Apex tables feasibility for San Cristobal

The San Cristobal property in southwestern Bolivia will be one of the world’s largest and lowest-cost producers of silver and zinc, according to a recent feasibility study.

The results of the study, compiled by E & C Metals, a division of Kvaerner, should greatly assist Apex Silver Mines (SIL-X) in its search for construction funding.

In January, Apex engaged Barclays Capital and Deutsche Bank Securities to arrange financing, and it later filed a shelf registration with the U.S. Securities and Exchange Commission for a US$200-million offering for construction purposes.

Once in production, the open-pit mine is expected to crank out 24 million oz. silver annually over the first five years, making it one of the three largest silver mines in the world — behind the Cannington lead-silver mine in Australia, operated by Broken Hill Proprietary, and the Fresnillo silver mine in Mexico, operated by Pe~noles. Over the life of the mine, San Cristobal will likely average 19 million oz. per year.

With total zinc output pegged at 560 million lbs., San Cristobal is slated to become the world’s third-largest producer of that metal — behind the Red Dog mine in Alaska, operated of Cominco (CLT-T), and the Century mine, which Australia’s Pasminco will start up later this year.

Proven and probable reserves at San Cristobal stand at 240 million tonnes grading 62 grams silver per tonne, 1.67% zinc and 0.58% lead, equivalent to 470 million oz. silver, 8.8 billion lbs. zinc and 3.1 billion lbs. lead. The reserves, calculated by Mine Reserves Associates and based on 132,000 metres of drilling, represent the world’s largest open-pit silver reserve.

Operating costs at San Cristobal will benefit from significant byproduct credits. During the first five years of production, the average cash operating cost per ounce of silver (net of lead byproduct) is estimated to be US$1.59, whereas the average cash cost per pound of zinc is pegged at US26 cents. Over the life of the mine, cash costs are estimated to be US$1.86 per oz. silver and US28 cents per lb. zinc

Mining will begin on the Tesorera and Jayula rhyolite domes, which will eventually coalesce into one large pit. With a stripping ratio of 1.8-to-1, the deposit is expected to yield 40,000 tonnes of ore per day. Apex is considering expanding throughput to 60,000 tonnes after a few years of operation.

The ore will be trucked to the crusher and conveyed to the mill for flotation. After being ground in a semi-autogenous ball mill, the material will be floated to produce separate lead and zinc concentrates, each of which will contain silver.

The company intends to transport the concentrates across the Altiplano and down the western side of the Andes to Punta Patache, Chile, on the Pacific coast. From there, ocean vessels will take the concentrates to smelters and refineries in Asia, America or Europe.

Apex anticipates the cost of the operation will reach US$413 million, including US$38 million for prestripping and US$375 for ore processing and support facilities. The figure includes contingency allowances of US$37 million.

The company will pay up to US$20 million in Bolivian value-added taxes during construction, though these taxes will be refunded once production begins. Also, Apex is to receive tax credits totalling nearly US$40 million in exchange for constructing a road from the mine site across the Salar de Uyuni to the Collahuasi copper mine, across the border into Chile. The Bolivian government hopes the road will encourage development in the poor desert region.

Apex expects to begin construction at San Cristobal early in 2000, once financing has been arranged. Construction is expected to last two years, during which time the village of San Cristobal will be relocated. The company will contract out the mining for the first five years.

San Cristobal is in Bolivia’s southern department of Potosi, at an elevation of more than 4,000 metres.

Apex believes the property has excellent potential beyond the 17 years of reserves. It hopes to add reserves around the pit, particularly around the old townsite where no drilling has been conducted.

Meanwhile, the company has found more mineralization at the Cobrizas deposit, 12 km north of San Cristobal. There, Apex has outlined a resource of 46 million tonnes averaging 90 grams silver per tonne, 1% zinc and 0.58% lead, equivalent to 133 million oz. silver. Early metallurgical tests suggest the mineralization is amenable to conventional processing at San Cristobal.