Bear Creek sees rising costs in Corani feasibility study

A feasibility study on Bear Creek Mining‘s (BCM-V) flagship Corani project in southern Peru has added slightly to silver reserves, while capital costs have increased 70%.

The project hosts an estimated 156 million proven and probable reserve tonnes grading 53.8 grams silver per tonne, 0.9% lead and 0.49% zinc for 270 million oz. silver, 3.1 billion lbs. lead and 1.7 billion lbs. zinc.

Silver reserve ounces increased by only 5% compared with a 2009 prefeasibility study, while measured and indicated resources increased 24% and inferred resources by 35%, owing largely to higher metal prices. Measured and indicated resources outside of reserves stand at 123.6 million tonnes grading 20.5 grams silver, 0.38% lead and 0.29% zinc, and inferred resources are 49.8 million tonnes grading 30 grams silver, 0.46% lead and 0.28% zinc.

The feasibility study establishes the potential to produce an average of 8 million oz. silver, 104 million lbs. lead and 37 million lbs. zinc per year for 20 years, with silver production highest in the early years. The open-pit mine would have a 1.69-for-1 strip ratio and the capacity to process 22,500 tonnes of ore per day.

The study estimated recoveries of 60.3% silver and 71.1% lead in a silver-lead concentrate and 3.9% silver and 51.6% zinc in a silver-zinc concentrate, all using conventional flotation. Recoveries in the zinc-silver concentrate were lower than in the prefeasibility study, with zinc dropping 19% and silver by 8%, factoring in lower-grade zinc zones. The company states that with 50% of payable silver in the zinc concentrate, the lower recoveries mean a 4% drop in payable silver compared with the earlier study.

To build the mine, Bear Creek would have to spend US$574 million, while sustaining capital is estimated at US$144 million for the life-of-mine. Capital payback is estimated at a little under four years. Silver cash costs per oz.  come in at US$3.68 per lb. for
the life-of-mine, net of lead and zinc by-product credits. The 2009 prefeasibility study outlined capital costs of US$339 million and life-of-mine cash costs at US$2.81 per oz. silver.

Based on US$18 per oz. silver and 85¢ per lb. lead and zinc, the base-case scenario establishes an internal rate of return (IRR) of 17.6% and a net present value (NPV), based on a 5% discount, of US$463 million. The company notes that at current metal prices the IRR jumps to 37.7% and the NPV to US$1.5 billion.

Bear Creek plans to submit permitting applications in the first half of next year and targets 2015 for mine start-up.

The company’s stock price had rallied from under $4 to over $5, in part because of anticipation for the study. On the day the study was released after market close, Bear Creek’s share price dropped 25¢, or 4.9%, to $4.84 on a tough day for markets. The company has a 52-week share price range between $3.45 and $12.

The company continues negotiations with the Peruvian government about restoring its right to develop the Santa Ana project, which the government revoked in June.