Genco Resources Ltd.

Genco Resources Ltd.

December 16, 2009 17:14 ET

Genco Announces Completion of Feasibility Study

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 16, 2009) - Genco Resources Ltd. (TSX:GGC) is pleased to announce the completion of its La Guitarra Feasibility Study. Kappes, Cassiday and Associates ("KCA") of Reno, Nevada prepared the study, which evaluated the expansion of Genco's existing mining operations at La Guitarra Mine, and within the Temascaltepec Mining District, from 300 to 3,000 tonnes per day.

The Feasibility Study examined the construction of a new cyanide leach plant, expansion of the existing La Guitarra Mine, development of new underground mining centres and surface mining operations. KCA estimates the operation of a cyanide leach plant, in conjunction with a Merrill-Crowe precious metals recovery process and doré refinery for silver and gold, will recover approximately 44 million silver equivalent ounces ("eAg") consisting of approximately 30 million ounces of silver and 241,000 ounces of gold over a 9-year mine life based on current Proven and Probable Reserves. The study considered the processing of 2.2 million tonnes of ore mined from underground and 6.8 million tonnes of ore mined from surface.

Projected pre-production capital costs for the construction of a new mill and mine development are US$148.7 million, which includes taxes, contingencies and working capital totaling US$40.4 million. Estimated pre-tax cash flows over the initial 9-year project life are US$125.2 million after capital recovery, resulting in a pre-tax 20% internal rate of return. The provisional time for project pay back is 3.6 years at the study's metal price averages. The estimated net present value of the project is US$74.8 million using a 5% discount rate. The study used average metal prices of US$14 per ounce for silver and US$800 per ounce for gold for all cash flow and pay back estimates.

Over the 9-year life of the current reserve, KCA summarizes average mining cost of US$11.54 per tonne of ore for surface mining and US$39.65 per tonne of ore for underground mining. Both average costs per tonne include waste movement and development. The average process cost is estimated at US$17.82 per tonne of ore, and general & administrative costs are estimated to be US$2.22 per tonne of ore. The total average cost is estimated at US$38.40 per tonne of ore from all sources. Estimated costs are US$8.32 per equivalent ounce of silver or US$475.62 per equivalent ounce of gold.

All equipment costs in the study were estimated by KCA using new equipment costs, and no provision has been made for any potential cost reductions should good used equipment become available. Estimated metal recoveries are 92% for silver and 90% for gold based on metallurgical test work conducted by KCA on several different bulk samples and ore from all identified deposits.

Mineral Reserves & Resource Information Contained in the Feasibility Study

The following table summarizes the Proven and Probable Reserves, as at August 31, 2009, contained in the Feasibility Study and used for economic analysis:

  Tonnes (000's) Ag g/t Au g/t eAg g/t
Underground Reserves
     Proven 577 208 1.50 292
     Probable 1,608 209 1.45 290
Total Underground Reserves (2P) 2,185 209 1.46 291
Surface Reserves
     Proven 2,615 87 0.80 132
     Probable 4,209 77 0.72 117
Total Surface Reserves (2P) 6,824 81 0.75 123
Total Reserves 9,009 113 0.93 165

Underground Reserves were estimated using a 135 gram per tonne ("g/t") cut off and a 20% dilution factor at zero grades. Underground Reserves were further reduced 10% to reflect a mineable recovery estimate. The methodology used for the Underground Reserves was a standard polygonal projection on longitudinal sections. Proven grades were projected 0-10 metres from data points and Probable grades were projected 10-25 metres from data points. Gold assays were cut to 15 g/t and silver assays were cut to 1,500 g/t. Silver equivalency is calculated using 1 gram of gold = 56 grams of silver.

Surface Reserves were calculated using a 45 g/t eAg cut-off. A total of 45,000 metres of drilling and channel samples were entered into the Guitarra deposits database for analysis prior to compositing and interpretation of the bounding 45 g/t eAg shell on 60 sections spaced on 25 metre centers along the Guitarra strike length. Sections were linked together to describe the mineralized volume to apply economics to determine the mineability of the open pit portion of the Guitarra deposits. Prior to compositing, very high grades were cut to eliminate any distortion potential to the open-pit model. Twenty-five very high grades with values up to 14.9 kg silver and 126 g/t of gold were cut to 2 kg silver and 30 g/t gold prior to compositing. The cut material represented more than a 6% decrease in average metal contained at the 1 g/t cut-off.

The methodology used for the Surface Resource is Inverse Distance Weighting to a power of three, and the Polygonal method for a check. An 'Outlier Restriction' technique was applied to composite grades of silver greater than 700 g/t and gold grades of greater than 10 g/t to be projected only 15 metres or less from their spatial location in any dimension. In its place, another closest data composite is selected. This technique recognizes a very high-grade area or vein has been encountered, and will reduce its area of influence.

The following table summarizes the Measured & Indicated Resources, as at August 31, 2009, contained in the Feasibility Study:

  Tonnes (000's) Ag g/t Au g/t eAg g/t
Underground Resources
     Measured 504 257 1.72 356
     Indicated 1,408 257 1.74 354
Total Underground Measured & Indicated 1,912 257 1.74 354
Surface Resources
     Measured 3,008 86 0.84 133
     Indicated 5,972 76 0.77 119
Total Surface Measured & Indicated 8,980 79 0.79 123
Total Measured & Indicated Resources 10,892 110 0.96 164

Measured & Indicated Resources reported in the Feasibility Study include Reserves. Measured & Indicated Resources are measured in-situ and no allowance is made for dilution or mineable recovery.

