Golden Arrow Resources Corporation announced the results of a pre-feasibility study of the Chinchillas project located in the Jujuy Province, for the joint-venture development of the project with Silver Standard Resources Inc. pursuant to the Business Combination Agreement between the parties dated September 30, 2015, as outlined in the Company’s news release dated March 31, 2017, in order to form a joint venture to combine the Chinchillas project with the producing Pirquitas Mine into a single new operation (The joint venture will be owned on a 75% / 25% basis by each company, respectively. Silver Standard will be the operator)
The pre-feasibility study envisions a satellite open pit mining operation at the Chinchillas project with ore processing undertaken using the existing mill and concentrator facility at the Pirquitas mine property, which has the capacity to accept and process Chinchillas ore, located approximately 42 kilometers west of Chinchillas.
Pre-Feasibility Study Highlights (All financial results are in U.S. dollars and all technical data are presented on a 100% project basis.)
- Average annual silver equivalent production of 8.4 million ounces over an eight-year mine life at a 4,000 tonne per day plant throughput.
- Robust operating margins based on cash costs of $7.40 per payable ounce of silver sold over the life of mine.
- Post-tax net present value of $178 million using a 5% discount rate and metal prices of $19.50 per ounce silver, $0.95 per pound lead and $1.00 per pound zinc.
- Attractive post-tax internal rate of return of 29%.
- Near-term production based on construction beginning in the third quarter of 2017, subject to permitting, followed by ore delivery to the Pirquitas mill in the second half of 2018.
- Low capital intensity based on initial capital expenditures, including owner’s costs and contingency, estimated to be $81 million.
- Mineral Reserves of 11.7 million tonnes containing 58 million ounces of silver at a grade 154 g/t, 310 million pounds of lead at a grade of 1.20% and 127 million pounds of zinc at a grade of 0.49%.
- Measured and Indicated Mineral Resources (inclusive of Mineral Reserves) of 29.3 million tonnes containing 96 million ounces of silver at a grade 101 g/t, 581 million pounds of lead at a grade of 0.90% and 386 million pounds of zinc at a grade of 0.60%.
Capital cost estimates assume utilizing certain property, plant and equipment from the Pirquitas mine. All costs incurred prior to the declaration of commercial production are considered capital costs.
Project Overview
The Chinchillas project is a silver-lead-zinc deposit, located in the Puna region of northwestern Argentina, in the Jujuy Province. Chinchillas is approximately 42 kilometers by road from the Pirquitas mine owned and operated by Silver Standard and 280 kilometers from the provincial capital of San Salvador de Jujuy. The project is composed of three contiguous claims, totaling 2,043 hectares. The project is accessed by paved road to the town of Abra Pampa via National Route No. 9 and an additional 66 kilometers west across public gravel roads, through the village of Santo Domingo, with similar road conditions presently utilized to service the Pirquitas mine. Santo Domingo is equipped with electricity, natural gas, and water services.
Metallurgical recoveries, used in the generation of the pit shell, are assumed to be 85% silver, 93% lead and 80% for zinc. Mineral Reserves estimate is based on metal price assumptions of $18.00/oz. silver, $0.90/lb. lead and $1.00/lb. zinc.
Mining and Processing
The pre-feasibility study evaluates the development and construction of an open-pit mine and supporting infrastructure, which will supply ore to the Pirquitas processing facilities over an eight-year active mining period.
Chinchillas will be mined by conventional drill, blast, truck, and loading open pit mining methods. A fleet of 35-tonne road haul trucks will transport ore approximately 42 kilometers to the Pirquitas processing facilities. Haul trucks, loading equipment and drills at the Pirquitas mine will be transferred to Chinchillas, allowing the project to leverage existing equipment and infrastructure for capital cost savings and a shorter time to production.
The Pirquitas processing facility has been in continuous operation since 2009. It will process ore from the Chinchillas project using standard crush, grind and flotation at a rate of 4,000 tonnes per day. Minor modifications to the Pirquitas plant are expected and the associated capital costs are included in the capital cost estimate. Over the life of mine, the plant is expected to produce a silver/lead concentrate and a zinc concentrate. The two concentrates will be shipped internationally to smelters for processing. A tailings storage facility will be located on the Pirquitas property and is included in the capital cost estimate.
Capital Costs Summary
Capital cost estimates assume utilizing certain property, plant and equipment from the Pirquitas mine. All costs incurred prior to the declaration of commercial production are considered capital costs. Ore delivery to the Pirquitas mill is expected in the second half of 2018. The total capital required to construct the mine and associated infrastructure is $81 million.
Summary of Capital Costs
| Capital Costs | Value ($M)
|
| Site Infrastructure | $10 |
| Mining Equipment | $12 |
| Pre-stripping Capital | $11 |
| Plant and Tailings | $16 |
| Owner’s Costs | $10
|
| Other | $5 |
| Contingency | $16 |
| Total | $81
|
Capital costs incurred after the start of commercial production are considered sustaining capital costs. The sustaining capital, excluding capitalized stripping, is expected to be $44 million, including a $9 million contingency.
Summary of Sustaining Capital Costs
| Sustaining Capital Costs | Value ($M) |
| Mining Equipment | $29 |
| Other | $7 |
| Contingency | $9 |
| Total | $44 |
Operating Costs Summary
These costs were developed based on actual operating experience and are adjusted where appropriate to characteristics specific to the Chinchillas project.
| Summary of Operating Costs
|
||
| Operating Costs | Units | Value |
| Mining | $/t mined | $2.88 |
| $/t milled | $15.34 | |
| Processing | $/t milled | $14.72
|
| General and Administrative | $/t milled | $7.00 |
| Ore Transport to Plant | $/t milled | $7.86 |
| Tails Management | $/t milled | $0.43
|
| Total | $/t milled | $45.34 |
Cash costs, which include cost of inventory net of capitalized stripping, and treatment and refining costs, total $7.40 per payable ounce of silver sold net of by-product revenues and estimated capitalized stripping over the life of mine. All-in sustaining costs, which include sustaining capital, capitalized stripping and reclamation, total $9.75 per payable ounce of silver sold net of by-product revenues over the life of mine.
Opportunities
Several opportunities to improve the economics of the Chinchillas project have been identified.
The Pirquitas mill has demonstrated operating throughput of up to 5,000 tonnes per day. Opportunity exists to sustainably increase the rate mining and transport of ore from the Chinchillas project above 4,000 tonnes per day, the rate utilized in the pre-feasibility study. This would increase annual production levels.
Further opportunity exists for Mineral Resource discovery and conversion of Mineral Resources to Mineral Reserves. Significant Mineral Resources in excess of Mineral Reserves exist on the Chinchillas property. Through additional drilling, higher metal prices or lower costs, there would be an opportunity to convert Mineral Resources to Mineral Reserves, thereby extending the operating life of the Chinchillas project. Additionally, more detailed drill testing in the areas surrounding and to the south-east of Socavon would have potential to add further Mineral Resources at the Chinchillas property.
Project Schedule
The permitting process for the Chinchillas project continues to advance with positive support from the local communities and government authorities. The Chinchillas Environmental and Social Impact Assessment has been prepared and submitted to the Argentine regulatory authorities, and is in the consultation process. Work with local communities on social programs and understanding of the Chinchillas project is advancing positively.
Subject to permitting, the company expects construction at Chinchillas to begin during the third quarter of 2017 with ore delivery to the Pirquitas mill expected in the second half of 2018.
