PGM Ventures Corporation

PGM Ventures Corporation

January 20, 2006 16:19 ET

PGM Receives Positive Feasibility Study for Aguas Tenidas

TORONTO, ONTARIO--(CCNMatthews - Jan. 20, 2006) - PGM Ventures Corporation ("PGM")(TSX VENTURE:PPG) and its wholly owned Spanish subsidiary, Minas de Aguas Tenidas SA ("MATSA"), are pleased to release the results of the Feasibility Study for the Aguas Tenidas base metal project, located in SW Spain. The Feasibility Study, prepared by SRK Consulting (UK) Ltd of Cardiff ("SRK"), demonstrates the project is both technically feasible and economically viable. The SRK report envisages a US$168.2 million trackless underground mine and ore processing plant with a 13 year mine reserve life. SRK has calculated a base case (equity only) for banking purposes of a 13.7% IRR, with an NPV of US$60.4 million at an 8% discount rate. Another case model, shown here in section 7, using metal prices approximately 20% less than those currently prevailing, reveals a 26.6% IRR and an NPV of US$225.6 million. The impact of including project loan finance and grants on these IRRs and NPVs is also shown in section 7.

During 2005, PGM and MATSA initiated a Feasibility Study to meet international standards, as well as Spanish regulatory and permitting requirements. In addition to the forecast operating statistics, financial analysis highlights from the Feasibility Study are presented here, including a variety of IRR and NPV calculations. The project has excellent logistics and PGM is planning to develop the project jointly with its subsidiary MATSA. MATSA will be the operator. Negotiations by MATSA with financial institutions to secure the debt funding required for the Project are at an advanced stage.

1. The Mine's Reserve Life of: 13 years is based on the following:

2. Mineral Reserves

Reserve Tonnes Copper Zinc Lead Silver Gold
Category (millions) (%) (%) (%) (g/t) (g/t)
Polymetallic (Zinc)
Proven 5.49 0.7 6.4 1.9 57 0.9
Probable 5.43 1.2 7.7 2.4 78 0.8
Total: 10.92 1.0 7.1 2.1 67 0.8

Cupriferous (Copper)
Proven 6.91 2.3 1.1 0.2 28 0.5
Probable 2.73 2.7 0.4 0.1 29 0.5
Total: 9.64 2.4 0.9 0.2 28 0.5

Note 1: The cutoff grades used to estimate the Mineral Reserve above were: 6.5% Zn equivalent for the polymetallic ore and 1.7% Cu equivalent for the cupriferous ore.

Note 2: The Mineral Reserves were estimated after allowing for the following dilution factors: Drift & fill stopes: 10%, longhole open stopes: 5%.

Note 3: Ore densities were estimated as: HW Polymetallic 4.45t/m3, FW Polymetallic 4.66 & Cupriferous 4.50.

Note 4: SRK is unaware of any environmental, permitting or any other matter which might have an adverse effect on any of the above figures.

Note 5: The effective date of the Mineral Reserve estimate described above is January 18th 2006.

3. Mineral Resources

Resource Tonnes Copper Zinc Lead Silver Gold
Category (millions) (%) (%) (%) (g/t) (g/t)
Polymetallic (Zinc)
Measured 7.13 0.7 7.8 2.3 63 1.0
Indicated 5.48 1.4 8.6 2.7 86 0.9
Total: 12.61 1.0 8.2 2.4 73 1.0
Inferred 0.87 1.2 10.3 2.6 111 0.9

Cupriferous (Copper)
Measured 7.13 2.5 1.0 0.2 29 0.5
Indicated 2.94 2.9 0.4 0.1 29 0.5
Total: 10.08 2.6 0.8 0.2 29 0.5
Inferred 1.34 3.5 0.6 0.1 23 0.5

Note 1: The effective date of the Mineral Resource estimate described above is January 18th 2006.

Note 2: SRK has classified the above resources according to the CIM code.

Note 3: The above mineral Resources are inclusive of the Mineral Reserves quoted in the table in section 2.

SRK comments: "It is anticipated that the above inferred Mineral Resources, located in the deeper western part of the deposit, will be upgraded to Mineral Reserves as more data is received and extracted at the end of the mine's currently forecast life. The life of mine reserves would be extended to 15 years if these Inferred Resources can be converted to the Proven and Probable Mineral Reserves. Additional Mineral Resources are expected to be defined in the future which can be expected to further extend the mine's life."

The Aguas Tenidas Mineral Reserve and Resource figures above were estimated using Datamine and Gemcom software packages. The sampling data used in these calculations were derived from the sulphide intercepts in 243 surface and underground HQ and NQ diamond holes. These intercepts, within 61,898 metres of drill core, resulted in the generation of 3,591 samples, which were sent for assay analysis at a number of laboratories in both Canada and Europe. Sulphide mineralisation was normally sampled over regular two metre intervals and core recovery was generally good at around 95%. There were 1,351 QA-QC samples, representing 37.6% of the total number of core samples assayed. SRK undertook a limited check assay program with samples being sent to SGS Lakefield in the UK and the Finland Geological Survey, and reported the grade correlations to be satisfactory.

Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

4. Project Design:

The Aguas Tenidas project is designed as an underground trackless operation. Mine workings will be accessed by an existing 5.0m x 4.5m incline ramp with the capacity to deliver 1,600,000 tonnes of ore annually to the processing plant. Mining will be undertaken by a mixture of drift & fill and longhole open stoping. The use of paste tailings as underground backfill is expected to allow an overall 87% ore recovery factor, as opposed to the approximate 60% recovery level achieved by Navan Mining Plc, the previous operator.

The plant is a conventional three stage milling operation, which will produce separate zinc, copper and lead sulphide concentrates, containing modest amounts of gold and silver. There will be two ore processing lines: 800,000tpy for the polymetallic ore and 800,000tpy for the cupriferous ore.

