Alamo Dorado

Alamo Dorado

Alamo Dorado is an open pit silver-gold mine located in Sonora, Mexico, and was acquired by Pan American in 2003 with the acquisition of Minera Corner Bay.

Highlights

  • Location: Sonora, Mexico
  • Mine Type: Open Pit
  • Ownership: 100%
  • Products: Silver and gold doré, copper-lead rich precipitate
  • Capacity: 4,000 tpd
  • Deposit Type: Epithermal quartz vein stockworks
Alamo Dorado Map

Silver and gold mineralization is present as structurally controlled, low sulphidation epithermal quartz veins and stockworks. Open pit mining finished by year end of 2015, and the mine will process stockpiles during the first half of 2016.

Until 2015, Alamo Dorado operated as a conventional surface mine utilizing hydraulic shovels, front end loaders, and trucks. The mine stockpiled low grade and mineralized waste category material, processing high grade material first in order to maximize the return on investment. At the end of 2015, the open pit mining operations were completed and the mine now plans to process the lower grade stockpile material for as long as it is economically viable to do so.

Ore is treated by conventional crushing and semi-autogenous and ball mill grinding followed by thickening, agitated cyanide leaching, leach residue filtration, direct electrowinning to produce a cathode sludge, AVR (acidify, volatilize, and re-neutralize) cyanide recovery and recirculation, leach residue washing with AVR product solutions, dry stack tailings, and conventional silver and gold doré production from melting of the cathode sludge. The nominal design treatment rate is 4,000 tpd of ore.

Operating Update

During 2015, we processed 1.8 million tonnes of ore, producing 3.0 million ounces of silver and 20,300 ounces of gold with average metallurgical recoveries of 82.9% of silver and 89.13% of gold.

Our Alamo Dorado mine has entered the final stages of operations. As expected, 2015 silver production of 3.0 million ounces was 14% less than the 3.5 million ounces produced in 2014 as open pit mining ramped down and concluded by year-end. Gold production rose 16% due to higher grades and recoveries as a result of mining a high grade gold zone in the final stages of the pit.

Despite lower gold prices, Alamo Dorado’s cash costs per ounce declined by 11% due to the combined effect of higher gold production and lower unit operating costs per tonne given the reduced mining rates, the favorable depreciation of the Mexican Peso, and the lower costs of certain consumables.

2015 all in sustaining costs per silver ounce sold (“AISCSOS”) of $12.72 decreased $0.33 from $13.05 in 2014. The 3% year over year reduction was attributable to a 12% decrease in production costs which benefited from the lower operating costs and a $2.5 million decrease in negative net realizable value adjustments, as well as a 5% increase in by-product credits on account of improved gold production. These benefits more than offset the negative impact of an 18% reduction in the amount of silver ounces sold.

There were no sustaining capital expenditures at Alamo Dorado during 2015 as it approaches the end of mine life.

For a more detailed discussion of cash costs and AISCSOS and their calculations, readers should refer to the “Alternative Performance (non-GAAP) Measures”, section of the Company’s Management’s Discussion & Analysis for the year ended December 31, 2015.

2016 Forecast

With open pit mining completed by year-end 2015, the Alamo Dorado mine will only process stockpiles during the first half of 2016, which is expected to result in a 45% to 50% decrease in throughputs as well as declined silver and gold grades and recoveries. The combination of the lower throughput grades and recoveries is reflected in the expected 60% to 66% reduction in both silver and gold production, which are expected to be between 1.0 million to 1.2 million ounces and 7,000 to 8,000 ounces, respectively.

The end of open pit activities at Alamo Dorado also results in a significant reduction to mining and overhead costs, leading to reduced unit costs per tonne. Despite the costs per tonne reductions, cash costs per ounce are expected to increase from $11.41 in 2015 to $13.50 to $14.50 per ounce in 2016 as result of the lower production levels and lower gold prices.

As with 2015, no sustaining capital expenditure has been planned for 2016 given the mine is at the end of its life.

AISCSOS at Alamo Dorado for 2016 is expected to be between $13.80 and $15.30, up from $12.72 AISCSOS reported in 2015 due to anticipated decreases in silver sales from processing stockpiles.

For a more detailed discussion of cash costs and AISCSOS and their calculations, readers should refer to the “Alternative Performance (non-GAAP) Measures”, section of the Company’s Management’s Discussion & Analysis for the year ended December 31, 2015.

Cautionary Note Regarding Forward Looking Statements

Mineral Reserves & Resources

Management estimates that mineral reserves at the Alamo Dorado mine, as at December 31, 2015, are as follows:

Alamo Dorado Mineral Reserves1,2,3

Reserve CategoryTonnes (Mt)Grams of Silver per tonneGrams of Gold per tonne
Proven1.6550.23
Probable0.0
TOTAL1.6550.23

Notes:

  1. Estimated using a price of $15 per ounce of silver and $1,100 per ounce of gold.
  2. Mineral reserve estimates for Alamo Dorado were prepared under the supervision of, or were reviewed by, Martin Dupuis, P.Geo., and Martin G. Wafforn, P.Eng., who are Qualified Persons as that term is defined in NI 43-101.
  3. All remaining mineral reserves are stockpiled material.

Management estimates that mineral resources at the Alamo Dorado mine, as at December 31, 2015, are as follows:

Alamo Dorado Mineral Resources1,2

Resource CategoryTonnes (Mt)Grams of Silver per tonneGrams of Gold per tonne
Measured1.2500.23
Indicated0.9780.40
Inferred0.0390.54

Notes:

  1. These mineral resources are in addition to mineral reserves. Mineral resources were constrained within a pit shell using a price of $25 per ounce of silver and $1,400 per ounce of gold.
  2. Mineral resource estimates for Alamo Dorado were prepared under the supervision of, or were reviewed by, Martin Dupuis, P.Geo., and Martin G. Wafforn, P.Eng., who are Qualified Persons as that term is defined in NI 43-101.

Click here to see Pan American’s full mineral reserves and resources at December 31, 2015

Mineral reserve estimates are based on a number of assumptions that include metallurgical, taxation and economic parameters. Increasing costs or increasing taxation could have a negative impact on the estimation of mineral reserves. There are currently no known factors that may have a material negative impact on the estimate of mineral reserves or mineral resources at Alamo Dorado.
Mineral reserves and resources are as defined by the Canadian Institute of Mining, Metallurgy and Petroleum.
Mineral resources that are not mineral reserves have no demonstrated economic viability.
Cautionary Note to US Investors