type Tonnes (t) AgEq (g/t) Ag (g/t) Pb (%) Cu (%) Zn (%) Au (g/t)
Polymetallic 9,056,000 222.1 36.0 0.31 0.82 1.46 0.69
Copper 8,000 571.0 118.3 0.83 3.40 1.80 0.83
Copper oxides 26,000 1,368.7 693.4 8.39 5.53 1.36 0.26
Oxides 553,000 731.6 283.9 7.62 0.87 2.76 1.67
Mina Ipillo (polymetallic) 168,900 662.2 140.8 1.33 1.32 6.34 1.30
Total 9,812,000 261.7 53.6 0.75 0.84 1.54 0.74
Contained metal
Mineralization type Ag koz Pb (t) Cu (t) Zn (t) Au oz
Polymetallic 10,489 28,246 74,248 132,268 200,236
Copper 30 66 272 144 214
Copper oxides 584 2,199 1,449 356 219
Oxides 5,050 42,164 4,828 15,272 29,639
Mina Ipillo (polymetallic) 765 2,246 2,229 10,708 7,059
Total 16,153 74,922 83,027 158,750 230,308
MEASURED AND INDICATED RESOURCES
Grades
Mineralization type Tonnes (t) AgEq (g/t) Ag (g/t) Pb (%) Cu (%) Zn (%) Au (g/t)
Polymetallic 10,731,000 239.1 40.1 0.42 0.81 1.66 0.71
Copper 18,000 569.1 109.7 0.76 3.45 1.70 0.78
Copper oxides 42,000 1,082.4 471.4 6.12 5.33 2.74 0.34
Oxides 621,000 756.7 290.4 7.93 0.85 2.75 1.74
Mina Ipillo (polymetallic) 168,900 662.2 140.8 1.33 1.32 6.34 1.30
Total 11,411,000 280.7 57.5 0.85 0.83 1.73 0.76
Contained metal
Mineralization type Ag koz Pb (t) Cu (t) Zn (t) Au oz
Polymetallic 13,838 45,284 86,459 178,615 243,786
Copper 62 133 606 298 438
Copper oxides 640 2,584 2,249 1,158 467
Oxides 5,795 49,184 5,281 17,080 34,774
Mina Ipillo (polymetallic) 765 2,246 2,229 10,708 7,059
Total 20,335 99,431 96,825 207,860 279,464
INFERRED RESOURCES
Grades
Mineralization type Tonnes (t) AgEq (g/t) Ag (g/t) Pb (%) Cu (%) Zn (%) Au (g/t)
Polymetallic 1,871,000 1,209.2 203.0 1.52 4.33 8.48 3.26
Copper 30 470.0 135.5 0.74 2.46 2.95 1.41
Copper oxides 4,500 1,353.8 649.7 10.96 5.10 0.94 1.31
Oxides 278,000 774.8 339.5 7.48 0.92 2.46 1.57
Mina Ipillo (polymetallic) -- -- -- -- -- -- --
Total 2,153,000 1,153.7 221.5 2.30 3.89 7.69 3.04
Contained metal
Mineralization type Ag koz Pb (t) Cu (t) Zn (t) Au oz
Polymetallic 12,214 28,357 81,022 158,644 196,206
Copper 0 0 1 1 1
Copper oxides 93 489 228 42 188
Oxides 3,030 20,765 2,554 6,829 14,013
Mina Ipillo (polymetallic) -- -- -- -- --
Total 15,337 49,611 83,804 165,516 210,407
SILVER EQUIVALENT CALCULATION VALUES
Metal Symbol Grade units Price Price symbol Recovery symbol
Silver Ag g/t $18.10/oz/t Pag Rag
Lead Pb % $0.96/lb Ppb Rpb
Copper Cu % $3.02/lb Pcu Rcu
Zinc Zn % $0.91/lb Pzn Rzn
Gold Au g/t $1,241/oz/t Pau Rau
Recovery Polymetallics Copper Oxides Cu oxides
Rag 59.76% 63.90% 31.98% 49.71%
Rpb 80.32% 0.00% 54.20% 28.38%
Rcu 69.65% 89.86% 0.00% 39.20%
Rzn 88.65% 0.00% 0.00% 0.00%
Rau 13.90% 7.50% 52.57% 10.01%
Metals price assumptions are based on six-month trailing averages as of the effective date of the resource estimation. Six-month averages were used as a proxy for spot prices, because the three-year averages which Gustavson typically employs are significantly higher and might overstate the resource and economics. Recovery assumptions are based on two-year trailing average production recoveries for the Chumpe plant.
The reader is advised that the silver equivalency stated herein is based upon updated price and recovery factors; therefore, a direct comparison with previous resource and reserve estimates should not be made.
Mineral reserve estimate
The effective date of this reserves estimate is Dec. 31, 2014. The mineral reserve was estimated by applying modifying factors to the mineral resources. Yauricocha is an operating mine, with significant production history. Because of this, the primary basis for the modifying factors applied for reserves definition is actual historical cost, recovery and mine planning data. Gustavson considers the reserves to meet industry standard practices, and to be CIM and NI 43-101 compliant.
