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Avino Silver & Gold Mines Ltd
Symbol ASM
Shares Issued 128,266,148
Close 2024-02-05 C$ 0.62
Market Cap C$ 79,525,012
Recent Sedar Documents

Avino Silver PFS pegs Oxide posttax NPV at $61M (U.S.)

2024-02-05 10:14 ET - News Release

Mr. David Wolfin reports

AVINO REPORTS OXIDE TAILINGS PROJECT PREFEASIBILITY STUDY WITH AFTER-TAX NPV OF US$61 MILLION AND 26% IRR

Avino Silver & Gold Mines Ltd. has released the results of the preliminary feasibility study (PFS), prepared in accordance with National Instrument 43-101 -- Standards for Disclosure for Mineral Projects, for its Oxide tailings project (OTP) at the company's Avino mine operations, located near Durango in west-central Mexico. The work that was completed as the basis for the PFS was managed by Tetra Tech Canada Inc., of Vancouver, B.C.

Highlights include:

  • NPV (net present value) of $98-million (U.S.) (pretax) and $61-million (U.S.) (posttax) at a 5-per-cent discount rate;
  • IRR (internal rate of return) of 35 per cent (pretax) and 26 per cent (posttax);
  • Payback period of 2.9 years (pretax) and 3.5 years (posttax);
  • Initial capital cost: $49.1-million (U.S.), including a complete on-site tailing leaching plant for silver and gold extraction, and a contingency provision in the amount of $5.3-million (U.S.). The continuing sustaining capital cost is $5.1-million (U.S.);
  • LOM (life of mine) average production unit cost: On-site operating costs (OOC) and all-in sustaining cost (AISC) of $9.71 (U.S.) and $10.23 (U.S.) per troy ounce (oz) silver equivalent (AgEq), respectively;
  • Proven and probable mineral reserves of 6.7 million tonnes (Mt) at a silver (Ag) and gold (Au) grade of 55 grams per tonne (g/t) and 0.47 g/t, respectively;
  • Nominal processing rate over a nine-year LOM: 2,250 tonnes per day (tpd) or 821,250 tonnes per year (tpy), with a 92 per cent plant availability;
  • Metal recoveries: 77.2 per cent Ag and 74.9 per cent Au;
  • Dore production: Total 9,073,000 oz Ag and 76,000 oz Au, life-of-project (averaging 1,008,000 oz Ag and 8,445 oz Au per year);
  • Direct employment: 121 employees, with additional job positions related to indirect employment and contracted services;
  • Ease of construction and operation: The project is located within the existing Avino mine operations. Site infrastructure such as power, water and road network is well established;
  • Elimination of risks associated with the conventional tailings design: A secondary dry stack tailings management facility will comprise dewatered tailings being stored in a geotechnically stable impoundment;
  • Elimination of risks associated with the heap leach design, which is replaced with a conventional tank leach design with a compact footprint. The process plant containment areas and berms on site will provide an additional layer of safety;
  • The project will generate $52.4-million (U.S.) in tax contributions to the local economy and government.

The PFS will be filed on SEDAR+ under the company's profile and filed on Form 6-K with the United States Securities and Exchange Commission (SEC) within 45 days of this release. All currency values are presented in U.S. dollars unless otherwise specified.

"The completion of the PFS is a key milestone in Avino's path to transformational growth," said David Wolfin, president and chief executive officer of Avino. "The economics of our Oxide tailings project, combined with the relatively low capital requirements, has the potential to significantly enhance the current Avino operation and grow cash flow."

Peter Latta, vice-president of technical services for Avino, commented: "For the first time in Avino's lengthy history, we are proud to demonstrate proven and probable mineral reserves. We have taken a dynamic leaching approach to the tailings reprocessing to improve overall recoveries and mitigate the potential recovery variability compared with heap leaching. We have selected, in this design, a simple, conventional flowsheet to keep capital costs low, and allow for a faster and simpler build if, and when, a construction decision is made."

The most notable improvement in the PFS financial results compared with the 2017 PEA (preliminary economic assessment) is the 100-per-cent increase in net present value to $98-million (U.S.) from $49-million (U.S.) on a pretax basis. Other PFS highlights of significance include strong project economics, long mine life, minimal payback period, and exceptional ESG (environmental, social and governance) and tax contributions to the local economy.

