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 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: TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473 Page 279
Pulacayo 1 000 t/d Phase I Feasibility Study - NI 43-101 Technical Report 090644-3-0000-20-IFI-100 Table 22.5: Output Values from the TFM LOM Results Constant Money Discount Rate- % pa 8% NPV IRR- % pa Operating Margin MUS$ 194 No IRR Cash before tax MUS$ 126 47 Cash after tax MUS$ 72.5 32.1 Maximum Month for NPV and IRR 174 174 NSR / ton RoM (milled) 171.1 USD / t Cash Cost per Oz Silver 1 11.20 USD / Oz Cash Cost per Eq Silver Oz 1,2 8.44 USD / Oz AgEq Notes: 1. (Operating costs plus [selling]shipping costs) / silver in concentrate produced, excluding royalties. 2. (Operating costs plus [selling]shipping costs) / (silver in concentrate produced + silver base metal credits). The application of "silver equivalent ounces", (Oz AgEq.) means the US dollar value of lead & zinc metals divided by the price of silver and added to the pure silver ounces in any applicable category. Economic calculations used the following factors: lead equivalent ounces is Lead AgEq. = (Lead Tonnes x 2204lbs/t x $0.86/lb) / $28/oz and for zinc equivalent ounces is Zinc AgEq.= (Zinc Tonnes x 2204lbs/t x $1.00/lb) / $28/oz The payback period for the mine has been calculated to be 20 months. This period is based on the metal prices shown in Table 22.1. It does not take into account interest on loans. The cash flow of the project over the mine life is tabulated below: TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473 Page 280
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Pulacayo Project Feasibility Study - Apogee Silver

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