No Inferred Resources were used in the economic analysis contained in the Study.

Starting with a 1g/t cut-off and thereafter at 10g/t cut-off increments, the following table summarizes the Surface Resource base used to determine the production Open-Pit Reserves at the study's silver and gold metal prices of US$14/oz silver and US$800/oz:

La Guitarra Open-Pit Resource by Class and Cut-off

eAg g/t
Class Tonnes Ag
Oz Ag Oz Au Oz eAg
1 Measured 4,608,923 62 0.60 95 9,188,821 88,918 14,078,704
Indicated 8,609,933 58 0.58 90 16,067,110 160,571 24,916,205
M + I 13,218,856 59 0.59 92 25,255,931 249,489 38,994,909
Inferred 4,001,103 54 0.73 95 6,947,252 93,917 12,222,019
10 Measured 4,328,709 65 0.63 101 9,047,141 97,688 14,057,865
Indicated 8,283,985 60 0.60 94 15,981,965 159,820 25,038,411
M + I 12,612,694 62 0.61 96 25,029,106 257,508 39,096,276
Inferred 3,810,374 56 0.76 99 6,861,113 93,115 12,129,486
20 Measured 3,966,982 70 0.68 108 8,928,898 86,738 13,776,015
Indicated 7,725,407 64 0.64 99 15,895,886 158,979 24,592,132
M + I 11,692,389 66 0.66 103 24,813,343 245,717 38,368,147
Inferred 3,474,568 61 0.83 108 6,815,069 92,729 12,066.024
30 Measured 3,590,744 76 0.74 117 8,774,808 85,439 13,508,587
Indicated 7,125,531 68 0.68 106 15,579,939 155,799 24,286,376
M + I 10,719,275 70 0.70 110 24,354,747 241,238 37,794,963
Inferred 3,187,303 66 0.89 115 6,764,051 91,212 11,785,847
40 Measured 3,194,151 82 0.80 127 8,421,877 82,165 13,043,639
Indicated 6,381,900 73 0.74 114 14,980,023 151,852 23,393,460
M + I 9,371,302 76 0.76 119 23,401,900 234,017 36,437,099
Inferred 2,859,991 71 0.96 125 6,529,240 88,283 11,495,141
50 Measured 2,800,997 90 0.88 138 8,105,578 79,257 12,428,861
Indicated 5,550,536 79 0.81 124 14,099,432 144,564 22,130,754
M + I 8,351,534 83 0.83 129 22,205,101 223,821 34,559,615
Inferred 2,493,972 77 1.06 136 6,174,786 85,004 10,906,115
60 Measured 2,431,322 98 0.96 152 7,661,401 75,050 11,882,988
Indicated 4,784,115 86 0.89 135 13,229,586 136,909 20,767,059
M + I 7,215,437 90 0.91 141 20,890,987 211,959 32,650,047
Inferred 2,167,428 83 1.16 148 5,784,454 80,843 10,314,448

KCA believes there is considerable exploration potential at La Guitarra and within the Temascaltepec Mining District. Genco is presently conducting focused exploration designed to target extensions of known mineralized systems.

Genco will review the Feasibility Study and offer guidance for the Company's plans based on that review at a future date. Subsequently, in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects, Genco will release a full update of Reserves and Resources separately.

Underground Reserves & Resources were prepared under the guidance of an independent mining consultant, Glenn R. Clark, P.Eng, of Glenn Clark and Associates. Surface Reserves and Resources were prepared under the guidance of an independent mining consultant, John Thornton, of Thor Resources LLC. Messrs. Clark and Thornton are 'Qualified Persons' for the purpose of NI 43-101, and are arms' length to Genco. The Feasibility Study was prepared under the direction of Daniel W. Kappes, President of Kappes, Cassiday & Associates. Mr. Kappes is a 'Qualified Person' for the purposes of NI 43-101, and he is arms' length to Genco. Messrs. Clark, Thornton and Kappes have prepared or supervised the preparation of the information that forms the basis of this news release and verified the data disclosed.

About Genco Resources Ltd.

Genco Resources Ltd. is a publicly traded mining company focused on developing its core asset, the producing La Guitarra silver-gold property located in the Temascaltepec Mining District of Mexico. La Guitarra Mine presently consists of two underground operation centres and a flotation mill with a proven capacity of 320 tonnes per day. Genco aims to create solid shareholder value through increased silver production and reserve & resource growth.

This news release may contain certain forward-looking statements that involve risks and uncertainties such as statements of the Company's plans, objectives, strategies, expectations, and intentions. The words "may", "would", "could", "will", "intend", "plan", "believe", "estimate", "expect" and similar expressions, as they relate to the Company, or its management, are intended to identify such forward-looking statements. Many factors could cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including those factors discussed below and in filings made with the Canadian securities regulatory authorities. Should one or more of these risk factors or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. The Company does not intend, and does not assume any obligation to update these forward-looking statements.

The Toronto Stock Exchange has not reviewed the contents of this release and does not accept responsibility for the accuracy of the contents of this release.

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