Additional Technical Information Related to the Feasibility Study
Financial Analysis
Projected prices(3) of $28.00 per ounce of silver, $0.89 per pound of lead and $1.00 per pound for zinc were used as the base case in the Feasibility Study. The silver price projection is based on a three-year trailing average at Nov 30, 2012, while the base metal price projections are based on independent market analysis. The financial analysis for the base case indicates a project with an expected pre-tax IRR of 47.1% and projected to generate $25.7 million of average annual after-tax cash flow for the first 6 years of production with a payback period of 3.9 years. Annual after-tax cash flow while in operation is expected to be $18.8 million. The project is sensitive to silver price, as set out in Table 2, still positive at a US$20/oz, and increasingly attractive at higher (current market) silver prices. The project is less sensitive to operational and capital costs (Table 3).
Table 2 - Project Sensitivity to Silver Price----------------------------------------------------------------------------Ag - Price NPV IRRUS$/oz $M %----------------------------------------------------------------------------20 20 16----------------------------------------------------------------------------24 46 24----------------------------------------------------------------------------28 (Base Case) 73 32----------------------------------------------------------------------------32 99 39----------------------------------------------------------------------------36 125 46----------------------------------------------------------------------------39 142 50---------------------------------------------------------------------------- Table 3 - Project Sensitivity to Capex and Opex Fluctuations----------------------------------------------------------------------------Escalation Factor OPEX CAPEX---------------------------------------------------------------------------- NPV IRR NPV IRR $M % $M %----------------------------------------------------------------------------+15% 61 28 64 28----------------------------------------------------------------------------0% (Base Case) 73 32 73 32-----------------------------------------------------------------------------15% 84 36 81 37----------------------------------------------------------------------------
Project Location & Infrastructure
The Pulacayo-Paca property currently comprises approximately 22,828 hectares of contiguous mining concessions centered on the historic Pulacayo mine and town site. The property is located in southwest Bolivia, approximately 460 km from the capital city of La Paz, 130 km southwest of the town of Potosi and 18 km east of the city of Uyuni (Figure 1). It is accessible by good roads from La Paz which are now paved to the town of Uyuni and Pulacayo. Uyuni has railway connections with Argentina and Chile. The Pulacayo Mine is supplied by a 44kV power line that is shared by the Pulacayo town which will be upgraded for the project. Project designs are also sensitive to the protection of potable water. This is currently fed via a twelve kilometer pipeline from a reservoir that collects water from a historical drainage tunnel as well as surface runoff from precipitation.
