La Colorada

La Colorada

La Colorada is an underground polymetallic silver mine located in Zacatecas, Mexico, and was acquired by Pan American in 1998.

Highlights

  • Location: Zacatecas, Mexico
  • Mine Type: Underground
  • Ownership: 100%
  • Production: Silver and gold doré, silver rich lead and zinc concentrates
  • Capacity: 1,250 tpd
  • Deposit Type: Epithermal veins, breccia pipes, mantos, and replacements
La Colorada Map

Silver, gold, zinc, and lead mineralization is present as epithermal veins, breccia pipes, mantos, and lime stone replacements in three main zones known as Candelaria, Estrella, and Recompensa.

The mining method used at all three mines is cut and fill stoping.

The operation currently produces approximately 430 tpd of oxide ore and 870 tpd of sulphide ore. Each type of ore is processed through separate circuits which share a single crushing plant. The daily processing capacity of the oxide plant is nominally 650 tonnes of ore and the capacity of the sulphide plant is nominally 750 tonnes.

The oxide plant comprises a conventional cyanide leach plant consisting of crushing, grinding, leaching, Merrill Crowe zinc precipitation, and on-site refining to produce precious metal doré. The sulphide plant is a conventional flotation plant comprised of crushing, grinding and selective lead and zinc froth flotation circuits to recover precious and base metals into separate lead and zinc concentrates.

Expansion Project

As the maximum capacity of the La Colorada mine in its existing configuration has been reached, an expansion project was approved in December 2013. The total throughput at La Colorada’s processing plants will progressively increase from the 1,330 tpd achieved in 2015 to 1,500 tpd starting in 2016 when the new shaft has been commissioned and to 1,800 tpd by the end of 2017. The mine’s expansion involves the construction of new mining infrastructure, the development of new mining zones to reach deeper mineralization, the expansion of the sulphide ore processing plant, and the installation of a new power line connection to the national grid.

A new shaft under construction between the Candelaria and Estrella mines, which is necessary regardless of the expansion project, will increase hoisting capacity to 2,300 tpd. Construction and commissioning of the new sulphide plant is expected to be completed in Q3 2016. The construction of the new shaft, headframe, and hoisting plant is in progress with commissioning expected to be completed by the end of 2016.

The total incremental expansion capital was estimated at $80 million. The sulphide plant expansion, additional mining equipment and accelerated development, plus several important infrastructure upgrades account for the largest portion of the incremental capital for the project.

Including sustaining capital, the total investment during the expansion project period of 2014 to 2017 is estimated to be $163.8 million. Assuming a project period of 2014 to 2023, at metal prices of $16 per ounce of silver, the incremental after tax net present value of the expansion project is estimated at $22.0 million at a 10% discount rate, with an internal rate of return of 18.0%, and a payback period of 2.9 years. Over the same period, at metal prices of $19 per ounce of silver, the incremental after tax net present value of the expansion project is estimated at $38.6 million at a 10% discount rate, with an internal rate of return of 22% and a payback period of 2.5 years.

The La Colorada Technical Report, on which the foregoing is based, is a preliminary economic assessment. The results of this preliminary economic assessment are preliminary in nature, in that it includes inferred mineral resources that are considered too geologically speculative to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the assessment will be realized. Mineral resources that are not mineral reserves have no demonstrated economic viability.

Cautionary Note Regarding Forward Looking Statements

Operating Update

Production at La Colorada in 2015 was approximately 5.3 million ounces of silver, 2,600 ounces of gold, 8,900 tonnes of zinc, and 4,300 tonnes of lead. In 2015, silver recovery averaged 82.4% from the oxide processing circuit and 92.9% from the sulphide processing circuit.

La Colorada achieved record silver production in 2015, 7% more than in 2014, due to increases in throughput, grades and recoveries. Ore mining rates increased in 2015 with benefits realized from the new mining equipment purchased as part of the mine expansion project that allowed for the development of new mining areas. During 2015, the mine produced 8,900 tonnes of zinc and 4,300 tonnes of lead, 16% and 14% more than in 2014, respectively. The increased base metal production was a function of the increased throughput in 2015 combined with improved zinc and lead grades of 13% and 10%, respectively.

