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
Plant site infrastructure includes a power supply line and substation connecting to the
Bolivian power grid.
Auxiliary buildings for administration, mine surface workshop, security facilities will be
constructed around the plant site.
25.1.9 Project Capital and Operating Cost Estimates
The pre-production (initial) capital cost for the Project was estimated at USD 45.9M.
Sustaining capital required over the life of the operation has been estimated to be in the
order of USD 41.1M (12.5 full production years).
The LOM operating cost is estimated at USD 54.9 per ton of ore processed.
25.1.10 Financial Analysis
Based on the technical work carried out for the Feasibility Study and the assumptions made,
TWP concludes that:
Capital costs have an impact on NPV and warrant close control and competitive
tendering on key contracts in order to maximize project returns.
Operating costs are significant in terms of labor, power and fuel and any efforts to
reduce these will have a positive benefit to the project economics.
The financial analysis, using a silver price of USD 28 per ounce indicates a pre-tax
Net Present Value ("NPV") (using an 8% discount rate) of USD 126M with a pre-tax
internal rate of return ("IRR") of 47.1%. The undiscounted payback period is 4.1
years after first capital expenditure.
The results of the Feasibility Study indicate that Project economics are positive
(based on the financial assumptions used), the Project is both technically and
economical viable. Fluctuations in metal price (and to a lesser extent capital and
operating costs) can significantly affect the economic viability of the Project. A
reduction in the silver price from USD 28 per ounce to USD 20.00 would reduce the
after tax IRR from 32.1% to 16.3%. Other than the metal price, the project does not
seem to be sensitive to any specific parameter. An increase in silver price from USD
28 per ounce to USD 36 per ounce would increase after tax IRR to 45.3%.
The project is not sensitive to capital expenditures and operating costs, i.e., 10%
increase in the on mine operating cost would reduce the after tax IRR from 32.1% to
29.4%. A 10% increase in capital expenditure would reduce the IRR from 32.1% to
28.9%.
At this time, given the exploration potential elsewhere on the property, Apogee may
want to consider further development of the Pulacayo deposit and evaluate if a joint
mining operation would improve project economics.
Considering that the environmental permitting process for this Project may be more
complex and take longer than planned, Apogee is currently proceeding with obtaining
permits and authorizations for the 1,000 t/d project so that if and when project
economics become more favorable, they can proceed quickly with execution. Delays
in permitting would be detrimental to project economics.
TWP Sudamérica S.A. Av. Encalada 1257 Of. 801, Santiago de Surco Lima 33, Perú (51-1) 4377473
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