Azure Minerals Limited (ASX: AZS) (“Azure” or “the Company”) is pleased to announce positive outcomes from the Scoping Study (“Study”) completed on its 100%-owned Oposura zinc-lead-silver project (“Oposura” or “the Project”), located in Sonora, Mexico.

Scoping Study Cautionary Statement

This Scoping Study has been undertaken to determine the potential viability of a combined open pit and underground mine with a conventional crushing, milling and flotation circuit to produce zinc and lead-silver sulphide concentrates onsite at the Oposura Project, and to provide Azure Minerals Limited with the confidence to continue with its ongoing feasibility study. The results should not be considered a profit forecast or a production forecast.

The Study is a preliminary technical and economic study of the potential viability of the Oposura Project. In accordance with the ASX Listing Rules, the Company advises it is based upon low-level technical and economic assessments (+/- 35%) that are not sufficient to support the estimation of Ore Reserves, or to provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the Study will be realised.

Further evaluation work including infill drilling, metallurgical testwork and appropriate studies are in progress and required before Azure will be in a position to estimate ore reserves and to provide assurance of an economic development case.

In accordance with ASX and ASIC guidance, the Production Target referred to in this announcement is based upon JORC Mineral Resources which are classified as approximately 75% Indicated and 25% Inferred. The Company has concluded that it has reasonable grounds for disclosing this Production Target.

The Study is based upon material assumptions outlined elsewhere in this announcement. These include assumptions about the availability of funding. While Azure considers all of the material assumptions to be based upon reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Study will be achieved.

To achieve the outcomes indicated in the Study, funding in the order of A$70 million (US$52.5 million) is likely to be required. Investors should note that there is no certainty that Azure will be able to raise funding when needed. It is also possible funding may only be available on terms that may be dilutive to or otherwise affect the value of Azure’s existing shares. It is also possible that Azure could pursue other “value realisation” strategies such as a sale, partial sale or joint venture of the Project. If it does, this could materially reduce Azure’s proportionate ownership of the Project.

The Company has concluded it has a reasonable basis for providing forward-looking statements included in this announcement and believes that it has a reasonable basis to expect it will be able to fund the development of the Project.

Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Study.

The Study delivers a Life of Mine (LOM) EBITDA of A$237 million, NPV8 (pre-tax) of A$112 million and an IRR (pre-tax) of 76%, confirming Oposura as an economically and technically robust, high-margin project. Low operating and capital costs, high-value concentrate, strong operating cashflows, a payback period of about 16 months and, most importantly, a C1 cash cost (per pound of payable zinc production) in the lowest quartile of world zinc producers, all support the positive project economics.

Commenting on the Scoping Study, Azure’s Managing Director, Mr Tony Rovira said: “The completion of this Study with its very positive project economics represents a key milestone for the Company. We’re immediately progressing into the Feasibility Study stage with the intention of developing Oposura into the Company’s first operating mine as swiftly as possible to take advantage of the strong zinc thematic.

“The style of the deposit will deliver exceptionally low estimated operating costs, driven by the near-surface, high-grade mineralisation and efficient open pit and underground mining methods which will see Oposura’s costs in the lowest quartile of zinc producers globally. Furthermore, there is excellent potential that additional exploration, which is currently underway, will significantly expand the Project’s resources and further improve the project economics and increase the mine life.

“We see this project as technically and financially robust and eminently financeable, and the Company has received strong expressions of interest from debt providers, concentrate offtakers and strategic parties interested at the asset level. We look forward to advancing this project expeditiously towards production that will see Azure transition from an exploration company to a producer. ”


ItemApproximate Value or Range
NPV @ 8% (pre-tax)RangeA$106 – $113.5 million
Preferred modelA$112 million
IRR (pre-tax)Range73% – 77%
Preferred model76%
LOM gross revenueRangeA$494 – $508 million
Preferred modelA$506 million
EBITDA (LOM)RangeA$229 – $239 million
Preferred modelA$237 million
Payback period16 months
Average LOM cash (C1) costs1
A$0.56/lb zinc
(US$0.42/lb zinc)
Year 1 C1 cash costs
A$0.18/lb zinc
(US$0.14/lb zinc)
Pre-production CAPEX (includes Capital Contingency of 25%)
A$69.9 million
Mining, crusher & DMS throughput rate
Mill & flotation circuit throughput rate (post-DMS)
Initial mine life
5.3 years
Average annual production of metal in concentrate
19,000t of zinc
10,000t of lead
145,000oz of silver
First lead-silver & zinc concentrate shipments
Targeted for 2020/21

Inputs to this Scoping Study are estimated to an accuracy of +/- 35%. The ranges listed above are representative of sensitivities and potential improvement or decrease in metallurgical recoveries. Details of all A$ and US$ currency amounts in this Study are contained in Appendices 1 & 2 of this report.

