Last checked at 10 Sep 2010 07:00
10 September 2010
Positive scoping study at Inmaculada project
·; Estimated average annual silver equivalent production of 11 million ounces
·; Estimated average annual gold equivalent production of 180,000 ounces
·; Total cash operating cost per tonne of $52
·; Measured and indicated resources increased to 3.8 million tonnes
·; Feasibility study to be fast tracked by IMZ and completed by the end of 2011
·; Joint Venture project owned 30% by Hochschild / 70% by IMZ
Hochschild Mining plc ("Hochschild") has been informed by its JV partner, International Minerals ("IMZ"), of positive results from an independent Preliminary Economic Assessment (scoping study) and an increased mineral resource estimate for the Inmaculada gold-silver project in southern Peru. Hochschild has a 30% interest in Inmaculada with IMZ currently earning the 70% interest by completing a feasibility study by September 2013 at its sole cost and by issuing 200,000 IMZ shares to Hochschild. IMZ intends to fast-track the feasibility study and is aiming for completion by the end of 2011.
Highlights of scoping study (on a 100% project basis. Base case using $1,000 per ounce ("/oz") gold and $17/oz silver and a 60:1 silver-to-gold equivalent ratio. All currency amounts in US dollars):
·; Conceptual mine production (after 5% mining loss and 20% mining dilution): 8.0 million tonnes ("Mt") at an average grade of 3.8 grammes per tonne ("g/t") gold and 137 g/t silver or 6.1 g/t gold equivalent
·; Recovered ounces ("ozs"): 858,000 ozs gold and 29.3 million ozs silver or approximately 1.35 million ounces of gold equivalent (based on metallurgical recoveries of 88% for gold and 83% for silver)
·; Pre-tax cash flows: $660 million non-discounted, $434 million at a 5% discount rate and $286 million at a 10% discount rate
·; Pre-tax Internal Rate of Return ("IRR"): 41%
·; Total cash operating cost per tonne: $52
·; Total cash operating cost per oz:
- Basis gold with silver credited as a by-product: negative $94 per oz of gold (indicating that silver by-product revenue is greater than the total cash operating cost.)
- Basis gold equivalent: $311 per oz of gold equivalent.
·; Initial Capital: $168 million (including $32.9 million in contingency)
·; Total cash operating cost per oz, including capital:
- Basis gold with silver credited as a by-product: $231 per oz
- Basis gold equivalent: $517 per oz
·; 3,000 tonnes per day ("tpd") underground mine using a long hole stoping mining method and
conventional recovery process by flotation to produce a saleable gold-silver concentrate.
Highlights of Independent Updated Resource Estimate (100% project basis):
·; Measured and Indicated ("M&I") Mineral Resources of 3.8 Mt at an average grade of 4.3 g/t
gold and 129 g/t silver respectively, containing approximately 532,000 ounces of gold and 15.8 million ounces of silver or 796,000 ounces of gold equivalent (basis 3 g/t gold equivalent cut-off grade).
This new M&I resource estimate represents a 245% increase in gold ounces and 225% increase in silver ounces compared to the previous IMZ resource estimate. In addition, the average gold and silver grades in the M&I categories increased by 10% and 6% respectively.
·; Inferred Mineral Resources of 4.4 Mt at an average grade of 4.6 g/t gold and 200 g/t silver
respectively containing approximately 645,000 ounces of gold and 28.3 million ounces of silver or 1,116,000 ounces gold equivalent (basis 3 g/t gold equivalent cut-off grade).
This new inferred resource estimate represents a 26% increase in gold ounces and 28% increase in silver ounces compared to the February 2010 resource estimate. In addition, the average gold and silver grades in the Inferred category increased by 35% and 36% respectively.
