Pulacayo Project Feasibility Study - Apogee Silver

Pulacayo 1 000 t/d Phase I Feasibility Study - NI 43-101 Technical Report
090644-3-0000-20-IFI-100
22.3.3 The Methodology of Modeling (after the Mine Value Chain)
Starting with a Free-on-Board (FoB) price, the off-mine cost and the concentrate
transportation cost were deducted to arrive at a Free-on-Truck (FoT) mine gate price.
The steady state operating cost varies between about $35 and $53 per tonne of the mill feed
over the mine life. The difference between the FoT price and the operating cost is the
Operating Margin (before Royalties). The Operating margin was used to calculate the
Earnings Before Interest, Tax and Dividends (EBITD). Royalties were calculated for each
concentrate based on the rates shown in Table 22.3 below and the metal contained in the
concentrate as well as the Net Smelter Revenue (NSR) as may be applicable
Table 22.4: Royalty Rates
Lead Concentrate
Zinc Concentrate
Regalia Minera - Pb 5.0% -
Regalia Minera - Zn - 5.0%
Regalia Minera - Ag 6.0% 6.0%
Comibol 2.5% 2.5%
Co-Operative 1.5% 1.5%
The Operating Margin or EBITD (after Royalties) was calculated. The capital expenditure
was then deducted to yield a Cash Flow before Tax. The taxable amount was calculated
taking depreciation into account. Two taxation rates were applied in the TFM. The first is a
corporate tax of 25% which is payable once both corporate tax and the cumulative corporate
tax become positive. The other is a mining tax rate of 12.5%. It becomes payable when the
local income turns positive. The Cash Flow after Tax was then calculated. The final result of
the TFM are the Net Present Value (NPV) and Internal Rate of Return (IRR) calculations of
the Operating Margin and Cash Flows before and after Taxes.
22.4 Results of the Technical Financial Model
The TFM is based on a mine using conventional mining on Level Zero and trackless mining
on the other levels. The Capital Cost associate with Ore Reserve Development has been
taken into account in the TFM. Ore Reserve Development is a Sustaining Capital Investment
that is made to accommodate future low commodity prices permitting ongoing development
to be temporarily halted without loss of production. This investment enables a mine to
maintain a positive cash flow when commodity prices are low. The TFM model is attached as
Appendix K in the Feasibility Study Report (Document No: 090644-3-0000-20-IFI-116). A
summary of the results obtained from the model is shown in Table 22.5 below:
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