1 C1 cash costs represent the total mine site costs, transport and off-site costs, smelting and refining charges, royalties and taxes, net of lead and silver by-product credits on a payable metal basis




The flagship Oposura Project is a high-grade zinc-lead-silver project located in the state of Sonora, in northern Mexico (see Figure 1). Oposura is approximately 150km by sealed highway to the northeast of the Sonoran state capital of Hermosillo and about 200km south of the international border with the United States of America.

Figure 1: Plan of Mexico showing location of Oposura Project and other Azure Minerals’ projects

Oposura is an advanced-stage project where historical drilling and exploratory underground mine development, together with extensive recent resource drilling by Azure, has defined a substantial body of high grade, massive sulphide-hosted, zinc, lead and silver mineralisation. Based upon this drilling, the Company has delivered a Mineral Resource Estimate (MRE) of 2.9Mt @ 5.0% Zn, 2.8% Pb & 17.0g/t Ag (Indicated + Inferred; refer to Page 5, Tables 2 & 3 for full details).

Through Azure’s wholly-owned Mexican subsidiary, Minera Piedra Azul, SA de CV, the Company acquired 100% ownership of all ten mineral concessions comprising the Project (see Table 1) in August 2017 for US$1,500,000 plus a 2.5% NSR royalty payable to the vendor Grupo Minero Puma SA de CV (Puma). There are no back-in, earn-back or other rights relating to the Project. The Oposura deposit is situated wholly within granted mineral concessions that are 100% owned by Azure (see Figure 2). 

Table 1: Details of Oposura mineral concessions

El Monstruo de PlomoT-18047327.04 May 19873 May 2037
Don GenaroT-18047420.04 May 19873 May 2037
El Crestón de PlomoT-18047520.04 May 19873 May 2037
CandelariaT-18047650.04 May 19873 May 2037
El HuecoT-18047725.04 May 19873 May 2037
Campo de PlomoT-18060210.013 July 198712 July 2037
Oposura Número 2T-18060320.013 July 198712 July 2037
Oposura Número 4T-18060420.013 July 198712 July 2037
Oposura Número 6T-1806056.013 July 198712 July 2037
El EncinalT-223473620.010 January 20059 January 2055
Nuevo Oposura 282/3972480.6Application – awaiting grant


Figure 2: Plan showing Oposura mineral concessions with location of mineral resource areas

The Study has demonstrated that the optimal mining rate will be approximately 0.5Mtpa from a combination of open pit and underground mining operations, at LOM average grades of 4.6% Zn, 2.6% Pb and 15.9g/t Ag, delivering an initial mine life of 5.3 years

The processing flowsheet comprises two-stage crushing followed by ore sorting utilising Dense Media Separation (DMS) to reject waste material and to feed an upgraded product to the milling and flotation circuit at approximately 0.3Mtpa at LOM average grades of 7.5% Zn, 4.1% Pb and 24.5g/t Ag.

The plant will produce approximately 35,000t of zinc concentrate and 16,000t of lead concentrate annually, containing approximately 19,000t of zinc and 10,000t of lead respectively. The annual production of lead concentrate will contain approximately 145,000 ounces of silver.

Metallurgical testwork completed for the Company by Blue Coast Research Ltd (BCR) of Parksville, British Colombia, Canada demonstrated that the proposed processing method will result in high metal recoveries and produce clean, commercial-grade concentrates with:

  • Average zinc concentrate grade of 53% Zn with an average zinc recovery of 87.5%;
  • Average lead concentrate grade of 60% Pb and 320 g/t Ag with an average lead recovery of 85% and an average silver recovery of 67%.

The concentrates are of marketable quality with analysis indicating low levels of deleterious elements that are unlikely to attract penalties from traders or end-use smelters. Azure has received strong interest from commodity traders for these concentrates.

The Project is expected to generate a total positive EBITDA in the range of of $A229 -$239 million with a preferred value of A$237M and a NPV8 in the range of $106 – $113.5 million with a preferred value of A$112M.