Scoping Study Details:
Results of the scoping study for the Inmaculada Project indicate that at base case gold and silver prices of $1,000/oz and $17/oz respectively and a 3,000 tpd throughput, an underground mining project could return a pre-tax non-discounted cash flow of approximately $660 million based on the Scoping study conceptual diluted mine production of 8.0 Mt at a grade of 3.8 g/t gold and 137 g/t silver.
The independent scoping study was overseen by P & E Mining Consultants Inc. of Brampton, Ontario Canada ("P&E"), with Golder Associates Perú S.A. ("Golder") responsible for the tailing disposal facility and fresh water supply studies and FSS Canada Consultants Inc. ("FSS") responsible for the updated resource estimate.
The results of the Scoping study are shown below in Table 1, with sensitivities to metal prices shown in Table 2.
Table 1 - Inmaculada, Angela Vein Scoping Study (100% Project Basis, all in US Dollars):
| Item | Units |
|
| Base Case Gold price | $ per ounce | $1000 |
| Base Case Silver Price | $ per ounce | $17 |
| Initial Mine life | years | 7.5 |
| Average annual gold production 6 | ounces/year | 117,000 |
| Average annual silver production 6 | ounces/year | 4,000,000 |
| Average annual gold Eq. production | Au Eq ounces/year | 180,000 |
| Life-of-mine gold production 6 | ounces | 858,000 |
| Life-of-mine silver production 6 | ounces | 29,300,000 |
| Life-of-mine gold Eq. production | Au Eq. ounces | 1,346,000 |
| Plant processing rate (~3,000 tpd) | tonnes/year | 1,095,750 |
| Metallurgical recovery - gold | % | 88% |
| Metallurgical recovery - silver | % | 83% |
| Initial capital 2 | $ millions | 168 |
| Total Cash operating cost 3 | per tonne processed | $52.08 |
| Total Cash operating cost 4 | per ounce Au Eq. | $311 |
| Total Cash operating cost, inc capital 4 | per ounce Au Eq. | $517 |
| Total Cash operating cost (by-product) 5 | per ounce Au (Ag credit) | -$94 |
| Total Cash operating cost inc capital (by-product) 5 | per ounce Au (Ag credit) | $231 |
| Pre-Tax IRR | % | 41% |
| Cash Flow (non-discounted) | $ millions | $660 |
| NPV, 5% discount rate | $ millions | $434 |
| NPV, 10% discount rate | $ millions | $286 |
1) This Preliminary Economic Assessment or Scoping study is preliminary in nature, in 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 categorised as mineral reserves, and there is no certainty that the results of the preliminary economic assessment study will be realised and actual results may vary substantially.
2) Initial Capital includes $32.9 million in contingency allowance. Costs are based on Q3 2010 estimates and no escalation factors have been applied. Value added tax has not been included in the cost estimates.
3) Total Cash Operating costs include smelting and refining and Peruvian Government royalties, but do not include employee profit sharing or depreciation, depletion or amortization.
4) Total Cash Costs per ounce of gold equivalent are calculated using a silver-to-gold ratio of 60:1.
5) By-product accounting subtracts the revenue generated by silver from the operating costs as a credit to determine the cost per ounce of gold.
6) Annual and life-of-mine production figures are after 5% mining losses, 20% mining dilution and the respective metallurgical recoveries for gold and silver.
7) Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Table 2 - Inmaculada, Angela Vein Sensitivity Analyses (100% Project Basis, all in US Dollars, base case in bold and highlighted):
| Gold Price/Silver Price ($/oz) | ||||||||
| Category | $800/ $13.60 | $900/ $15.30 | $1,000/ $17.00 | $1,100/ $18.70 | $1,200/ $20.40 | $1,300/ $22.10 | $1,400/ $23.80 | $1,500/ $25.50 |
| IRR | 28% | 35% | 41% | 47% | 52% | 58% | 63% | 68% |
| Cash Flow ($ millions) | 416 | 538 | 660 | 782 | 904 | 1,026 | 1,148 | 1,271 |
| NPV 5% ($ millions) | 257 | 346 | 434 | 522 | 611 | 699 | 787 | 875 |
| NPV 10% ($ millions) | 156 | 221 | 287 | 352 | 417 | 483 | 548 | 613 |
1) Cash flow and NPV's are all shown pre-tax, but do include Peruvian government royalties and smelter and transportation charges. Value added tax (generally recoverable in Peru) was not included in the cash flows.
