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 Table 19.12: Treatment Charges/Refining Charges/Escalators/De-Escalators (USD) Zinc Concentrates TC $190.00 per dmt $225.00 per dmt Basis price $2,200 per mt Zn $2,000 per mt Pb Escalator De-escalator +$0.03/dmt for each $1.00 Zn price > $2200/mt -$0.03/dmt for each $1.00 Zn price < $2,200/mt Lead Concentrates +$0.10/dmt for each $1.00 Pb price > $2200/mt -$0.05/dmt for each $1.00 Pb price < $1,800/mt RC – Ag Nil $1.50 per payable oz RC – Au Nil $8.00 per payable oz If sales are to be made to a trader or traders, then mines should typically expect to receive a discount to the benchmark treatment charge to entice the mine to sell to them. In exchange for such discounts, traders will seek contract flexibility, including options on Quotational Periods (discussed below), as well as possible destination and/or quantity options. The more options provided, the greater the value to the trader and thus the higher the level of the likely discount provided. Other factors can also come into play when determining discounts such as prevailing market conditions (e.g., a softer market would likely command smaller discounts) and concentrate quality considerations. As it is assumed that sales will ultimately be made to the trade, for the purposes of the Feasibility Study it is recommended that the following discounts to the zinc and lead TCs are used: Table 19.13: Discounts to the Zinc and Lead TCs Zinc Concentrates Lead Concentrates TC Discount $15.00 per dmt $15.00 per dmt 19.4.5 Penalties As noted, based on indicated assays, the Pulacayo zinc concentrates are to be considered “clean” and thus not subject to any penalties. Nonetheless, at the time of preparation of this report a specification for cadmium, an element commonly found in zinc concentrates, was not available. Typical cadmium penalties for zinc concentrates are: Cd USD 1.50/dmt for each 0.10% Cd > 0.35% Cd The Pulacayo lead concentrates are to be considered somewhat complex due to the elevated levels of arsenic and antimony. While these levels are unlikely to create significant challenges to placing this material, penalties will apply. As such, for purposes of the Feasibility Study, it is recommended that the following penalty schedule be used: As Sb USD 1.50/dmt for each 0.10% As > 0.30% As USD 1.50/dmt for each 0.10% Sb > 0.30% Sb TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473 Page 231
Pulacayo 1 000 t/d Phase I Feasibility Study - NI 43-101 Technical Report 090644-3-0000-20-IFI-100 Based on the above penalties and projected grades, Pulacayo could expect to incur penalties per ton of lead concentrate as set out below. Table 19.14: Potential Penalties–Lead Concentrates Element Estimated Grade Penalty Arsenic 1.45% USD 17.25/dmt Antimony 1.23% USD 13.95/dmt 19.4.6 Freight Allowance For deliveries of concentrates to the buyer’s/receiving smelter’s discharge port (CIF), there is typically no freight allowance provided to the buyer as the miner covers all costs to deliver the concentrates to destination (vessel loading, ocean freight, insurance). For deliveries to an intermediate destination (e.g. in warehouse at or near the load port, loaded on a vessel [FOB] or delivered to the buyer at the mine [FCA/EXW]), the miner will typically provide a freight allowance to the buyer to cover the typical costs which would otherwise be incurred to move the concentrates to their ultimate destination. This allowance is typically based on prevailing rates for movement of the concentrates either in bulk in vessels or by container and may be adjusted based on changes to prevailing market conditions. As noted above, the freight allowance may be rolled into the treatment charge or may be a standalone item but, in either case, the value of the freight allowance should be roughly equivalent to the actual costs associated with moving the concentrates from the point of delivery to their agreed upon destination. Similarly, if concentrates were to be delivered to a domestic smelter, or a destination other than an agreed upon market destination (typically China/Japan/Korea ex west coast South America but may be a main European port), the buyer may seek an allowance to cover the cost differential versus delivery to such other market destination. In this instance, the freight allowance is effectively a freight capture or locational advantage, which the buyer is expecting to benefit from either in full or in part. 19.4.7 Quotational Period The Quotational Period (QP) is the month (typically, although it can be any period of time) during which the payable metals in the concentrates are priced when the concentrate is sold to a buyer. The QP is typically tied to the month of shipment or the month of vessel arrival at the discharge port when concentrate is being shipped by vessel by the seller, or tied to month of delivery when concentrates are being delivered to a buyer at a named destination (e.g. INW at or near the load port), and can range from month of shipment (and, in some instances, even prior to shipment) to several months after arrival at the delivery point. In long-term and medium-term contracts, the QP is usually defined although buyers frequently seek an option which allows them to change the QP month for a particular metal (or metals), which they exercise under certain market conditions. Traders will always seek QP options and the greater the range or flexibility that can be offered, the higher the value to the buyer, which can typically be translated into higher discounts to applicable charges. For zinc and lead, the QP will typically range from month of delivery/shipment to third or fourth month after month of delivery/vessel arrival at destination, although even more TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473 Page 232
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Pulacayo Project Feasibility Study - Apogee Silver

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