Apogee Minerals Ltd.
TSX VENTURE : APE

Apogee Minerals Ltd.

June 24, 2010 07:39 ET

Apogee's Pulacayo Deposit Delivers Positive Preliminary Economic Analysis and Increases in Silver Resources

Highlights include:

- Internal Rate of Return 24 %

- Cash flow of US$ 109.5 M over 6.5 year mine life.

- NPV of US$ 50.0 M at an 8% discount rate.

- Average annual production of 4.6 million Silver Equivalent Ounces.

TORONTO, ONTARIO--(Marketwire - June 24, 2010) - Apogee Minerals Ltd. ("Apogee" or the "Company") (TSX VENTURE:APE) reports the results from its preliminary economic analysis ("PEA") and updated National Instrument 43-101 Mineral Resource Statement for its Pulacayo Silver-Zinc Lead deposit located in Bolivia. The study was independently prepared by Micon International Limited (Micon) through their offices in Toronto and Vancouver, Canada, and Norwich, United Kingdom, with support from EPCM Consultores S.R.L., mining engineering consultants based in La Pas, Bolivia.

Project Location

The Pulacayo-Paca property is located in southwest Bolivia, approximately 20 kilometres east of the town of Uyuni in the Department of Potosi. (Figure 1) .The property includes the past producing Pulacayo Mine which was the second largest silver mine in Bolivia's history with past production exceeding of 600 million ounces of silver. Apogee has been exploring the property since September, 2005 when it entered into a joint venture agreement with Golden Minerals Ltd. (formerly Apex Silver Mines) to earn a 60% interest in the property. In January 2010, Apogee and Golden Minerals reached an agreement whereby Apogee can acquire 100% of the property. (See Press Release dated January 26, 2010). The property hosts two epithermal silver-lead-zinc deposits with National Instrument 43-101 mineral resources, the Paca and Pulacayo Deposits. (See Press Releases dated February 19, 2007 and October 28, 2008, and the NI 43-101 technical reports dated March 2007 and December 2008 filed under the SEDAR profile of the Company at www.sedar.com). The Pulacayo Deposit contains a higher grade zone that can be accessed from the historical underground mine workings and that is the focus of the current preliminary economic analysis.

Base Case:

The base case considers the development of an underground mine and stand-alone milling complex at the Pulacayo Deposit. An alternative scenario considers the development of an underground mine and crushing plant at Pulacayo with the subsequent transport of the crushed ore to a facility in nearby Potosi for toll milling.

The study is preliminary in nature and uses inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that this preliminary economic assessment will be realized.

The estimates for the key financial metrics of the base case analysis are outlined in Table 1 below:

Table 1 Summary of Base Case Pre-Tax Cash Flow Analysis, Pulacayo Project - June 2010

Cash Flow Metric Base Case
Internal Rate of Return (IRR) 24.0 %
Net Present Value (NPV8%) US$ 50.0 million (at 8% discount rate)
Total Cash Flow (life of mine) US$ 109.5 million
Operating Costs US$ 37.70 per tonne milled, including:
- mining US$22.60 per tonne;
- processing US$12.77 per tonne; and
- G&A US$2.33 per tonne
Cash operating cost/Oz. of Silver US$ 10.59
Cash Operating Cost/Oz. of Silver Equivalent 1 US$ 5.25
Mine Life 6.5 years
  1. Silver equivalent is calculated as [(Recovered & payable pounds zinc x zinc Price) + (Recovered & payable pounds lead x lead price) + (Recovered & payable ounces silver x silver price)] / silver price 

The base case concludes that the Pulacayo Deposit can produce an annual average of 2.3 million ounces of payable silver, 21.1 million pounds of zinc and 10.8 million pounds of lead from an underground mine with a 6.5 year mine life. This represents an average annual production forecast of 4.7 million ounces on a silver equivalent basis.

The estimated diluted mineable portion of the mineral resources used in the preliminary economic analysis are outlined in Table 2 below:

Table 2 Life of Mine Production Forecast based at a 200 g/t Ag Equivalent Cutoff1 – June 2010

Class Tonnes (x 1000) Silver g/t Lead % Zinc %
Indicated 1,793 143.4 1.0 2.1
Inferred 2 2,456 162.2 1.0 1.9
  1. Mineral Resources which are not mineral reserves do not have demonstrated economic viability.
  2. The quantity and grade of inferred resources in this estimation are conceptual in nature and there has been insufficient exploration to define these resources as an indicated or measured mineral resource. And it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category.