Mining
The mine design concept for Inmaculada is to utilise the long hole stoping mining method. The Angela Vein deposit is well suited for this method with good continuity of mineralisation along strike and average vein widths of approximately six meters. A main development decline will be driven in the footwall of the vein(s) and the mining blocks will be defined and accessed from a series of spiral ramps driven off the main decline. A majority of the mineralisation to be mined is above the main development decline, allowing for gravity transport to the decline for trucking to the process plant. Paste backfill of the mined out stopes is planned to minimize mining recovery losses. Sub-level spacing is 25m, with an assumed 5% mine loss and 20% mining dilution.
Processing
The base case processing plan for Inmaculada project envisages crushing and grinding, followed by flotation to generate a saleable gold-silver concentrate (similar to the recovery process at the Pallancata mine located 25km to the North). The Angela Vein mineralisation is amenable to other industry-standard recovery methods, but currently the flotation option provides the best project economics.
Mineral Resource Estimate Details
Based on drill results received up to a cut-off date of 15 May 2010 (drill hole INMA 139), an updated mineral resource estimate was calculated by FSS Canada, an independent consulting firm. This new estimate was used as the basis for the scoping study. The updated resource, as shown in Table 3 and summarised below (on a 100% project basis) comprises:
·; Measured and Indicated Resources: 3.8 Mt at an average grade of 4.3 g/t gold and 129 g/t silver containing approximately 532,000 ounces of gold and 15.8 million ounces of silver.
·; Inferred Resources of 4.4 Mt at an average grade of 4.6 g/t gold and 200 g/t silver containing approximately 645,000 ounces of gold and 28.3 million ounces of silver.
This updated resource estimate, which includes Measured resources for the first time, represents a significant increase in both the confidence level of the resource estimate and the overall gold and silver content of the Angela Vein deposit from the previously-reported, independently-calculated, Indicated and Inferred mineral resource estimate, as discussed in the Highlight section above.
The resource estimate is reported at a cut-off grade of 3 g/t gold equivalent (using a silver to gold ratio of 60:1), which approximates the cut-off grade for the underground mining and flotation process option selected for Inmaculada, using a base-case gold price of US$1,000 per ounce. Because the cut-off grade is a factor of operating costs, metallurgical recoveries and gold price, it is possible that a lower or higher cut-off grade could be applied in the future.
Table 3. Angela Vein, Inmaculada Project - Mineral Resource Estimate at a cut-off grade of 3g/t gold equivalent (as of 9 September 2010 at US$1,000/oz gold and $17/oz silver):
| Resource Estimate Category | Tonnes | Gold Grade (g/t) | Silver Grade (g/t) | 100% Project Contained Ounces | |||
| Gold | Silver | Gold Equivalent | Silver Equivalent | ||||
| Measured | 1,080,000 | 5.1 | 107 | 178,000 | 3,717,000 | 240,000 | 14,395,000 |
| Indicated | 2,747,000 | 4.0 | 137 | 354,000 | 12,128,000 | 556,000 | 33,392,000 |
| Measured and Indicated | 3,827,000 | 4.3 | 129 | 532,000 | 15,845,000 | 796,000 | 47,788,000 |
| Inferred | 4,388,000 | 4.6 | 200 | 645,000 | 28,283,000 | 1,116,000 | 66,959,000 |
1) Resources are shown on a 100% project basis.
2) Numbers are rounded to reflect the precision of a resource estimate.
3) The estimated mineral resources are not mineral reserves and do not have demonstrated economic viability.