The Company has published the following Mineral Resource estimate (Tables 2 & 3) for Oposura. The Mineral Resource was estimated and classified as Indicated and Inferred Mineral Resources in accordance with the guidelines of the JORC Code (2012)2 by global mining consultancy CSA Global Pty Ltd (CSA Global)3 , Perth, Western Australia (for full details, refer to ASX announcement of 4 July 2018):

Table 2: Oposura Mineral Resource Estimate – by classification4



Table 3: Oposura Mineral Resource Estimate – by zone

West Zone
East Zone

This Mineral Resource forms the basis of resources in the mining plan after the application of a range of modifying factors including cut-off grades, minimum mining width, mining dilution and mining recovery. The resources in the mining plan are summarised in Table 4:

2 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. The JORC Code, 2012 Edition. Prepared by: The Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC).

3 The Mineral Resource estimate was prepared by Mr Alex Whishaw, Senior Resource Geologist at CSA Global under the direct supervision of Dr Matthew Cobb. Dr Cobb is a Principal Resource Geologist at CSA Global and qualifies as an MRE Competent Person, as defined under the JORC Code

4 All Mineral Resources use a 1.5% Zinc Equivalent cut-off, as detailed in ASX announcement dated 4 July 2018


Table 4: Oposura resources in the mining plan – by mining method

Open Pit1.


The mining study has identified that approximately 95% (by contained metal) of the zinc and lead mineralisation to be mined in the first year is classified in the JORC Indicated Mineral Resource category. This ensures that almost all of the payback period of 16 months is achieved by mining Indicated Resources.

Approximately 83% of resources in the mining plan mined in the first four years are classified in the JORC Indicated Mineral Resource category, and therefore Inferred Resources do not underpin the economic viability of the project. There is a low level of geological confidence associated with Inferred mineral resources and there is no certainty that further exploration will result in the determination of Indicated mineral resources or that the production target itself will be realised.



The Study has identified that the most suitable and economical mining methods at Oposura comprise low unit cost, open pit and room and pillar underground extraction methods. The design and sequencing of the mine plan have been completed by CSA Global.

Approximately 2.5Mt of resources in the mining plan will be mined at grades of 4.6% Zn, 2.6% Pb and 16g/t Ag at a mining rate of approximately 0.5Mtpa, delivering an initial mine life of 5.3 years. Mine scheduling demonstrates that minimal mining capital will be required ahead of the development of the open pits and underground stopes.

Mineral resource extraction and project economics are optimal with a single open pit on the East Zone and three open pits on the West Zone, followed by room and pillar underground mining of both mineralised bodies (see Figure 3).

These mining methods will create multiple mining faces across both the East and West Zones, providing opportunities for concurrent exploitation. This provides exceptional optionality, scheduling flexibility and risk reduction for the proposed mining operation.

High-grade mineralisation will be accessed in the first month of the open pit mining schedule from low strip ratio pits in both the East and West Zones. It is expected that minimal pre-stripping of the open pits will be required due to the presence of significant quantities of near-surface mineralisation.

Underground mining is scheduled to commence as the two smaller pits (Pits B and C) in the West Zone are completed. Access to most underground stoping blocks can be achieved within mineralisation, and underground stopes are designed to be accessed directly from the base of the optimum pit shells in both East and West Zones. Considering the flat-lying nature of the mineralisation and utilising room and pillar mining, final resource recovery is designed to be greater than 95%, with pillar recovery scheduled as the final mining phase.

Significant exploration upside is present at Oposura with potential to increase resources by additional drilling outside of the identified deposits, particularly within the Central Zone where historical exploration has identified the presence of the mineralised host horizon (see Figure 3). This area will be tested by drilling in the 4th Quarter of 2018.

Figure 3: Oposura East Zone and West Zone optimum open pit shells showing resources in the mining plan and additional exploration potential – elevated view from the south



The Oposura deposit comprises massive zinc and lead sulphide mineralisation. The Study has demonstrated that the mineralisation can be upgraded by flotation of the sulphide grains to produce separate lead-silver and zinc concentrates by utilising the industry standard process of crushing, Dense Media Separation (DMS), milling, flotation and filtration (see Figure 4).

Based upon the proposed mining rate, a crusher throughput rate of 500,000tpa is planned.

