Mr. Michael Staresinic reports
SRHI INC. ANNOUNCES 2021 OPERATING AND CAPITAL GUIDANCE FOR THE MINERA TRES VALLES COPPER PROJECT
SRHI Inc. (formerly Sprott Resource Holdings Inc.) is pleased to provide operational and capital guidance for the 2021 calendar year for its 70-per-cent-owned Minera Tres Valles copper project (MTV) located in Salamanca, Chile. All amounts expressed in United States dollars.
"In 2020, the world experienced the arrival of COVID-19, with the pandemic affecting each of us. It continues, but there is hope with several vaccines being distributed worldwide," said Terry Lyons, interim chief executive officer of SRHI. "Our business was impacted in several ways as we reacted to the changing environment ultimately resulting in the successful restructuring of MTV in late 2020. With this restructuring complete, we have moved forward with several initiatives, the most prominent one being the construction and development of our underground mine, Papomono."
"Our view on copper is increasingly positive," stated Michael Staresinic, president of SRHI. "We see three pillars of demand driving prices higher as supply will struggle to keep up with this demand -- China's ongoing growth, worldwide stimulus spending on infrastructure and construction, and the proliferation of electric vehicles. The latter has exponential potential and copper is at the heart of this revolution. Electric cars use between three and four times the amount of copper than conventional cars, and electric buses require anywhere between 11 and 16 times the amount of copper. This, coupled with the necessity for more and more electric 'gas' stations to alleviate consumer range anxiety, will only solidify copper's importance in the years to come. The shift is already happening, with President Biden vowing to electrify the U.S. federal fleet and General Motors announcing it will be aggressively shifting to electric vehicles, producing 30 new electric models within four years, and producing only electric vehicles by 2035."
"We believe that Chile, in terms of prospectivity and business climate, is the best jurisdiction in the world to build a copper business," added Mr. Staresinic. "As we look to expand operations upon the completion of Papomono's construction in early 2022, our focus for production this year will come from our recently restarted operations at our Don Gabriel open pit, together with ore expected from third party miners as well as from ENAMI, Chile's national mining enterprise.
"When reflecting on the company's technical report (December, 2018) at today's copper price, the operating leverage to the copper price, all else being equal, is dramatic to SRHI," continued Mr. Staresinic. "The technical report states the net present value of the project approaches $275-million at today's prices -- a much higher value compared to where SRHI trades today.
"Two thousand twenty-one will be an exciting year on many fronts -- vaccine deployment with the hope of returning to normality, the construction and development of Papomono, a strengthening copper price environment and the continued increase in demand for electric vehicles. We believe we are well positioned and invite shareholders, interested parties and potential investors to explore our new website ... together with our corporate presentation for more information."
Operating and capital guidance 2021
Copper production for 2021 is expected to begin slowly as copper in ore processed from the recent restart of operations works its way through the leaching process before converting to copper cathodes. This will be aided by the company's new chloride leaching process that has now reached design parameters in the leaching solution. The salt leach is expected to increase recoveries, reduce sulphuric acid consumption and reduce the leaching time for the company's sulphide ore. The company's production profile includes mineralized material primarily from Don Gabriel, and material from ENAMI and third party miners. Even with these other sources of ore, the processing facility will continue to operate well below its annual capacity (18,500 tonnes of copper cathodes) resulting in higher unit costs until production from Papomono comes on-line in early 2022.
OUTLOOK FOR 2021 AT MTV
Operating information Year ended
Copper (MTV operations) Dec. 31, 2021
Cu production (tonnes) 6,000 to 7,000
Cu production (millions of pounds) 13.2 to 15.4
Cash cost per pound produced (2) $2.60 to $2.90
Capital expenditures ($ millions) $12 to $15
- Guidance is based on certain estimates and assumptions, including, but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations, and metallurgical performance. Please refer to the technical report prepared by AMEC Foster Wheeler, a Wood company, in respect of the project filed on Dec. 14, 2018, and to the company's SEDAR filings for complete risk factors.
Cash cost is a non-IFRS (international financial reporting standard) measure: Cash costs of production include all costs absorbed into inventory less non-cash items such as depreciation and non-site charges such as trucking charges capitalized to inventory. Cash costs per pound produced are calculated by dividing the aggregate of the applicable costs by copper pounds produced.
Planned capital expenditures for 2021 are focused primarily on the construction and development of Papomono for the inclined block-caving mining project. It is expected that, by early 2022, the underground operation at Papomono will be at commercial production and the resulting production growth is expected to lower per-unit operating costs in 2022 as the results of this capex are realized.
By the end of 2022, production is expected to reach levels over-50-per-cent higher (and still not at capacity) than 2021's expected exit production with unit costs meaningfully lower as both capacity increases and the higher grade ore (1.3 per cent to 1.5 per cent TCu) of Papomono Masivo enters production. This is expected to be supported by a further $5-million to $8-million of mostly sustaining capex.
MTV is in the early stages of Papomono's construction and development, and the company is monitoring its capital requirements to support MTV through this important stage of growth. The company is also watching the geopolitical landscape as it can materially impact foreign exchange rates used in planning and modelling MTV's operations and cash flows.
MTV has a significant strategic land package of over 46,000 hectares in a good neighbourhood that is expected to be explored in the coming years. These property holdings are in the well-known copper-producing Coquimbo region including Antofogasta Minerals' Los Pelambres mine that is located approximately 50 kilometres to the east of MTV. With more than 100 copper outcrop occurrences and 70 artisanal mining sites with geological characteristics similar to that of the Papomono and Don Gabriel orebodies, together with near-term infill drilling opportunities, there is significant exploration potential for the property.
The scientific and technical content contained in this news release is taken from the technical report entitled "Minera Tres Valles Copper Project, Salamanca, Coquimbo Region, Chile NI 43-101 Technical Report," prepared by Dr. Antonio Luraschi, RM CMC, manager of metallurgic development and senior financial analyst at Wood, Sergio Navarrete, RM CMC, mining engineer at Wood, Alfonso Ovalle, RM CMC, mining engineer at Wood, Michael G. Hester, FAusIMM, vice-president and principal mining engineer at Independent Mining Consultants, Inc., Enrique Quiroga, RM CMC, mining engineer at Q&Q Ltda., Gabriel Vera, RM CMC, metallurgical process consultant at GVMetallurgy, and Sergio Alvarado, RM CMC, consultant geologist, general manager and partner at Geoinvestment Sergio Alvarado Casas E.I.R.L., all of whom are independent qualified persons as defined by National Instrument 43-101. The technical report is available under the company's profile on SEDAR. Readers are encouraged to read the technical report in its entirety.
Notes on PEA
Please note that the PEA case of the technical report is preliminary in nature, that it 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 case will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
About SRHI Inc.
SRHI is a company based in Toronto and its principal operating business is its 70-per-cent equity interest in the producing copper mine MTV in Salamanca, Chile.
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