Fresnillo Plc FRES Results of AMC Prefeasibility Study on Juanicipio

  Fresnillo Plc (FRES) - Results of AMC Prefeasibility Study on Juanicipio

RNS Number : 3975F
Fresnillo PLC
14 June 2012
 



 

                                                                              

                                                                              

                                                                              

                                                                 Fresnillo Plc

                                                           28 Grosvenor Street

                                                                London W1K 4QR

                                                                United Kingdom

                                                          www.fresnilloplc.com

 

Fresnillo PLC Reports Results of AMC Prefeasibility Study on Juanicipio
Property

 

Highlights

·     The Prefeasibility Study has been completed in respect of Juanicipio
property

·     The study anticipates a 15 year mine life  with an average annual
payable production of approximately 10,3 million ounces of silver and 29,200
ounces of gold.

·     Cash cost of US$6.61 per ounce of silver equivalent and US$-0.03 per
silver ounce, net of by-product credits.  

·     After-tax NPV of US$1.2 billion at a 5% discount rate and US$23.39 per
ounce silver price. 

·     The study was prepared on the basis that the project will be developed
on a standalone basis

 

Fresnillo PLC today reports the results of a prefeasibility study received  by 
Minera Juanicipio S.A. de  C.V., its 56% owned  joint venture with MAG  Silver 
Corp. (44%) (TSX: MAG  and NYSE: MVG), in  respect of the Juanicipio  property 
located in the Fresnillo District, Zacatecas State, Mexico.

 

 

The study was completed by AMC  Mining Consultants (Canada) Ltd. and is  based 
on an assumed initial processing capacity of approximately 850,000 tonnes  per 
annum, (ramping up  to a maximum  rate of  950,000 tonnes per  annum), at  the 
stand-alone project.  The  AMC study  recommends  long-hole open  stoping  and 
cemented  paste  backfill  as  the  primary  mining  method,  with  processing 
consisting of a comminution circuit followed by the sequential flotation of  a 
lead -silver concentrate, and zinc concentrate and pyrite (gold) concentrate.

 

 

The study anticipates  three and  a half years  of pre-production  development 
from the start of construction  to mill start-up, followed  by a mine life  of 
approximately 15 years with average annual payable production of approximately
10.3 million ounces  of silver, 29.2  thousand ounces of  gold, 11.2  thousand 
tonnes of lead and 18.2 thousand tonnes of zinc in concentrates at a cash cost
of US$6.61 per ounce of silver equivalent.

 

 

The after-tax net present value would be US$1.2 billion at a 5% discount  rate 
, according to the AMC  study. The after-tax net  present value does not  take 
into account the  cost of  the mandatory  profit sharing  to employees  (MPSE) 
under Mexican Federal Labor Law, which Fresnillo complies with at its  Mexican 
operations. The MPSE is required to be  paid at a rate equivalent to 10%  over 
income subject to profit sharing (taxable income adjusted for certain  items). 
MPSE is deductible for income tax purposes.

 

 

 

 

 

 

 

Summary of Assumptions and Economic Analysis^(1,2)

(All amounts in US$ unless otherwise indicated)

 

Item               Unit Base Case  Item              Unit       Base Case
Initial Throughput tpa    850,000  Mining Costs      $/t milled    $43.92
Silver Grade       g/t        416  Milling Costs     $/t milled    $19.18
Gold Grade         g/t        1.3  Unit G&A Costs    $/t milled     $3.46
Lead Grade         %         1.4%  Cash Cost         $/oz AgEq      $6.61
Zinc Grade         %         2.7%  Initial Capital   $ mm            $302
LOM Payable Silver moz        153  Sustain. Capital  $ mm            $267
LOM Payable Gold   koz        430  NPV (After-tax)   $ mm          $1,233
LOM Payable Lead   mlbs       361  IRR (After-tax)   %                43%
LOM Payable Zinc   mlbs       584  Payback (Pre-tax) Years              3
                                   Corporate Tax     %                28%

 

 

^(1)    The AMC Base Case utilizes a discount rate of 5% and three year
trailing average metal prices for silver ($23.39 per ounce), gold ($1,257 per
ounce), lead ($0.95 per pound) and Zinc ($0.91 per pound) to December 31,
2011.
^(2)    Source: AMC Mining Consultants  (Canada) Ltd.

 

 

AMC  was  engaged  by   Minera  Juanicipio  in  July   2010  to  prepare   the 
prefeasibility study. The scope of the AMC study includes, among other things:
the resource estimate and model developed by Strathcona Mineral Services dated
November 2011; a geotechnical assessment and mining options study; a  detailed 
mine design  with  detailed  schedules  based  on  chosen  mining  methods;  a 
metallurgical and processing  review; a capital  and operating cost  estimate; 
and an economic assessment and sensitivity  analysis of cash flows, pay  back, 
mine life, NPV and IRR. 