4) To limit the influence of individual high-grade samples, grade cutting was used. Gold assay grades were capped at 100 g/t and silver grades were capped at 1,500 g/t.
5) Average dry bulk densities of 2.51 tonnes per cubic meter ("t/m3") were used for all mineralised rocks.
6) The grades were interpolated using "Ordinary Kriging" estimation technique.
7) Descriptions of parameters to determine "Measured", "Indicated" and "Inferred" resources are provided below.
8) The contained metal estimates remain subject to factors such as mining dilution and process recovery losses.
9) The mineral resources in this press release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council 11 December 2005.
The mineral resources were estimated based on IMZ's previously-released assay results from 139 core drill holes totaling approximately 48,513m over a strike length of 2 km. These mineral resources were classified in accordance with CIM guidelines by FSS's Qualified Person, R. Mohan Srivastava (P.Geo.), and the estimate has an effective date of 9 September 2010.
Ordinary kriging was used to interpolate gold grades for four separate sub-domains that may intermix within each block (block size is 10 meters ("m") long by 2m wide by 10m high). The four sub-domains were defined by geological sectional interpretation. The grades of each sub-domain were interpolated separately, using only the nearby data from the same sub-domain, and the final block grade was calculated by taking the proportion and density-weighted average of the grades from each of the sub-domains.
Resources were classified according to the number of nearby drill holes, their proximity to the block being estimated, and their spatial arrangement around the block. Blocks were classified as Measured Resources if they were estimated by data within the range of the variogram in at least four of eight octants, and with a sample within 25m (1/3 the range of the variogram) of the block centre. Blocks were classified as Indicated Resources if they were estimated by data within the range of the variogram from at least two drill holes in at least three of eight octants, and with a sample within 50m (2/3 the range of the variogram) of the block centre. Blocks were classified as Inferred Resources if they had data within the range of the variogram but could not be classified as Measured or Indicated Resources.
Forward looking statements:
The statement in this press release relating to the results of the scoping study commissioned by International Minerals Corporation and the advancement and development of the Inmaculada Project is a forward looking statement within the meaning of securities legislation. The statement is based on the public disclosure of International Minerals Corporation, dated 9 September 2010, which is available on SEDAR at www.sedar.com under International Minerals Corporation, and is subject to the statements by International Minerals Corporation about such forward looking statements and the assumptions and risks associated with it. Hochschild Mining does not accept any responsibility for the adequacy or inadequacy of the disclosure made in this news release and any responsibility is hereby disclaimed in all respects.
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Enquiries:
Hochschild Mining plc
Isabel Lütgendorf +44 (0)20 7907 2934
Head of Investor Relations
Finsbury
Faeth Birch +44 (0)20 7251 3801
Public Relations
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About Hochschild Mining plc:
Hochschild Mining plc is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has over forty years' experience in the mining of precious metal epithermal vein deposits and currently operates four underground epithermal vein mines, three located in southern Peru, one in southern Argentina and one open pit mine in northern Mexico. Hochschild also has numerous long-term prospects throughout the Americas.
About International Minerals
International Minerals is a silver-gold producer and developer with silver and gold production from its 40%-owned Pallancata Mine in Peru, one of the top-10 primary silver mines in the world. Production of approximately 10 million ounces of silver and 33,000 ounces of gold (on a 100% project basis) is estimated by IMZ in calendar year 2010. In addition to the Pallancata Mine, IMZ also controls a 70% interest in the Inmaculada gold-silver project in Peru and majority or 100% ownership interests in development stage gold projects in Nevada (Goldfield and Converse) and Ecuador (Rio Blanco and Gaby). IMZ also owns a 3% net smelter return ("NSR") royalty from Barrick Gold's Ruby Hill gold mine in Nevada, which produced approximately 100,000 gold ounces in 2009.
IMZ is listed on the Toronto Stock Exchange (since 1994) and the Swiss Stock Exchange (since 2002).