Pulacayo Project Feasibility Study - Apogee Silver

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Pulacayo 1 000 t/d Phase I Feasibility Study - NI 43-101 Technical Report 090644-3-0000-20-IFI-100 18.10 Waste Rock Management There are 2 areas for mine waste disposal for the current activities and will continue being used when operations increase. Both are located south of the railroad on its way to the crushing building. The use of using some of the existing voids inside the mine has also been considered. 18.11 Security The entire plant site will be surrounded by a 2 m high fence. Access to the plant will be restricted to one access at the main gate, which will include a gatehouse manned 24 hours per day. The main mine gate house and security office will be located near the administration building at the main property entrance. This small building will house security offices, toilet and small reception area. A Bolivian security firm will be contracted to provide on-site security services to the Project starting during construction. 19 MARKETING AND LOGISTICS 19.1 Introduction At the request of Apogee Silver Ltd. (“Apogee”), Mr A. Falls of Exen Consulting Services was asked to prepare a Marketing and Logistics Study for the zinc and lead concentrates projected to be produced from Apogee’s Pulacayo Project. Although selected parties were contacted to assess their interest in and/or their ability to treat these concentrates, no terms indications were sought due to the early-stage nature of the project. Instead, NSRs were prepared based on the author’s knowledge of the zinc and lead concentrate markets and metal price and treatment charge assumptions as set out in this report. Also due to the early stage of the project, only a limited number of service providers were contacted to assess potential concentrate transportation and logistics costs to be used in the derivation of these NSRs. Although information as provided is believed to provide a reasonable estimate of what such costs might be, further work should be undertaken to verify the figures contained in this report once a decision is made to approach the market with these concentrates as several different concentrate distribution options will likely be available, including, but not limited to: Direct offshore sale with concentrates either (a) loaded in containers (in bags or bulk) either at the mine site or at an intermediate facility, or (b) shipped in bulk in an ocean going vessel hold, to a buyer or buyers (Apogee manages/oversees all logistics through to final destination). Delivery to a warehouse/blending facility in either Chile or Peru where concentrates can be combined with other materials and shipped either (a) in bulk in vessel holds, or (b) in bags or bulk in containers, to smelters (Apogee manages trucking to the warehouse/blending facility; all onward logistics from delivery in-warehouse managed by buyer). TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473 Page 205
Pulacayo 1 000 t/d Phase I Feasibility Study - NI 43-101 Technical Report 090644-3-0000-20-IFI-100 Delivery to a warehouse/blending facility in either Chile or Peru where concentrates can be combined with other materials and shipped in containers or in bulk to smelters (Apogee manages trucking to the warehouse/blending facility; all onward logistics from delivery in-warehouse managed by buyer) Delivery of concentrates ex Works (loaded in trucks or containers) with buyer(s) managing all logistics from site to destination. The above options will need to be refined based on potential buyer interest and capabilities and Apogee’s appetite for managing the logistics activities. Regardless of which avenue is selected, the net cost to Apogee can be assumed to be approximately the same as if Apogee manages the logistics itself, as buyers taking delivery anywhere along the continuum will look for allowances to cover the cost to deliver the concentrates from that point of delivery to the ultimate market destination, which, for the purposes of this report, is assumed to be Asia. 19.2 Payable Metal Price Assumptions 19.2.1 Market Outlook: Zinc and Lead Global demand for zinc is forecast to be approximately 13.4 Million tons in 2012, up some 4.4% on 2011, while that for lead is expected to grow by close to 5% to 10.8 Million tons (see Figure 19.1 and Figure 19.2). Despite these relatively strong growth rates, inventory levels remain stubbornly high, with zinc stocks, in particular, estimated to be close to 2 Million tons (producer +consumer +merchants +exchanges) representing some 8 weeks supply. Global lead stocks have also crept up since hitting lows in 2007 to 2008 but, at an estimated 650 kt (total), they still represent just 3 weeks of supply. Refined Zinc Consumption ('000 mt) 14000 12000 10000 8000 6000 4000 2000 0 2007 2008 2009 2010 2011 China Europe United States India Japan Korea, Rep. Other Countries Figure 19.1: Global Refined Zinc Consumption TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473 Page 206
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