Morococha

Morococha

Morococha is an underground polymetallic silver mine located in Yauli, in the department of Junin, in Peru.

Highlights

  • Location: Yauli, Junin, Peru
  • Mine Type: Underground
  • Ownership: 92.3%
  • Products: Silver rich zinc, lead, and copper concentrates
  • Capacity: 2,000 tpd
  • Deposit Type: Epithermal veins, mantos, and replacements
Morococha Map

Pan American entered into an agreement in 2004 to purchase the mine and currently has a total ownership interest of approximately 92.3%. Silver, zinc, lead, and copper mineralization is present as a complex system of epithermal veins, mantos, and limestone replacements.

Underground mining operations at Morococha consist primarily of conventional and mechanized overhand cut and fill, long hole open stoping, and stope development.

Morococha operates an 803,000 tonne per year capacity mill, known as the Amistad mill, using froth induced selective flotation technology to produce silver in zinc, lead, and copper concentrates.

Operating Update

In 2015, the mill processed approximately 690,500 tonnes of ore with metallurgical recoveries of 85.3% for silver, 64.1% for zinc, 59.0% for lead, and 85.8% for copper. Pan American’s share of metal production for the year was approximately 2.2 million ounces of silver, 11,370 tonnes of zinc, 2,560 tonnes of lead, and 8,200 tonnes of copper.

In 2015 Morococha produced 9% less silver than in 2014 due to lower silver grades, partially offset by increased throughput, a result of a change in mine sequencing made in early 2015 that targeted higher value higher copper grade ore during the year. This increased throughput was partially offset by the impact of intersecting unexpected water in-flows in high value copper-rich zones during the last four months of 2015, an issue that has now been resolved.

As a result of targeting the copper-rich zones in 2015, Morococha produced 8,200 tonnes of copper; more than twice that produced in 2014. The prioritization of copper-rich zones negatively impacted 2015 production of lead and zinc which were 46% and 28% less than in 2014, respectively, a result of lower grades and recoveries.

Cash costs of $13.03 per payable ounce of silver declined 1% as a result of substantially lower unit operating costs per tonne driven by benefits from the on-going mechanization efforts and increased by-product credits per ounce from copper production. These positive variances more than compensated for the 8% decline in payable silver production and lower base metal prices.

2015 all in sustaining costs per silver ounce sold (“AISCSOS”) of $19.21 was $0.18 lower than $19.39 in 2014. The slight year over year reduction was attributable to a 4% decrease in production costs and a 24% reduction in sustaining capital which more than offset the 6% decrease in the amount of silver sold, and the 59% increase in treatment and refining charges associated with the copper concentrates.

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

Significant changes in mine sequencing are expected at Morococha during 2016 towards higher grade zinc and silver zones, resulting in a change of the plant feed composition. Silver grades are expected to increase by up to 14% to 16%, while zinc grades are expected to increase to 27% to 28%. Increases to both silver and zinc recoveries and grades are expected to result in silver production of between 2.45 million and 2.60 million ounces for the Company, a 13% to 20% increase from the 2.17 million ounces produced in 2015. Similarly, zinc production for the Company is expected to increase 42% to 50% to between 16,100 and 17,000 tonnes, and 2016 lead production is also expected to increase 5% to 9% to between 2,700 and 2,800 tonnes. Copper production for the Company is expected to decrease between 4% and 8% in 2016 to between 7,490 and 7,790 tonnes.

Cash costs per payable ounce of silver are forecast to be between $12.00 and $13.75 per ounce of silver in 2016, comparable to 2015 cash costs of $13.03 per ounce. The potential reduction to 2016 cash costs represented by the low end of 2016 guidance could be achieved through increased payable silver production and reduced operating costs and by-product production more than offsetting lower overall by-product metal prices and increased treatment and refining charges due primarily to the higher tonnage of zinc and lead concentrate production.

Morococha’s sustaining capital for 2016 is expected to be between $7.0 million and $8.5 million, comparable to the 2015 capital spending of $7.7 million. The major components of the 2016 capital expenditures include $4.2 million in mine development related to deepening the Manuelita shaft and development level, and $0.9 million for brownfield exploration.

AISCSOS at Morococha for 2016 is expected to be between $15.40 and $17.10, an 11% to 20% decrease from the $19.21 AISCSOS reported in 2015 primarily due to an expected increase in silver and by-product production levels and an expected decrease in operating costs more than offsetting the lower by-product metal prices.

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 Morococha mine, as at December 31, 2015, are as follows:

Morococha Mineral Reserves1,2,3

Reserve CategoryTonnes (Mt)Grams of Silver per tonne% Zinc% Lead% Copper
Proven2.31763.571.180.78
Probable1.92023.701.350.53
TOTAL4.21883.631.260.66

Notes:

  1. Estimated using a price of $17.00 per ounce of silver, $1,800 per tonne of zinc, $1,800 per tonne of lead and $5,000 per tonne of copper.
  2. Mineral reserve estimates for Morococha 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. Tonnes are shown for 92.3% of the Morococha property. Through our subsidiary, Pan American Peru, we have a 92.3% interest in the Morococha property.

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

Morococha Mineral Resources1,2,3

Resource CategoryTonnes (Mt)Grams of Silver per tonne% Zinc% Lead% Copper
Measured0.31243.040.960.35
Indicated0.61553.131.000.39
Inferred4.82393.141.250.33

Notes:

  1. These mineral resources are in addition to mineral reserves. Estimated using a price of $17.00 per ounce of silver, $1,800 per tonne of zinc, $1,800 per tonne of lead and $5,000 per tonne of copper.
  2. Mineral resource estimates for Morococha 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. Tonnes are shown for 92.3% of the Morococha property.

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.

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.
Cautionary Note to US Investors