The mineable resource was determined by filtering the mineral resources block model at a cut-off grade of 200 g/t silver equivalent. The resultant geometry and continuity were examined and recovery and dilution factors were estimated. Planned and unplanned mining recovery was estimated to be 81 % with planned and unplanned mining dilution estimated to be 22 % at a grade of 20% in-situ.

The base case proposes the re-development of selected levels of the past producing Pulacayo mine to facilitate sub level long hole open stope mining. It is contemplated that the mine will feed a proposed newly developed conventional floatation mill, processing 1,800 tonnes of ore daily, in order to produce marketable zinc-silver and lead-silver concentrate products.

Pre-production capital expenditure requirements have been estimated in the aggregate amount of US$ 69.4 million, consisting of: (i) US$ 18.5 million for mine development; (ii) US$ 27.8 million for processing plant development; and (iii) US$ 23.1 for infrastructure development. A US$ 2.0 million environmental reclamation bond is included in the infrastructure capital. A 30% contingency has been incorporated in all the capital cost estimates. Life of mine capital expenditures have been estimated at US$ 97.1 million. The project has an estimated 3.04 year payback period from the start of production.

The preliminary analysis used the three year trailing average price of silver and 27 month forward contract prices for zinc and lead over the life of mine. The metal prices and metallurgical recoveries used in the preliminary analysis are summarized in Table 3 below:

Table 3 Metal Prices and Recovery Factors Used in the Preliminary Analysis

Metal PEA Price  % Recovery % Payability
Silver US$ 14.78 / oz 82.40 89.3
Lead US$ 1.04 / lb 80.32 91.3
Zinc US$ 1.11 / lb 90.71 81.3

Toll Milling Alternative:

A toll milling alternative proposes an identical mine development scheme, with production of 1,800 tonnes of ore daily, however, the run of mine ore will be crushed and subsequently transported to a third party milling complex near Potosi for concentrate production. The pre-tax estimates for the toll milling option are summarized in the Table 4 below:

Table 4 Summary of Toll Milling Option Pre Tax Cash Flow Analysis, Pulacayo Mine Project1

Internal Rate of Return (IRR) 19.8 %
Net Present Value (NPV8%) US$ 23.8 million (at 8% discount rate)
Operating Costs US$ 59.17 per tonne milled, including:
- mining US$22.60 per tonne;
- processing US$34.24 per tonne; and
- G&A US$2.33 per tonne
Cash operating cost/ounce of Silver US$ 16.63
Cash Operating Cost/ounce of Silver Equivalent 2 US$ 8.25
Total Cash Flow (life of mine) US$ 58.9 million
  1. As of June 2010.
  2. Silver equivalent is calculated as [(Recovered & payable pounds zinc x zinc Price) + (Recovered & payable pounds lead x lead price) + (Recovered & payable ounces silver x silver price)] / silver price.

The total pre-production capital cost for the toll milling option has been estimated at an aggregate amount of US$ 36.4 million, consisting of: (i) US$ 18.5 million for mine development; (ii) US$ 6.3 million for processing; and (iii) US$ 11.6 million for infrastructure development. A US$ 2.0 million environmental reclamation bond is included in the infrastructure capital and 30% contingency is incorporated in all the capital cost estimates.

Chris Collins, the President of Apogee Minerals commented, "The completion of the preliminary economic analysis is an important milestone for Apogee as we progress towards our goal of becoming a silver producer. Micon's analysis confirms that the Pulacayo Deposit is capable of supporting an underground mine with the potential to generate cash flow for Apogee over the mine life. While both alternatives returned positive cash flow indicators, it is apparent that the development of the Pulacayo deposit on a standalone basis offers the greatest potential for reward for Apogee and its shareholders. Moreover, recent exploration results support our belief that the Pulacayo deposit holds excellent potential to be significantly expanded which we believe will further enhance the base case alternative. This preliminary analysis represents an excellent foundation for Apogee at Pulacayo and we anticipate the project can continue to grow in magnitude as we advance towards production."