 

While the results of  the AMC study  are promising, as  anticipated by us,  it 
constitutes a preliminary study that, by definition, is preliminary in  nature 
and,  among  other  things,  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. 
The estimates produced in the study have  a level of accuracy in the order  of 
+/- 25%.  There can  therefore be no certainty  that the results reflected  in 
the AMC Study will  be realised.  It  is also important  to note that  mineral 
resources that  are not  mineral reserves  do not  have demonstrated  economic 
viability.  

 

Fresnillo  intends  to  complete   a  full  review  of   the  study  and   the 
recommendations made by  AMC. The  Technical Committee of  the Joint  Venture, 
which comprises Fresnillo  and MAG Silver  representatives, will then  discuss 
and evaluate the implications of the AMC study and recommend to the Board  the 
appropriate next steps. As  Fresnillo has previously said,  the AMC study  was 
prepared on  the basis  that the  Juanicipio project  will be  developed on  a 
standalone basis. There  are no  plans to integrate  the project  with any  of 
Fresnillo's properties in the area.

 

 

 

For further  information, please  visit our  website: www.fresnilloplc.com  or 
contact:

 

 

Fresnillo plc          

London
Office                                                                        
Tel: +44 (0)20 7399 2470

Arturo Espínola, Head of Investor Relations

 

Mexico City Office

Gabriela
Mayor                                                                       
Tel: +52 55 52 79 3203

 

Brunswick
Group                                                                   Tel:
+44 (0)20 7404 5959

Carole Cable

David Litterick

 

About Fresnillo plc

 

Fresnillo is the world's largest  primary silver producer and Mexico's  second 
largest gold producer, listed on the London and Mexican Stock Exchanges  under 
the symbol FRES. Fresnillo has seven operating mines, all of them in Mexico  - 
Fresnillo, Saucito,  Cienega,  San Ramón  (a  satellite of  the  Ciénega  gold 
mine),Herradura, Soledad-Dipolos and Noche Buena  (new gold mine at  Herradura 
District);two development projects - Saucito II, and Dynamic leaching to treat
high grade gold ore from Herraduraand Soledad-Dipolos mine; and five  advanced 
exploration prospects - San Julián, Centauro Deep, Juanicipio, Orysivo and Las
Casas as well as a number of other long term exploration prospects. In  total, 
has  mining  concessions  covering  approximately  2.1  million  hectares   in 
Mexico. Fresnillo has a strong  and long tradition in  mining, a proven  track 
record  of  exploration  success,   reserve  replacement,  mine   development, 
efficient mine operations with productioncosts  in the lowest quartile of  the 
cost curve for both silver and gold. 

 

Fresnillo's goal is  to maintain  the Group's position  as the  world'slargest 
primary silver  company, producing  65 million  ounces of  silver and  500,000 
ounces of gold by 2018.

 

This announcement contains forward  looking statements. All statements,  other 
than statements of historical  fact are forward  looking statements. By  their 
nature, forward  looking statements  involve risks  and uncertainties  because 
they relate to events and  depend on circumstances that  will or may occur  in 
the future.  Actual  results, performance  or  achievements may,  for  various 
reasons, be  materially  different from  any  future results,  performance  or 
achievements expressed or implied by such forward looking statements. A number
of  factors  could  cause  results,  performance  or  achievements  to  differ 
materially from those expressed or  implied by the forward looking  statements 
including, without  limitation,  general  economic  and  business  conditions, 
industry trends,  competition, commodity  prices,  changes in  regulation  and 
currency fluctuations.

The forward looking statements reflect knowledge and information available  at 
the date of  preparation of this  announcement. Except as  required by the  UK 
Listing Rules  and  applicable  law,  the Board  of  Fresnillo  plc  does  not 
undertake any obligation to update or change any forward looking statements to
reflect events occurring after the date of this announcement.

 

 

 

 

THIS PRESS RELEASE  REFERS TO THE  STUDY COMPLETED BY  AMC MINING  CONSULTANTS 
(CANADA) INC. (THE "AMC  STUDY") AS A "PREFEASIBILITY  STUDY".  THE AMC  STUDY 
CONSTITUTES A PREFEASIBILITY STUDY  FOR PURPOSES OF  FRESNILLO PLC and  MINERA 
JUANICIPIO S.A.  de C.V.,  ALTHOUGH  FRESNILLO UNDERSTANDS  THAT IT  DOES  NOT 
CONSTITUTE  A  PREFEASIBILITY  STUDY  FOR  CANADIAN  PURPOSES  UNDER  NATIONAL 
INSTRUMENT 43-101 - STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS.

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           The company news service from the London Stock Exchange
 
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MSCBKQDNNBKDNAD -0- Jun/14/2012 14:01 GMT