The selection of Base Case pricing of US$1.00/lb for zinc and US$1.10/lb for lead is based solely on a review of 17 institutions with recent price forecasts for zinc and lead for 2014 and beyond. The sensitivity chart illustrates key economic parameters for various price scenarios that investors may wish to consider.
We have also included an evaluation of the ScoZinc Project using forecast zinc and lead prices by Wood Mackenzie (January 2013) a well-respected UK based institution that provides the mining industry with supply, demand, cost and price forecast information. Importantly, the evaluation utilizing Wood Mackenzie forecasts metal price in conjunction with varying forecast treatment and refining charges. The latter vary with metal prices due to price participation provision that are customary in concentrate smelting contracts, and therefore provides for a more realistic sensitivity analysis. The Wood Mackenzie prices and treatment and refining charges are forecast annually through 2023.
The two conventional open pits and the proposed underground mine provide a blended feed to the mill. The Main and Northeast pits were optimized by technical staff using MineSight software. The underground mine plan was designed by independent consultants using GEMS software and AutoCAD. Production scheduling is based on an average production rate of 877,800 tonnes per year (or 2,500 tonnes per day) into the mill over an average of 351 operating days per year. The average waste to ore ratio for the life-of-mine open pits is 13.4 to 1 (excluding pre-stripping which is included in the capital costs). Approximately 62% of the waste is readily removed without blasting, including soils that will be used for reclamation, and 22% of the waste is gypsum, which will be stockpiled for possible future sale: no value for gypsum has been used in the PEA. Open pit mine dilution and mining losses are assumed to be 10% and 5%, respectively. In-pit diluted mineral resources are 6,394,000 tonnes grading 3.03% zinc and 1.59% lead.
The underground operation, designed by independent mining consultant Mr. Gerry Beauchamp, is based on Cut and Fill mining with un-cemented backfill, producing 500 tonnes per day of high grade mill feed. A drawdown of the water table in the proposed mine area, would be achieved largely by the pumping associated with the open pit operations. The development of the underground mine access requires a sustaining capital investment of about $11.7 million, most within Year 5 of the overall mining schedule, to develop the access to the high grade zones. Diluted and recoverable underground mineral resources are estimated at 283,000 tonnes grading 6.96% zinc and 3.98% lead. This material will be blended with open pit and stockpile feed to the mill over approximately two years beginning in the second half of Year 5 of the Life of Mine plan.
The addition of underground mine feed results in an approximate average 44.8% increase in zinc and 52.7% increase in lead grade during years 5, 6 and 7 of mine life. Aggregate production from the two open pits and the underground mine is estimated at 6,677,000 tonnes grading 3.20% zinc and 1.69% lead.
The restart plan provides for modifications to the mill, including redesign and replacement of the crushing circuit, primary screen, concentrate filters and regrind mill. These modifications, together with improved plant availability, will allow average mill feed rates of 877,800 dry metric tonnes (dmt) per annum or 2,500 dmt per day. The projected feed grades for the first five years average 3.76% zinc and 1.96% lead. The projected metallurgical performance for the first five years, based on historical data and recently completed metallurgical test work, provides for a zinc concentrate grade of 57.0% zinc at 87.4% recovery, and a lead concentrate grade of 71% lead at 89.9% recovery. Recent metallurgical test work supervised by independent metallurgist Mr. Jeffrey Austin and conducted by ALS Metallurgy in Kamloops, BC confirmed the potential for improved lead recovery with modest adjustments to the mill and operating parameters. No deleterious minor elements are contained in the concentrates. The products are expected to be readily marketable, given their clean, high-grade nature.
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