La Colorada’s cash costs per payable ounce of silver during 2015 declined $0.73, or 9%, due to lower direct operating costs and a 7% increase in payable silver ounces produced. The decrease in unit operating costs per tonne primarily resulted from the devaluation of the Mexican peso and lower costs of certain consumables. 2015 by-product credits per ounce remained relatively consistent with 2014, as increased by-product metal production was largely offset by lower metal prices.

2015 AISCSOS of $9.57 decreased 12% from $10.90 in the previous year, primarily due to a $3.6 million decrease in sustaining capital expenditures, a $1.2 million decrease in production costs and an 8% increase in the amount of payable silver ounces sold.

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

La Colorada’s 2016 silver production is expected to be 5.60 million to 5.70 million ounces, increased from the 5.33 million ounces produced in 2015. The 2016 mine plan contemplates a production rate of 1,350 tpd for the first nine months, with an increase to 1,600 tpd for the fourth quarter as the new sulphide plant and shaft are phased into production. With a combination of greater sulphide tonnages mined throughout the year and the additional capacity in the sulphide plant coming in during the fourth quarter, it is expected that base metal by-product production will also be increasing relative to 2015, with zinc increasing 7% to 12% to between 9,500 and 10,000 tonnes, and lead increasing 13% to 15% to between 4,800 and 4,900 tonnes.

2016 cash costs per payable ounce of silver of $7.75 to $8.25 are expected to be slightly higher than the $7.41 per ounce 2015 cash costs, primarily due to minor interferences expected from the continued expansion project, and the decline in by-product metal prices, which are expected to be partially offset by the Mexican peso devaluation.

Sustaining capital expenditures at La Colorada in 2016 are expected to be between $8.0 and $10.5 million, comparable to the $9.9 million spent in 2015. The major elements making up the expected 2016 sustaining capital include approximately $4.3 million in mine capital, the largest components being a ventilation raise and numerous equipment overhauls; $1.2 million in brownfield exploration; $1.8 million in tailings storage expansion work; and $1.0 million in general capital expenditures including access road improvements and mine rescue equipment.

AISCSOS at La Colorada for 2016 is expected to be between $9.25 and $10.30, in-line with the $9.57 AISCSOS reported in 2015.

In addition, capital expenditures relating to an expansion project for the La Colorada mine are expected to require $64.0 million to $66.5 million in 2016.

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 La Colorada mine, as at December 31, 2015, are as follows:

La Colorada Mineral Reserves1,2,3

Reserve CategoryTonnes (Mt)Grams of Silver per tonneGrams of Gold per tonne% Zinc% Lead
Proven3.34740.353.151.69
Probable3.73460.302.061.18
TOTAL7.04060.322.571.42

Notes:

  1. Estimated using a price of $17.00 per ounce of silver, $1,180 per ounce gold, $1,800 per tonne of zinc and $1,800 per tonne of lead.
  2. Mineral reserve estimates for La Colorada have been prepared under the supervision or were reviewed by Martin Dupuis, P. Geo., and Martin Wafforn, P. Eng., who are Qualified Persons as that term is defined in NI 43-101.
  3. Lead and zinc grades shown are the average for the deposit. However, the base metals are only payable in the concentrates produced from the sulphide ores and not in the doré produced from the oxide ores.

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

La Colorada Mineral Resources1,2,3

Resource CategoryTonnes (Mt)Grams of Silver per tonneGrams of Gold per tonne% Zinc% Lead
Measured0.42340.220.850.47
Indicated1.92880.260.880.64
Inferred1.93740.394.022.27

Notes:

  1. These mineral resources are in addition to mineral reserves. Estimated using a price of $17.00 per ounce of silver, $1,180 per ounce gold, $1,800 per tonne of zinc and $1,800 per tonne of lead.
  2. Mineral resource estimates for La Colorada have been prepared under the supervision, or were reviewed by Martin Dupuis, P. Geo., and Martin Wafforn, P. Eng., who are Qualified Persons, as that term is defined in NI 43-101.
  3. Lead and zinc grades shown are the average for the deposit. However, the base metals are only payable in the concentrates produced from the sulphide ores and not in the doré produced from the oxide ores.

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 La Colorada.

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