The 2024 PFS features improvements in comparison with the PEA that was completed in 2017. The life of the project has increased by two years, the silver production has increased almost three million ounces and the gold production has more than doubled. The PFS includes processing rates of 2,250 tpd and an increase of 880 tpd.

Economic analysis and sensitivity analysis

The economic analysis is based on the PFS mineral reserve estimate totalling 6.7 million tonnes of proven and probable mineral reserves at an average grade of 54.46 g/t Ag and 0.47 g/t Au. This reserve is adequate to allow for a nine-year project life, based on current tailings recovery assumptions, including a processing rate of 2,250 tonnes per day. Metal recoveries are expected to average 77.2 per cent and 74.9 per cent for silver and gold, respectively.

The gold and silver prices for the financial analysis are based on three-year trailing averages on Nov. 7, 2023, as below:

  • Silver price: $23.45 (U.S.)/troy oz;
  • Gold price: $1,839.51 (U.S.)/troy oz.

The exchange rate for United States dollars to Mexican pesos used for the project is 1:18.15.

These assumptions, together with capital cost and operating cost estimates noted above, result in a pretax NPV, at a 5-per-cent discount rate, of $98-million ($61-million posttax). The pretax payback period for the project is 2.9 years from the start of production (3.5 years posttax). The project generates a pretax IRR of 35 per cent (26 per cent posttax).

A sensitivity analysis was performed to test the impact of changes to several key assumptions included in the economic model, with the results shown in the table entitled "IRR sensitivity (posttax)."

Avino Oxide tailings project mineral reserves

The mineral reserves were estimated using both oxide and sulphide tailings, and are based on measured and indicated resources only. The pit design used for the estimation was at the PFS level. The ultimate pit limit was determined by the Lerchs-Grossman optimizer in Datamine, with consideration of economic parameters and physical constraints such as pit road widths, mining bench width and face angles for the recommended mining equipment. The proven and probable mineral reserves are shown in the table entitled "Mineral reserve statement of the Avino Oxide tailings project (effective date: Jan. 16, 2024)."

Mineral resources

The PFS uses the latest updated mineral resource estimate that is based on $1,800 (U.S.) per ounce gold, $21 (U.S.) per ounce silver and $3.50 (U.S.) per pound copper. In addition, the resources are constrained by conceptual mining shapes. Measured and indicated mineral resources at the property are estimated at 34.7 million tonnes grading 63 grams per tonne silver, 0.54 gram per tonne gold and 0.39 per cent copper (70 million ounces of silver, 597,000 ounces of gold and 301 million pounds of copper). An additional 19.3 million tonnes are estimated in the inferred mineral resource category grading 46 grams per tonne silver, 0.34 gram per tonne gold and 0.37 per cent copper (28.4 million ounces of silver, 213,000 ounces of gold and 159 million pounds of copper).

The mineral resources of the tailings deposit have been updated during 2023 in accordance with revised topographic data.

For information, the inclusive mineral resources (inclusive of mineral reserves) for the Avino mine area (not including La Preciosa) are summarized in the table entitled "Posttax financial result summary."

The current mineral resources for the entire property (Avino and La Preciosa areas) are summarized in the table entitled "Avino property (including La Preciosa area) -- mineral resources (inclusive of oxide tailings mineral reserves, effective date: Oct. 16, 2023)."

Avino Oxide tailings project mine plan

The Avino Oxide tailings deposit will be extracted using conventional surface mining techniques with excavator, wheel loader and existing contractor truck fleet on site. Five cash-flow-positive mining pushbacks, or phases, were designed to allow for operational flexibility while stripping the overburden and targeting high-grade material.

The mine life of the tailings deposit is expected to be approximately nine years. The mining rate will ramp up to 1.4 Mt in years two to five, to accommodate a high strip ratio to remove most of the overburden, and will start to ramp down in later years as the strip ratio decreases. Over the life of the mine, saturated ground condition is expected as the mining benches are advanced deeper. Numerous practical approaches were considered to address mining equipment trafficability challenges and reduce risks from geotechnical stability. Waste material or overburden material will be placed in dedicated facilities located near the mine.

