Mr. John Lee reports
SILVER ELEPHANT: GIBELLINI VANADIUM PROJECT'S PEA SHOWS 25.4% AFTER TAX IRR AT $10/LB V2O5, CAPEX $147 MILLION
Silver Elephant Mining Corp. has released the results of a preliminary economic assessment (2021 PEA) for its Gibellini vanadium project that demonstrates an after-tax internal rate of return (IRR) of 25.4 per cent, and after-tax cumulative cash flow of $260.8-million, assuming an average vanadium pentoxide (V2O5) price of $10 per pound.
The Gibellini project is designed to be an open-pit, heap leach operation in Nevada's Battle Mountain region (25 kilometres south of Eureka) with initial capital cost of $147-million, average annual production is 10.2 million lb of V2O5, at an all-in sustaining cost of $6.04 per lb with strip ratio of 0.18 to 1 (waste rock:leach material).
As of Aug. 27, 2021, the European price of vanadium pentoxide (98 per cent) was $9.60 per lb.
The 2021 PEA was prepared by Wood Group USA Inc. (Wood) and Mine Technical Services Ltd. (MTS). The technical report that summarizes the 2021 PEA will be filed under the company's SEDAR profile and will be available within 45 days.
All dollar values are expressed in U.S. dollars unless otherwise noted.
2021 PEA highlights:
The 2021 PEA is preliminary in nature, and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
HIGHLIGHTS OF THE 2021 PEA (AFTER TAX)
Internal rate of return 25.4 per cent
Payback period 2.49 years
Life of mine 11.1 years
Total V2O5 recovered 114.6 million lbs
Average V2O5 selling price $10 per lb
Cash operating cost $4.70 per lb V2O5
All-in sustaining cost $6.04 per lb V2O5
Initial capital cost including 25-per-cent contingency $147 million
Average grade 0.271 per cent V2O5
Strip ratio (waste:leach) 0.18:1
Mining operating rate 9,700 tonnes per day
Total material leached 33.4 million tonnes
Average V2O5 recovery through direct heap leaching 63.4 per cent
The PEA mineral resource is based on measured, indicated and inferred mineral resource estimates for the Gibellini deposit and inferred mineral resource estimates for the Louie Hill and Bisoni McKay deposits, totalling 131.34 million lb of contained V2O5 in the measured and indicated categories, and 227.81 million lb of contained V2O5 in the inferred catetory.
Mining and processing
A subset of the Gibellini and Louie Hill mineral resource estimates were adopted in the 2021 PEA mine plan. The Bisoni McKay mineral resource estimate was not included in the mine plan in the 2021 PEA to better reflect the company's already submitted plan of operation in its permitting efforts.
Capital and operating costs for the 2021 PEA are based on supplying three million tonnes of crushed and agglomerated leach material annually from two open pits at Gibellini and Louie Hill. Initial mine development will be focused on Gibellini, with Louie Hill following nine years later.
Mining at the Gibellini and Louie Hill deposits is planned to be a conventional open-pit mine using a truck and loader fleet consisting of 100-tonne trucks and front-end loaders. A power line would be constructed from an existing transmission line and water will be leased from a private ranch. Both water and power sources are within five miles of the planned mining operations.
Mining will be completed using contract mining, with Silver Elephant's mining staff overseeing the contracted mining operation and performing the mine engineering and survey work.
The processing method envisioned will be to feed leach material from the mine via loader to a hopper that will feed a crushing plant. The leach material will be fed to the agglomerator where sulphuric acid, flocculent and water will be added to achieve adequate agglomeration. The agglomerated leach material will be transported to a stacker on the leach pad, which will stack the material to a height of 15 feet. Once the material is stacked, solution will be added to the leach heap at a rate of 0.0025 gallons per minute per square foot. The solution will be collected in a pond and this pregnant leach solution (PLS) will be sent to the process building for metal recovery. In the process building, the PLS will go through solvent extraction (SX) and stripping processes to produce vanadium pentoxide.
Capital and operating costs
During the capital period, an initial leach pad having a capacity of 16.7 million short tonnes will be constructed, and will be followed by one expansion of approximately 16.7 million short tonnes. The total initial capital cost is estimated at approximately $147-million.
Sustaining capital is estimated at $25.2 million.
The cash operating costs in the first half of the Gibellini project covering years one to seven is $4.20 per lb of V2O5 produced and for years eight to 12 is $5.87 per lb of V2O5 produced, resulting in a weighted average cash cost of $4.70 per lb of V2O5 produced and all-in sustaining cost of $6.04 per lb. The cash operating cost is lower in the first half of the Gibellini project due to processing of higher-grade material.
