Silvermet Inc.

Silvermet Inc.

June 05, 2008 14:40 ET

Silvermet Receives SNC Lavalins Capital and Operating Cost Report for Its Planned Waelz Kiln Plant in Turkey

TORONTO, ONTARIO--(Marketwire - June 5, 2008) - Silvermet Inc. (TSX VENTURE:SYI)("Silvermet" or "the Company) announced today that SNC Lavalin, Montreal, the designer and builder of the 1970's Waelz kiln plant at Kayseri, Turkey, has completed Silvermet's bankable Capital and Operating Cost Report (the "SNC Report"). The SNC Report is a result of two years of work at a total cost of approximately $2,000,000.

The SNC Report for Silvermet's planned Waelz kiln project is based on an established industrial site on the outskirts of Kayseri which has been offered to Silvermet by the Industrial Park authorities. The report provides for the installation of two kilns to produce 200 million pounds of contained zinc metal in concentrate, grading in the order of 70 percent zinc. The first kiln, as scheduled, would be ordered early in 2009, and would start operations by early 2011. The second kiln, ordered at the same time, but manufactured on a later schedule, would be commissioned by late 2011.

The extensive work done by SNC Lavalin to prepare the report comprises considerable data and details and a full suite of preliminary drawings. Preliminary bids were obtained from contractors and suppliers for all key equipment, installations and construction. Detailed testwork was performed in Germany on samples of Electric Arc Furnace Dust (EAFD) and the Turkish zinc ores.

Receipt of the SNC Report now enables Silvermet to complete negotiations with government and industrial park authorities on permitting, and to prepare the environmental studies needed for the overall environmental approval of the project. Additionally, Silvermet is now able to negotiate and work towards finalizing agreements related to raw materials of EAFD and ores. Detailed agreements will be required in the following areas:

1. Land lease costs.
2. Site infrastructure levies.
3. Project permitting costs.
4. Environmental statement and related costs.
5. Raw materials capital and procurement contracts and costs.

The full suite of plant drawings and detailed descriptions of the aspects of the project are scheduled for presentation to the local authorities and the federal government agencies in Kayseri at a meeting in late June. This meeting is the second presentation and management expects that the proposed plant layout will be approved and accepted in principle with minimum revision.

The capital cost of the Waelz kiln plant and site infrastructure for the two kiln (200 million pounds contained zinc per year) project has been forecasted at $178,823,000, to be incurred over three years beginning in 2009. The operating costs for the production of 200 million pounds of output, delivered to the Port of Mersin, are projected at 41 cents per pound of contained zinc. Capital costs relating to the upgrading of low content ores, owners costs and financial charges are not included in this figure, although the procurement and operating costs related to the EAFD and the ores, particularly the transportation costs, are included. Capital costs for EAFD and ores could be in the order of $25 million.

SNC Lavalin has also forecasted the added capital costs to construct a third 100 million pound kiln. This future addition was prepared and is to be included in the presentation to the authorities to indicate that the plant layout, as proposed, has sufficient space should such an expansion occur. Silvermet plans ultimately to obtain a gross production of 300 million pounds of zinc in concentrate per year from three kilns. The installation of the third kiln has an indicated schedule for operation in 2013.

It is expected that the Company will be negotiating financing for the project and financial negotiations will occur in parallel with the negotiation of final lease and infrastructure terms. Financial negotiations will likely run until the end of 2008 and possibly well into 2009, depending on various factors including metal price forecasts.

The key component of the project and its critical path is the delivery of the kilns. The current quote on timing indicates an 18 month delivery for the first kiln and 24 months for the second kiln. The capital for the kilns only is forecast at $16 million per kiln.

Management believes that the Silvermet project in Turkey has certain advantages and is unique compared to zinc projects located elsewhere in the world, particularly sulphide projects. The country is relatively stable with a low rate of political risk and it has a defined tax structure. Turkey has detailed environmental regulations derived from European regulations and a defined project permitting process with experienced personnel monitoring and executing approvals. Turkey also has readily available skilled trade personnel, particularly in the Kayseri area, as well as many university trained professionals. International mining and service companies are recognizing these advantages in Turkey and are becoming increasingly involved in small and large projects.

Approximately 65 percent of the projected capital costs are related to equipment supply, which once ordered fixes the delivery cost on the largest component of the project. Local site preparations, equipment installations and concrete foundations, represent approximately 20 percent of the project and currently enjoy low inflation rates. Accordingly, management believes that the project is less likely to be subject to unforeseen cost escalations when compared to other new mining developments throughout the world.

Silvermet Inc. is an exploration and development company presently focused on developing a major zinc project in Turkey and exploring for nickel-copper-platinum group metals at its Muskox project located in Nunavut, Canada. Silvermet is reviewing the restructuring of the Turkish and Muskox activities into separate entities, one as project development and the other pure exploration.

Caution concerning forward-looking statements: The information in this release may contain forward-looking information under applicable securities laws. This forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those implied by the forward-looking information. Factors that may cause actual results to vary include, but are not limited to, inaccurate assumptions concerning the exploration for and development of mineral deposits, political instability, currency fluctuations, unanticipated operational or technical difficulties, changes in laws or regulations, the risks of obtaining necessary licenses and permits, changes in general economic conditions or conditions in the financial markets and the inability to raised additional financing. Readers are cautioned not to place undue reliance on this forward-looking information. The Company does not assume the obligation to revise or update this forward-looking information after the date of this release or to revise such information to reflect the occurrence of future unanticipated events except as may be required under applicable securities laws.

The TSX Venture Exchange has in no way passed upon the merits of the transaction and has neither approved nor disapproved the contents of this press release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Silvermet Inc.
    Clifford H. Frame
    (416) 203-8336
    (416) 203-9483 (FAX)
    Silvermet Inc.
    Stephen G. Roman
    President and CEO
    (416) 368-3949