Mineral reserves are defined as that portion of mineral resources which are economically extractable and for which there is mining access planned. The stated reserves include factors for dilution, ore loss and mine-mill reconciliation. Therefore, the grades are somewhat less than the resources, and the tonnages are somewhat higher. Reserves are presented at a net smelter royalty cut-off based on value of recoverable metal, less an allowance for refining costs. Cut-offs vary by zone, include all operating costs and general and administrative costs, and reflect mining cost assumptions for each zone. Cut-offs vary from $42 to $87 per tonne depending on mining method. However, due to bulk mining methods employed, some marginal value blocks inside of stope shapes are included as reserves.
The reserve estimate effective date is Dec. 31, 2014.
YAURICOCHA PROVEN MINERAL RESERVES
Grades
Mineralization type Tonnes (t) AgEq (g/t) Ag (g/t) Pb (%) Cu (%) Zn (%) Au (g/t)
Polymetallic 1,108,000 348.5 65.2 1.17 0.68 3.07 0.81
Copper 10,000 444.5 80.3 0.58 2.74 1.34 0.57
Copper oxides 18,000 523.1 88.8 1.96 4.31 4.32 0.39
Oxides 72,000 775.1 276.1 8.41 0.59 2.30 1.91
Total 1,207,000 377.6 78.2 1.61 0.74 3.02 0.87
Contained metal
Mineralization type Ag koz Pb (t) Cu (t) Zn (t) Au oz
Polymetallic 2,320 13,014 7,493 33,963 28,749
Copper 27 60 283 138 189
Copper oxides 50 346 760 762 221
Oxides 638 6,047 422 1,655 4,427
Total 3,036 19,467 8,958 36,518 33,586
YAURICOCHA PROBABLE MINERAL RESERVES
Grades
Mineralization type Tonnes (t) AgEq (g/t) Ag (g/t) Pb (%) Cu (%) Zn (%) Au (g/t)
Polymetallic 3,607,000 270.4 43.3 0.48 0.78 2.24 0.86
Copper 9,000 447.3 92.6 0.69 2.66 1.50 0.65
Copper oxides 32,000 1,111.3 538.3 6.97 4.69 1.12 0.46
Oxides 522,000 671.0 263.5 7.00 0.76 1.55 1.47
Total 4,170,000 327.4 74.8 1.35 0.81 2.15 0.93
Contained metal
Mineralization type Ag koz Pb (t) Cu (t) Zn (t) Au oz
Polymetallic 5,017 17,465 28,093 80,871 99,942
Copper 26 60 230 130 181
Copper oxides 559 2,250 1,514 362 478
Oxides 4,422 36,516 3,982 8,089 24,731
Total 10,024 56,291 33,819 89,452 125,332
YAURICOCHA PROVEN AND PROBABLE MINERAL RESERVES
Grades
Mineralization type Tonnes (t) AgEq (g/t) Ag (g/t) Pb (%) Cu (%) Zn (%) Au (g/t)
Polymetallic 4,714,000 288.7 48.4 0.65 0.75 2.44 0.85
Copper 19,000 445.8 86.0 0.63 2.71 1.41 0.61
Copper oxides 50,000 903.5 379.5 5.20 4.56 2.25 0.44
Oxides 594,000 683.6 265.0 7.17 0.74 1.64 1.53
Total 5,377,000 338.6 75.5 1.41 0.80 2.34 0.92
Contained metal
Mineralization type Ag koz Pb (t) Cu (t) Zn (t) Au oz
Polymetallic 7,338 30,479 35,586 114,834 128,691
Copper 52 119 513 268 370
Copper oxides 609 2,596 2,274 1,124 699
Oxides 5,060 42,564 4,404 9,744 29,158
Total 13,059 75,758 42,778 125,970 158,918
Quality control
The quality assurance-quality control program employed by Sierra Metals has been reviewed by Gustavson. Gustavson considers that the QA-QC program meets industry standards, and to be CIM and NI 43-101 compliant.
Mining and economics
Yauricocha is an underground mine which has been in continuous operation for over 60 years. Mining at Yauricocha is accomplished by various extraction methods, principally sublevel caving and overhand cut and fill stoping. Ore is processed at the Chumpe plant, which operates three process streams -- polymetallic, copper and oxide -- to produce as many as five marketable concentrates.
All reserves will be processed at the operation's current flotation plant with resultant concentrates of copper, lead oxides, lead sulphides and zinc transported off-site under processing contracts with the operation's customers. Mining is all underground, with processing and tailings storages nearby.
There is no internal rate of return or payback period, as the mine is in operation; therefore, there is no initial capital required for start-up.
The production decision was not based on a feasibility study of mineral reserves demonstrating economic viability. There is an increased uncertainty and economic and technical risks of failure associated with this production decision. Production and economic variables may vary considerably, due to the absence of a complete and detailed site analysis according to and in compliance with NI 43-101 standards of disclosure specific risk analysis.
The mineral resource and reserve estimate was prepared by Mr. Matthews, MMSA, QP, principal resource geologist with Gustavson Associates. Mr. Matthews is a qualified person as defined by NI 43-101 and has reviewed and approved the contents of this press release with respect to the mineral resource and reserve estimate at the Yauricocha mine.
An NI 43-101-compliant technical report supporting the disclosure of the mineral resource and reserve estimate will be filed on SEDAR within 45 days of this press release.
We seek Safe Harbor.
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