Vanadium recoveries and metallurgical testing
Approximately 114.6 million lb of V2O5 is expected to be produced from the Gibellini and Louie Hill leaching operations at an average recovery of 63.4 per cent (oxide: 60 per cent, transition: 70 per cent and reduced: 52 per cent). The heap leaching will be performed at ambient temperature and atmospheric pressure without preroasting or other beneficiation processes. The PLS will be continuously collected with leach material undergoing, on average, a 150-day heap-leaching cycle.
The direct heap leach vanadium recovery estimates used in the 2021 PEA were based on extensive metallurgical test work performed by SGS Lakefield Research laboratories, Dawson Minerals Laboratories and McClelland Laboratories. Samples were selected from a range of depths within the Gibellini deposit, and are considered to be representative of the various types and styles of mineralization within that deposit. Samples were obtained to ensure that tests were performed on sufficient sample mass. The end results demonstrated low acid consumption (less than 100 lb acid consumption per tonne leached) and high recovery through direct leaching.
Solvent extraction processing was conducted to recover vanadium from sulphuric acid PLS generated during pilot column testing on bulk leach samples from the Gibellini project. Laboratory-scale testing was conducted on select solutions generated during the pilot SX processing, to optimize the SX processing conditions. Additional laboratory-scale testing was successfully conducted on the loaded strip solution to purify, precipitate and extract final marketable vanadium-bearing products.
The associated tables show the sensitivity analysis to the vanadium pentoxide price, grade and to the PEA capital cost and operating costs. A sensitivity analysis to vanadium price indicates strong project economics even in very challenging conditions, and that the Gibellini project is well positioned to benefit from the current rising vanadium price environment. A 30-per-cent increase in the vanadium price to $13 per lb V2O5 relative to the base case translates to a 42-per-cent IRR and $295.4-million after-tax net present value at a 7-per-cent discount rate.
A notice of intent (NOI) to prepare an environmental impact statement (EIS) for the Gibellini project was published on July 14, 2020, in the federal register. The NOI commences the National Environmental Policy Act (NEPA) review by the Bureau of Land Management (BLM). The Gibellini project conforms to the current U.S. administration's green energy initiatives and the EIS record of decision (ROD) is expected in early 2022. Operating permits from the state of Nevada are on track to be received on the same timeline as the ROD. The renewable energy alternative in the EIS includes six megawatts of solar panels and a 10-megawatt vanadium flow battery to provide 100 per cent of the Gibellini project's electrical power demand. If selected by the BLM, the Gibellini project would be the first mine in the United States completely powered by renewable energy. The Gibellini project would also be the first primary vanadium mine in the U.S.
Vanadium as a critical metal
Vanadium was designated a critical material by the U.S. government in 2018 due to its importance to the defence and energy storage sectors and there being no domestic production with all supply through imports, mostly from Russia, China and South Africa.
Vanadium alloy steel is 30 per cent lighter than non-alloyed steel, with double the tensile strength. It is used extensively in the aerospace and defence sectors, as well as in skyscraper construction. A structural vanadium deficit is expected to occur by 2025 with the rising popularity of the vanadium redox flow battery which is a mature technology featuring up to an eight-hour duration discharge and is scalable to hundreds of megawatt hours. Battery life is projected to be a minimum of 20 years with no expected degradation of the vanadium or the charge density.
Opportunity exists to upgrade the Gibellini, Louie Hill and Bisoni Mckay inferred mineral resources to higher confidence categories through drilling, and to incorporate Bisoni McKay mineral resources in future economic studies.
The acquisition of the Bisoni McKay deposit in September, 2020, significantly expanded the company's land position from approximately seven kilometres of Woodruff Formation strike to 21 kilometres. The Woodruff Formation is the host of the vanadium mineralization in the three deposits. Numerous vanadium-bearing surface rocks were identified by the company in its 2019 reconnaissance program of surface exposures of the Woodruff Formation. These may warrant drill programs upon further investigation (see company's press release dated May 26, 2019).
Data verification performed in support of the mineral resource estimates included in the technical report that supports the 2021 PEA included site visits; review of QA/QC data, sampling analytical data and drill campaigns; database verification; review of metallurgical data and metallurgical recovery assumptions including projected leach pad performance; review of mine and recovery plan assumptions; and review of commodity price, capital and operating cost assumptions
Wood is a part of the Wood Group, a global leader in the delivery of project, engineering and technical services to energy and industrial markets. The Wood Group operates in more than 60 countries, employing around 55,000 people, with revenues of over $10-billion.
About Silver Elephant Mining Corp.
Silver Elephant Mining is a premier mining and exploration company in nickel, silver and vanadium.
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