Sierra Metals to Boost Yauricocha Mine Output by 66 Percent

A new preliminary economic assessment( PEA) for Sierra Metals’ (TSX:SMT,NYSEAMERICAN:SMTS) Yauricocha silver-lead–zinc–copper–gold mine in Peru shows the company will be able to expand output by 66 percent to 5,500 tonnes per day. 

According to a Thursday (June 28) release, Sierra will increase the mine’s production from the current 3,000 tonnes per day to 3,600 tonnes per day in Q1 2019, and then to 5,500 tonnes per day in 2021.

The 66-percent expansion will bring Yauricocha’s return on investment to 486 percent. The PEA places its after-tax NPV at US$393 million at an 8-percent discount, and sets the mine’s life at 10 years.

“The expansion of our capacity is a natural step that follows mineral resources increases in recent years. The expansion adds to the value of our resources by accelerating its production timing and also adds to the potential value to future resource increases, which we expect to continue due to the on-going aggressive exploration campaign at the mine,” said Igor Gonzales, president and CEO.

“We are continuing with our strategy to increase shareholder value and grow the economic potential of the company. Building upon a successful PEA recently announced for the expansion of the Cusi mine, we are now adding another successful study for the expansion of the Yauricocha mine, and a third PEA will follow shortly for our Bolivar mine,” he added.  

The PEA follows a successful brownfields exploration program, as well as a successful operational improvement program at Yauricocha, both of which demonstrate returns on well-spent capital.  

“Building upon these successes, we are continuing to endeavour to maximize value and profitability through the implementation of automation, best practices and further potential throughput increases which will drive further growth and benefit all shareholders,” Gonzales stated.

Other highlights from the PEA include:

• After-tax payback period life-of-mine capital: 4.1 years
• Life-of-mine capital cost: US$238 million
• Net after-tax cashflow: US$532 million
• Total operating unit cost: US$43.86 per tonne
• Mine processing rate: 5,500 tonnes per day
• Plant processing rate: 5,500 tonnes per day
• Life of mine zinc payable production: 621.1 million pounds

The Yauricocha mine is located in the Allis district of Lima in Peru, where polymetallic mineralization has been mined for more than 50 years.  

“Mineralization is genetically and spatially related to the Yauricocha stock; six skarn bodies host mineral resources around the margins of the stock. Near surface mineral is exhausted but significant mineral resources are reported at depth,” the company says in Thursday’s release.

The geometry and grade of mineralization at Yauricocha lends itself to the sub-level caving mining method, with more than 98 percent of total current mineral production coming from sub-level caving.

Looking forward, Sierra will construct the Yauricocha shaft, which will have the capacity to hoist 5,600 tonnes per day and is expected to be completed in January 2020. When combined with the current three hoisting shafts, capacity will reach 10,200 tonnes per day. The company expects advanced development ahead of its production increase to boost the mine’s waste-to-mineral ratio.

As of 3:21 p.m. EST on Thursday, Sierra was trading at US$3.57.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.