Summary of the Updated Mineral Resource

The updated underground mineral resource statement for the Pulacayo Deposit which includes material in the Pulacayo Deposit model that is below the oxidized surface, flagged as un-extracted, and contained within a US$ 40 NSR deposit model is summarized in Table 5 below:

Table 5 Pulacayo Deposit Mineral Resource Statement – October 20093

Pulacayo Deposit – Underground Resources 2 – (all blocks contained within a  >US$ 40/t NSR Domain Model)
Classification Tonnes 1 Silver g/t Zinc % Lead % Silver (Oz.) Silver Eq. (Oz.) 4
Indicated 4,892,000 79.96 1.64 0.79 12,576,000 27,442,000
Inferred 6,026,000 98.26 1.68 0.78 19,037,000 37,098,000
  1. Tonnages have been rounded to the nearest 1,000 tonnes. Average grades may not sum due to rounding.
  2. Mineral Resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, and relevant issues.
  3. The quantity and grade of inferred resources in this estimation are conceptual in nature and there has been insufficient exploration to define these resources as an indicated or measured mineral resource. And it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category.
  4. Due to the polymetallic, though predominantly silver endowed, nature of the Pulacayo mineralization silver-equivalent has been introduced in order to express the content of all metals in terms of a silver grade. Silver equivalent grade has been calculated using the following formula:

Ag Equivalent Grade = [(silver grade x silver recovery x silver price) + (zinc grade % x zinc recovery x zinc price x 2204.622) + (lead grade % x lead recovery x lead price x 2204.622)] / (silver price). The metal recovery and conversion factors used in the calculation correspond to those adopted by Micon in the accompanying NI 43-101 Technical Report.

This represents an approximate 10% increase in the contained silver ounces within the underground resource model from the mineral resource estimate completed in October 2008. (See Press Release dated October 28, 2008, and the NI 43-101 complaint technical report dated December 2008 filed under the SEDAR profile of the company at www.sedar.com.)

Next Steps

Apogee Minerals is continuing with its strategic objective of advancing the Pulacayo-Paca project to production with efforts focused along two key fronts. Exploration drilling with the goal of expanding the high grade resources at Pulacayo was restarted in January 2010. Results to date have been positive (See Press Releases dated March 15, April 19, and June 3,2010) and continue to expand the deposit along strike to the east and increase confidence in the grades and continuity of the higher grade zone .

Apogee is also continuing with its efforts to advance the Pulacayo deposit to production. Baseline environmental studies were initiated in March 2010 and continue to progress well. Key recommendations from the Micon report with respect to the next phases of mine and metallurgical engineering are under review and plans for implementation are being developed. 

Qualified Persons

The Preliminary Assessment report was prepared by Micon International Limited, with the resource section under the supervision of Mr. Reno Pressaco, M.Sc. (A), P. Geo. (APGO #0939), an independent qualified person under the standards set forth by National Instrument 43 -101; the mining section by Mr. Geraint Harris, CEng., MAusIMM, the mineral processing and metallurgical testing section by Michael Godard, P.Eng, the environmental and social aspects section by Jennifer Hill, R.P. Bio., and the project economics by Chris Jacobs, CEng., MIMMM. 

Mr. Joaquin Merino, B.Sc., M.Sc., P. Geo., Vice President of Exploration of Apogee Minerals, a qualified person as defined by National Instrument 43 – 101, is the Company's designated qualified person for the purposes of this study, and has reviewed and approved scientific and technical information in this press release. The release has been approved by Mr. Chris Collins, P. Geo., President of Apogee Minerals and a qualified person as defined by National Instrument 43-101. 

About Apogee Minerals Limited

Apogee Minerals Ltd. is an exploration stage company a listed on the TSX Venture Exchange under the symbol APE. Apogee targets advanced silver-zinc-lead projects in South America that demonstrate potential to be developed to production. Currently its projects are located in the historic silver producing regions of southwest Bolivia and northern Chile.

Its most advanced project is the Pulacayo-Paca project in Bolivia, on which Apogee has entered into a term sheet agreement to earn 100% from Golden Minerals Company. This project includes the property that covered the second-largest silver mine in the history of Bolivia with over 600 million ounces of past production.

Cautionary Note Regarding Forward-Looking Information This press release contains "forward looking information" within the meaning of applicable Canadian securities legislation. Forward looking information includes, but is not limited to, statements with respect to the future financial or operating performance of the Company, its subsidiaries and its projects, statements regarding the impact and potential of the preliminary economic assessment and implementation of the proposed recommendations of the study, projected use of proceeds, statements regarding exploration prospects and the potential to generate cash flow, and requirements for additional capital. Generally, forward looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: financing not being available at desired prices; general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of mineral prices; failure of plant, equipment or processes to operate as anticipated; accidents, labor disputes and other risks of the mining industry; and, delays in obtaining governmental approvals or required financing or in the completion of activities. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

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