Existing infrastructure at Avino mine

The Avino mine is currently in operation. A well-established network of internal access roads exists at the property. The primary internal access roads are used for hauling supplies and heavy equipment access, while the secondary internal access roads are used by lighter vehicles for other operational activities. The OTP only requires minor extension of the existing road network. The existing power supply infrastructure has a three-megawatt (MW) capacity, which is sufficient to provide the power source required for OTP. Other utilities such as water and waste management are available at the Avino mine, and can be provided to OTP by extending the existing utility systems to OTP area.

General arrangement

The OTP process equipment and buildings, dry stack TMF, and utilities are located within proximity of the existing Avino mine operation. Most utilities, such as power and water pipelines, can be extended from the current operations to the OTP area. The OTP process plant and infrastructure will be located on an existing terrace currently occupied by a core storage and guest houses. The site preparation and earthworks required to prepare the OTP site will be minimal. The OTP process plant is conveniently located above the dry stack TMF. The tailings discharge conveyors from the OTP process plant to dry stack TMF follow the downhill terrain and can potentially generate supplemental electricity for the OTP operation.

The proposed processing plan

The proposed processing flow sheet consists of:

  • Leach feed preparation by trommel screen repulping and thickening;
  • Two-stage cyanide leaching of the repulped tailings;
  • Countercurrent decantation (CCD) washing and preclarification of the pregnant leach solution (PLS);
  • Deaeration, and gold and silver precipitation using the zinc powder (Merrill-Crowe process);
  • Gold and silver precipitate melting to produce dore;
  • Cyanide destruction of leach residual tailings;
  • Leach residue filtration and deposition to the lined dry stack tailings facility.

Based on the test results, and the proposed process and mine plan, the LOM average gold and silver recoveries to dore were projected to be 77.2 per cent for silver and 74.9 per cent for gold.

Capital cost estimate

Initial capital cost (including contingency of $5.3-million (U.S.)) is estimated at $49.1-million (U.S.). Initial capital costs include all costs required to bring the facility to production. The continuing, sustaining capital costs are estimated to be $5.1-million (U.S.) over the nine-year project life.

Operating cost estimate

Average mine, process and G&A (general and administrative) operating costs over the project's life (including waste mining and on-site power, excluding off-site shipping and smelting costs) are estimated at $21.34 (U.S.) per tonne processed, including a 5 per cent contingency.

Qualified persons

The qualified persons as defined by National Instrument 43-101, who are responsible for the technical content of this news release, are:

  • Hassan Ghaffari, PEng, MASc, director of metallurgy, Tetra Tech Canada Inc.;
  • Michael F. O'Brien, PGeo, MSc, PrScitNat, FAusIMM, FSAIMM, principal consultant, Red Pennant Communications Corp.;
  • Jianhui (John) Huang, PEng, PhD, senior process engineer, Tetra Tech Canada;
  • Jay Li, PEng, senior mining engineer, Tetra Tech Canada;
  • Mr. Latta, PEng, MBA, vice-president of technical services, Avino, who is a qualified person within the context of National Instrument 43-101, has reviewed and approved the technical data in this news release.

C-suite webinar

In addition, the company will be holding a C-suite webinar to discuss the prefeasibility study for its Oxide tailings project on Tuesday, Feb. 6, 2024, at 9 a.m. PT (12 p.m. ET). Shareholders, analysts, investors and media are invited to join the webinar. To participate in the webinar, register on-line.

When prompted, please allow the application access to use your speakers and microphone. You will be joined to the meeting with your microphone muted.

Alternatively, if you wish to connect by telephone, dial 1-844-763-8274 (Canada/United States toll-free) or 1-647-484-8814 (international toll) and ask to be joined to the Avino conference call.

About Avino Silver & Gold Mines Ltd.

Avino is a silver producer from its wholly owned Avino mine near Durango, Mexico. The company's silver, gold and copper production remains unhedged. The company's mission and strategy are to create shareholder value through its focus on profitable organic growth at the historic Avino property and the strategic acquisition of the adjacent La Preciosa project, which was finalized in Q1 2022. Avino currently controls mineral resources, as per National Instrument 43-101, with a total mineral content of 368 million silver equivalent ounces, within the company's district-scale land package. Avino is committed to managing all business activities in a safe, environmentally responsible and cost-effective manner while contributing to the well-being of the communities in which the company operates.

We seek Safe Harbor.

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