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 Should levels significantly exceed any of the thresholds certain smelters may choose not to consider such concentrates for their feed mix. 19.3.2.2 Lead Concentrates At around 48% Pb, the Pulacayo concentrates can be considered medium-grade with several internationally traded qualities running both higher and lower than these levels. The silver level in the concentrates can be considered relatively high, which will likely make these, concentrates less attractive to Chinese smelters because of the prevailing negative arbitrage between the LBMA and Shanghai prices. Elements commonly found in lead concentrates, which are typically subject to penalties, and their thresholds are: Table 19.9: Elements Commonly Found in Lead Concentrates Which are Typically Subject to Penalties and their Thresholds Element Typical Penalty Thresholds As 0.2 to 0.5% Sb 0.2 to 0.5% Zn 5 to 7% F+Cl 500 to 800 ppm Based on the information available, arsenic and antimony levels are both seen to be well above typical penalty thresholds and, on a standalone basis, might make these concentrates less attractive to certain buyers for, at a combined 2.6 to 2.8% arsenic +antimony, the level is quite high. While Chinese smelters can typically handle antimony at these levels - in fact, many smelters in southern China like antimony unfortunately, this is not the case at many Western plants, as the overall load of arsenic and antimony will affect product and by-product quality. As such, although most plants in theory could handle the concentrate the quantity that each plant might accept will vary dramatically. In addition to the arsenic and antimony, the silver content may determine the final homes for this material for, as highlighted in this report; high silver-bearing concentrates are a very difficult fit for the Chinese market. This can be expected to lead to additional charges being incurred via higher silver refining charges, higher treatment charges, or both. In addition to these elements, other potential quality issues with the lead concentrates include: The lead grade at 46 to 50% is acceptable for China and in many cases preferable, although this is not the case in the West where most plants generally look for higher grade concentrates; Zinc at 3.5% would be attractive to the Chinese however, it is generally an undesirable element at most Western plants, and although at these levels, it is unlikely to be a significant issue. Despite the above, it is not believed that quality issues would preclude sales of these concentrates, as there are other means of managing the impurities. Accordingly, regardless of TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473 Page 225
Pulacayo 1 000 t/d Phase I Feasibility Study - NI 43-101 Technical Report 090644-3-0000-20-IFI-100 quality (unless, of course, impurities proved to be at extreme levels), placing the Pulacayo lead (or zinc) is not seen to be an issue. 19.3.3 Proposed Concentrate Sales Strategy and Distribution For large scale projects where project financing is required, lenders generally look to have 70 to 80% of a mine’s output committed to smelters (or other acceptable buyers) under multi-year sales contracts with the balance of production available for sales under short- (spot) and medium-term contracts. Because of the size of and anticipated investment required for the Pulacayo project it is not expected that such restrictions will apply. Accordingly, sales of concentrates to buyers can likely be made at Apogee’s discretion. Based on annual production volumes in the 10,000 and 20,000 ton ranges for lead and zinc concentrates, respectively, it is likely best to distribute the full volume of each product to a single buyer (or buyers if the zinc and lead products are sold separately). Seeing, as smelters will be the ultimate destination for both these products, consideration should be given to contacting selected operations to determine interest in these products. Both Korea Zinc and Teck, for example, are known to buy concentrates in South America and are prepared to handle all logistics from the ports of loading and, in the case of Korea Zinc, may also consider handling some internal logistics. While they are certainly alternatives for consideration, it is more than likely that traders operating in South America will present better opportunities to Pulacayo, both with respect to commercial terms and overall logistics. Traders active in the zinc and lead markets include the following: Trafigura (CorMin) Glencore Ocean Partners MRI Transamine Louis Dreyfus Most, if not all traders will take delivery of concentrates in warehouse at or near port facilities and will manage all logistics including packaging, if required (bags, lined containers, etc.), documentation and shipment to destination, subject to the provision of suitable allowances in consideration of the costs incurred. Some traders (e.g. Trafigura at Callao, Peru) operate extensive concentrate blending operations which are specifically designed to handle small- to medium sized quantities of concentrates (lead, zinc and copper) which are blended (e.g. to control Ag grade and impurity levels) to produce qualities particularly suited to specific buyers. As such, deleterious elements in complex qualities of concentrates can be diluted to levels acceptable to different smelters. Because of their ability to produce specific products from these blends, traders are frequently able to offer more aggressive purchase terms than will smelters, including early payment and financing provisions. As noted above, the zinc concentrates are clean and can likely be placed direct with most smelters. Nonetheless, traders are regular buyers of clean concentrates, which they can either use as a dilutant for their blend or for direct sale opportunities and will frequently bid aggressively TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473 Page 226
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Pulacayo Project Feasibility Study - Apogee Silver

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