Pan American Silver Corp. (TSX:PAA,NASDAQ:PAAS) announced that it will proceed with the expansion of its Mexico-based La Colorada mine. The move was prompted by a recent positive preliminary economic assessment (PEA) for the project; it shows that the expansion has the potential to increase the mine’s silver production from about 4.7 million ounces per year to 7.7 million ounces per year by the end of 2017.
PEA highlights include:
- 64% increase in estimated annual silver production from current 4.7 million ounces forecast for 2013, to 7.7 million ounces in 2018 when the full expansion Project is completed
- 39% reduction in estimated cash costs from $10.00 forecast for 2013, to $6.10 per ounce of silver, net of by-product credits in 2018
- Increase mining and processing rates from current 1,250 tpd to an estimated 1,500 tpd by mid-2016 and to 1,800 tpd by the end of 2017
- Installation of a new 600-metre deep shaft and hoist between the Candelaria and Estrella mining zones
- Expansion and upgrade of the current sulphide processing plant
- An estimated minimum project mine life of 10 years at increased capacity, based on mid-year 2013 reserves and resources estimate
- Incremental expansion capital estimated to be $80 million, the majority of which will be spent over the next 3 years
- Assuming a $19/oz silver price, the estimated after-tax net present value (NPV**) of the incremental cash flow at a 10% discount is $38.6 million, with an internal rate of return (IRR) estimated at 22% and a capital payback period of 2.5 years. At a $25/oz silver price, the estimated 10% NPV increases to $71.7 million, the estimated IRR jumps to 32% and the payback period is reduced to 2.0 years
- Additional exploration success at La Colorada could meaningfully increase the economic potential of an expanded operation
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