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 in 2007 and 2008, up more than five-fold since the beginning of the decade. In a dramatic retracement however, the market gave up all of these gains by the end of 2008 as the global financial crisis took hold and only a marginal recovery has been witnessed since (see Figure 19.13). These market movements translate into ocean freight rates for shipment of 10,000 ton parcels from Chile/Peru to Japan/Korea/China reaching as high as USD 120 to 130 per ton at their peak, with current rates being seen in the USD 50 to 60/wmt range. While a gradual rise in rates is expected going forward as current levels are simply not sustainable, the return to the highs of 2007 to 2008 are not foreseen anytime soon. Source: InvestmentTools.com Figure 19.13: Baltic Dry Index: 2000 – 2012 Container shipments of concentrates typically present an expensive alternative to bulk shipments, however for some movements they have become a competitive option and, in certain instances, have in fact become a cheaper alternative. Rates to China in particular have come down to very low levels as container lines look for backhaul opportunities to fill otherwise empty containers returning to China. Additionally, reduced in-transit losses and the ability to ship more frequently and in smaller lot sizes (as low as approximately 20 tons) thereby reducing working capital, can further add to the value of shipping by this means. SDV, part of the diversified transportation and logistics group Bolloré, and which focuses on international ocean freight movements (including container and inland logistics management), provided the following indicative rates for the movement of concentrates in containers from Uyuni to delivery China via Antofagasta, Chile: TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473 Page 235
Pulacayo 1 000 t/d Phase I Feasibility Study - NI 43-101 Technical Report 090644-3-0000-20-IFI-100 Table 19.15: Rates for the Movement of Concentrates in Containers from Uyuni to Delivery China via Antofagasta, Chile US$ Zn Concs via Antofagasta, Chile Pb Concs via Antofagasta, Chile Truck Uyuni to Port USD 3,100/truckload USD 3,100/truckload Handling Costs, including container stuffing USD 760/cont. USD 935/cont. Add’l Terminal Costs/Customs USD 170/cont. USD 170/cont. Ocean Freight, basis 20’ cont 1 USD 1,980/cont. USD 2,230/cont. Total USD 6,010/cont. USD 6,435/cont. Total per wmt 1 USD 325/wmt USD 348/wmt Note: 1. incl. estimated IMO charges of $250/container 2. Basis max payload of 22.0 mt/container As an alternative to the above movement, SDV also advised that concentrates could be shipped in bulk in trucks to a facility owned and operated by their affiliate Grupo Empresarial Nautilius in Patacamaya, Bolivia (La Paz district), some 450 kms from the project, where they can be transloaded into bags and stuffed in containers for export. According to SDV, this facility regularly handles concentrates in Bolivia and employing this option could reduce costs as issues associated with Chilean regulations and weight limits on the roads can be negated. Indicated costs for this movement to China are as follows: Table 19.16: Costs to Export the Concentrates to China US$ Truck Uyuni to Patacamaya (est.) 1 Zn or Pb Concs via Patacamaya, Bolivia/ Arica, Chile USD 1,500/truckload USD 75/wmt Handling Costs, incl stuffing (est.) 1 Container to Shenzhen China, basis 20’ cont. 2 USD 15/wmt USD 4,600/cont. USD 210/wmt Total per wmt 2 USD 300/wmt Note: 1. Exen estimate 2. basis 22 wmt/container Because of the production volumes and the concentrate quality expected from Pulacayo, for the purposes of this report, it is assumed that zinc concentrates will be shipped via container ex Arica to China at a cost as indicated above, although if concentrates can be shipped as part of a bulk movement, total realized savings may be in the order of USD 40/mt, based on estimated port costs and ocean freight rates. For the lead concentrates, because it is expected that they will have to be blended and because of potential Chilean export restrictions, is it is assumed that they will be trucked to a facility in TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473 Page 236
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Pulacayo Project Feasibility Study - Apogee Silver

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