Bear Creek tables Corani scoping study

Vancouver – Bear Creek Mining (BCM-V, BCEKF-O) must be pretty happy with results from a recently completed scoping study on its 70%-owned Corani silver-lead-zinc deposit in southern Peru indicating robust preliminary economics for a proposed open pit mining operation.

The study pegs a net present value (NPV) of US$329 million, using a 7% discount rate, for Bear Creek’s portion of the deposit and projects an internal rate of return (IRR) of 40%. The undiscounted NPV comes in at $587 million for the company’s interest. Estimates use a silver price of US$12.00 per oz. plus lead and zinc prices of US$0.93 and US$1.19 per lb. respectively – a three-year historical rolling average (to the end of November 2007) and two-year future prices weighted 60-40 historical-to-future.

“Using January 14th metals prices, Bear Creek’s 70% interest in Corani has an NPV of US$614 million and a 60% IRR,” states company president and CEO Andrew Swarthout in the news release.

Initially planning to sequence three high-grade starter pits, mining at Corani is projected to output 22 million oz. silver annually in its first two years of operation. Over an estimated 12.5-year mine life, it will produce an average of 15.2 million oz. silver, 123 million lbs. (55,800 tonnes) lead and 66 million lbs. (30,000 tonnes) zinc annually at a silver cash cost of US$2.49 per oz. net of base metal credits.

Costing to build the mine is estimated at US$428 million while life-of-mine capital expenditures come in at US$592 million. Payback is projected in less than two years.

The base case mining scenario sees mining of about 10.5 million tonnes of ore annually at an average grade of 60.6 grams silver, 0.99% lead and 0.56% zinc. Overall recoveries of 80% for silver, 58% for lead and 61% for zinc are modeled in the study. Open pit mining will see an overall stripping ratio of 1.56-to-1 and produce a total of 204.7 million oz. silver, 1.66 billion lbs. lead and 955 million lbs. zinc over its 12.5-year life. Bear Creek states, “mine-life will likely extend well beyond the 12.5 years depending on ongoing metallurgical test work and future silver prices.”

“We’ve reached a crossroads that we knew we would be at and the numbers are quite compelling,” commented company president Swarthout. “I hope it shows the market that we are serious in taking this project forward and that it merits a pre-feasibility study. Corani has passed a threshold.”

Last November Bear Creek updated its Corani resource tally – upgrading a significant portion of inferred tonnes to the measured and indicated category that now stands at 248.4 million tonnes grading 40.9 grams silver per tonne, 0.73% lead and 0.45% zinc in the three deposits (Main, Minas and Este) of the silver zone. Contained metal inventory is 327.1 million oz. silver, almost 4 billion lbs. (1.8 million tonnes) lead and just under 2.5 billion lbs. (1.1 million tonnes) zinc. The estimate is based on a US$9.35 per tonne net smelter return (NSR) cut-off and on what the company describes as “prudent” open pit constraints.

Under the scoping study, final pit limits for the production schedule are based on metal prices of US$8.50 per oz. silver, US$0.50 per lb. lead and US$0.75 per lb. zinc.

An additional 33.2 million inferred tonnes was tabled in the resource estimate at 32.6 grams silver, 0.54% lead and 0.37% zinc.

The study also reviewed a higher-grade core (based on a US$19.60 per tonne NSR cut-off) within the silver zone of 72.1 million measured and indicated tonnes averaging 76.6 grams silver, 1.24% lead and 0.59% zinc.

Bear Creek’s November 2007 Corani resource estimate also identified a series of high-grade zinc mineralized pods containing 25.5 million measured and indicated tonnes of 1.88% zinc, 1.09% lead and 53.6 grams silver using a 1% zinc cut-off grade. The company has designed a zinc circuit in its mine sequencing to optimize recoveries from the higher-grade pods.

Corani is a low-sulphidation, epithermal silver-lead-zinc deposit hosted in stockworks, breccia veins and fractures. Mineralization is structurally controlled and has a vertical component. Host rocks are a Tertiary-age tuffaceous volcanic unit overlying a Paleozoic sedimentary sequence.

The company recently vested its 70% earn-in at Corani from Rio Tinto (RTP-N, RIO-L) by making its final payment of US$3 million to create a joint venture. Bear Creek holds a right of first refusal should Rio Tinto look to sell its interest. The junior is also required to pay the major US$0.015 per oz. silver based on recoverable ounces defined in a bankable feasibility study plus US$5 million should the recoverable resource exceed 100 million oz. silver.

Rio Tinto retains a back-in right for 60% of the project by reimbursing Bear Creek three times its pro-rated exploration expenditures should economic resources exceed 11 billion lbs. copper or exceed 10 million oz. gold or gold equivalent.

Besides Corani, Bear Creek is also advancing its Santa Ana silver discovery located in southern Peru.

Shares of Bear Creek notched up a dime on the Corani scoping study report to close at $8.00 apiece. Based on the company’s 45.2- million shares outstanding it posts a $362-million market capitalization. The stock has a 52-week trading range of $5.69-$9.00.