Trafigura Beheer AG will be responsible for marketing the mine's entire concentrate production under a recently signed long term offtake agreement, primarily to European smelters.

5. Forecast Annual Average Metal Output

At design capacity, the Aguas Tenidas project is expected to report the following metal recoveries, which will yield concentrates with the following grades:

Concentrate Concentrates Metal Concentrate
Produced (Gross) Recovery Grade

Polymetallic Ore
Zinc 98,000t 85% 53% Zn
Copper 19,000t 70% 23% Cu
Lead 28,000t 70% 45% Pb

Cupriferous Ore
Copper 73,000t 85% 25% Cu

These concentrates are expected to contain a net realisable metal
content of:

Copper: 21,900t Lead: 11,900t
Zinc: 44,000t Silver(a): 835,000oz

(a) Silver credits will be derived from both the copper and lead

6. Project Capital Requirements (Including Contingencies in US$m)

Category Start Up Life of Mine
Mine: $ 16.15m $ 35.26m
Processing Plant: $118.04m $ 2.38m
Other & Owner's Costs: $ 34.03m $ 2.88m
Total: $168.22m $ 40.53m

7. Financial Models

The financial models, which assume a successful mine financing program, were prepared by SRK, utilising their projected capital and operating costs and are summarised in the ensuing tables. SRK comments: "SRK's financial analysis assumes the currently defined Inferred Resources will be processed in the years 14 and 15 of the mine life (years 2022 and 2023), once the mineral reserves are exhausted."

Price Profiles - Assumed Average Long Term Metal Prices (US$)

Copper Zinc Lead Silver
SRK Base Case(b): $1.12/lb $0.55/lb $0.34/lb $6.00/oz
Intermediate Case: $1.40/lb $0.65/lb $0.40/lb $6.75/oz
Best Case: $1.70/lb $0.75/lb $0.45/lb $7.50/oz

(b) Copper prices of $1.40/lb, $1.30/lb, $1.20/lb and $1.10 lb
assumed for 2007,2008,2009 and thereafter.
(b) Zinc prices of $0.58/lb, $0.57/lb, $0.55/lb and $0.55/lb assumed
for 2007, 2008, 2009 and thereafter.

Project IRRs & NPVs - Equity Only:

Price Case IRR NPV @ 8%
SRK Base Case: 13.7% $ 60.4m
Intermediate Case: 20.6% $143.9m
Best Case: 26.6% $225.6m

Project IRRs & NPVs - 20% grant availability & US$65m project loan

Price Case IRR NPV @ 8%
SRK Base Case: 21.9% $ 93.6m
Intermediate Case: 34.6% $176.9m
Best Case: 47.2% $258.3m

(c) Denotes: i) the US$65 million project finance being negotiated
with Investec Bank (UK) Ltd, and

ii) recent precedents of approximate 20% grants for base metal mines
located in SW Spain.

The revenues generated in these financial forecasts were calculated using the SRK mine plan. This plan included the use of estimated mining costs of $12.50/t and estimated processing costs of $14.10/t for the polymetallic ore and $10.60/t for the cupriferous ore.

8. Outline Deposit Geology

The Aguas Tenidas property is located in Spain's Northern Pyrite Belt and is underlain by a polymetallic (zinc/copper/lead/silver) volcanogenic massive sulphide (VMS) deposit, approximately 1,500 metres in length and 100-150 metres wide. Economic mineralisation is generally 10-25 metres thick, occasionally approaching 70 metres. Drilling has extended the zone of known VMS mineralisation several hundred metres to the west of the main Aguas Tenidas deposit.

9. Environmental Issues

MATSA, PGM's wholly owned subsidiary, is currently in possession of most of the necessary permits to resume mining operations and expects to receive the few remaining required permits shortly.

Aguas Tenidas is an historic mining operation, which never officially closed. Although underground mining operations ceased in late 2001, the mine was kept on a care and maintenance basis. In consequence, and with the assent of the Spanish authorities, the mine's development can now proceed without the necessity of an Environmental Impact Study.

10. Utilities

The Aguas Tenidas Mine is located in SW Spain in a region with a long mining history, approximately 80kms from the Port of Huelva, with excellent access by either road or rail.

The mine has assured electrical supplies from the national grid and has secured more than adequate water supplies from a nearby dam.

11. Other

Those seeking or requiring further information and clarification on the Aguas Tenidas project are strongly advised to: i) access the Feasibility Study's executive summary and/or the Feasibility Study itself, which are being filed on SEDAR at, or ii) request the documents in CD form from PGM's head office in Toronto.

SRK has approved the contents of this press release.

Subject to the availability of the required financing, PGM now intends to proceed with the construction phase of the Aguas Tenidas project. It is anticipated that the required financing will consist primarily of a mixture of project debt, government grants and equity.

Mike Newbury, P.Eng., is the Qualified Person who has reviewed and approved the technical information in this news release on behalf of the company.

There are 78,629,031 shares issued and outstanding shares in PGM.

To find out more about PGM Ventures Corporation (TSX VENTURE:PPG), please contact Peter Miller or Norm Brewster at 1-416-815-8666.

This press release includes certain "Forward-Looking Statements" within the meaning of the US Private Securities Reform Act of 1995. Other than statements of historical fact, all statements are "Forward-Looking Statements" that involve such various known and unknown risks, uncertainties and other factors. There can be no assurance that such statements will prove accurate. Results and future events could differ materially from those anticipated in such statements. Readers of this press release are cautioned not to place undue reliance on these "Forward-Looking Statements". All dollar amounts are in US dollars unless otherwise noted.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • PGM Ventures Corporation
    Peter Miller or Norm Brewster