Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAA) ("Pan American" or the "Company") has decided to proceed with the expansion of its La Colorada mine in Zacatecas, Mexico, based on the positive results of a recently completed Preliminary Economic Assessment (the "PEA" or the "Assessment"). The PEA demonstrates that the relatively low-risk expansion project has the potential to provide robust after-tax economic returns using a $19 per ounce long-term silver price. The PEA contemplates an increase in silver production from the current level of approximately 4.7 million ounces per year to 7.7 million ounces per year by the end of 2017, for an incremental capital investment of $80 million, the majority of which will be spent over the next 3 years.
Commenting on the La Colorada expansion project, Geoff Burns, President & CEO of Pan American said, "We have had exceptional exploration success at La Colorada and have grown the mine's reserves and resources considerably." Burns continued, "La Colorada has become a core long-term asset for the Company and we are pleased to be able to turn this exploration success into an organic expansion project with considerable economic potential. Even at today's silver price, it makes sense to invest a relatively modest amount of capital to significantly increase our low-cost silver production at this high-grade and long-life asset. This is a low-risk project, at one of our best-performing and most stable mines, which we can comfortably finance with our internal resources. I am very pleased that our Board of Directors has unanimously decided to transform La Colorada into our largest silver producer and I look forward to fully realizing La Colorada's potential."
Scope of the Expansion Project
La Colorada's expansion project will be built progressively, ramping up from the current mining and processing rates of 1,250 tpd to 1,800 tpd by the end of 2017. Once the expansion is complete, La Colorada's annual production capacity is estimated to grow 64% to approximately 7.7 million ounces of silver in 2018.
The mine's expansion will be achieved through the construction of new mining infrastructure, the development of new mining zones to reach deeper, higher-grade areas of mineralization and the expansion of the sulphide ore processing plant. A new 600-metre deep shaft will be constructed between the main Candelaria area that contains the NC2 and HW veins, and the Estrella area that contains the Amolillo vein, utilizing a highly efficient raise boring technique. The new shaft, which over the long term would be required whether or not we had decided to proceed with the expansion, will increase hoisting capacity to 2,300 tpd, accommodating ore and waste extraction as well as serving as the main access to working areas for mine personnel and materials. Preliminary engineering work for the new shaft and hoist has already been conducted and detailed engineering will begin in early 2014. Construction of the new shaft is scheduled to start early in 2015, following completion of sufficient underground development around the shaft bottom, and is expected to be commissioned in the later part of 2016. The new shaft will allow for increased underground development rates to access additional mining areas, allowing production rates to rise. The shaft and associated hoisting equipment will be designed such that it can be deepened in the future if justified by future exploration success.
Mining at both the Estrella and Candelaria areas will continue utilizing the cut-and-fill methods currently being successfully employed. The capacity of the ventilation and dewatering systems will be increased to handle the mine's hot and wet ground conditions as mining operations extend at depth. The expansion plan also includes the addition of 22 new pieces of mining equipment to the fleet and the hiring of over 100 additional mining personnel.
Total throughput at La Colorada's processing plants will progressively increase from today's 1,250 tpd to 1,800 tpd by 2018. The mine currently produces doré bars from a conventional cyanide leach plant for the oxide ore, and silver-rich lead and zinc concentrates from a floatation plant that treats the sulphide ore. Both circuits currently share a single crushing plant. While the oxide plant will not be modified due to La Colorada's oxide production remaining at current levels for the rest of the mine's life, the sulphide plant will be expanded to treat the increased sulphide ore feed.
Qualified Persons
The PEA and this press release were prepared under the supervision and review of Michael Steinmann, P.Geo., Executive VP Corporate Development & Geology and Martin Wafforn, P.Eng., VP Technical Services, who are the Company's Qualified Persons for the purposes of NI 43-101.
About Pan American Silver
Pan American's mission is to be the world's pre-eminent silver producer, with a reputation for excellence in discovery, engineering, innovation and sustainable development. The Company has seven operating mines in Mexico, Peru, Argentina and Bolivia and several development projects in USA, Mexico, Peru and Argentina.