DMS is a low-cost beneficiation technology that is widely used in the mining and mineral processing industry. It utilises differences in density between liberated particles of mineralisation and waste by rejecting low density waste and concentrating high density mineralisation.

The Study demonstrates that approximately 40% of the material entering the DMS system will be rejected as waste, resulting in a commensurate upgrade in metal grades.

A 295,000tpa capacity milling, flotation and filtration plant has been designed to process life of mine average grades of 7.5% Zn, 4.1% Pb and 25g/t Ag.

Metallurgical testwork demonstrated that the proposed processing method will deliver high metal recoveries and produce clean, commercial-grade concentrates:

  • Average zinc concentrate grade of 53% Zn with a zinc recovery of 87%;
  • Average lead concentrate grade of 60% Pb with a lead recovery of 85%; and
  • Average silver grade of 320g/t Ag in the lead concentrate with a silver recovery of 67%.

The plant will produce approximately 35,000t of zinc concentrate and 16,000t of lead concentrate annually, containing approximately 19,000t of zinc and 10,000t of lead respectively. Approximately 145,000 ounces of silver will be contained in the annual lead concentrate production.

Figure 4: Diagrammatic processing flow sheet for Oposura Project



Commodities trading agency BPDT & Co (BPDT) of Sydney, Australia, was requested by Azure to prepare an overview of the marketing of zinc and lead concentrates expected to be produced from Oposura.

Expected annual production is 35,000t of zinc concentrates and 16,000t of lead concentrates containing approximately 19,000t of zinc and 10,000t of lead respectively.

Based on analytical data provided, BPDT advise the concentrates appear to be of marketable quality and should attract strong interest from prospective customers.

Penalties apply for concentrates exceeding specified levels of deleterious elements/compounds. Importantly, analysis of Oposura concentrate samples indicate that they appear to be clean with very low levels of contaminants and are unlikely to attract penalties.

Given the above, BPDT also advise that Treatment Costs (TC’s) and Refining Costs (RC’s) and metal payability should be within industry standard ranges with no penalties applied.

Commodity traders and end-use smelters were identified as the two main customers for both the zinc and lead concentrates. It is expected there will be strong competition for the concentrates and, already, several meetings have been held with commodity traders who have expressed interest in purchasing the Oposura concentrates.



Azure completed concentrate transport and logistics studies assisted by M3 Engineering of Tucson, Arizona. These studies examined options for the transport of concentrate to a number of well-known concentrates blending hubs internally in Mexico operated by metals traders as well as externally via the Port of Guaymas.

The proposed mine and plant site are well serviced by existing infrastructure, including:

  • Two lane bitumen national Highway 14, located 6km to the north of the plant site
  • 6km single lane gravel access road from Highway 14 to the plant site
  • 230kV high voltage transmission line 12km to the northwest and 34kV transmission line approximately 10km to the north
  • Communications tower 10km to the northeast located in the nearby town of Moctezuma
  • Several aquifers within 8km to the east
  • Services in Moctezuma including a hospital, ambulance station, department and grocery stores, banking, accommodation and service stations.

Infrastructure required for the Oposura Project includes:

  • Power for processing and mining operations
  • Water for processing and underground drilling equipment
  • Communications
  • Upgraded site access road from Highway 14 to the plant site
  • Offices
  • Site security and medical facilities; and
  • Employee accommodation

M3 conducted a number of trade-off studies prior to determining the preferred options for:

  • Power supply
  • Communications
  • Accommodation
  • Concentrate and ore transport logistics

The proposed operation is relatively small scale (approximately 0.5Mtpa mining and 0.3Mtpa processing) and the power and water requirements are not substantial. The proposed use of a DMS plant reduces power and water requirements for downstream processing operations. Dewatering of tailings using a centrifuge with water recycling reduces make-up water required for the processing plant.

The preferred option for the supply of power is the construction of a 34kVA medium voltage transmission line located to the north of the project.

Two deep bores drilled into the aquifer located in the Arenillas Valley adjacent to the plant site will provide the water requirements for the processing plant and mine. Make-up water usage requirements are estimated as 3.69 litres/second. 

The 6km site access road from Highway 14 will be upgraded by widening in specific areas. The mine haul road (2.5km) will be constructed with a running surface width of 7.4m, with drainage and safety berms adequate to allow passing of light vehicles, highway trucks and mine trucks.

Offices for administration and technical personnel will be located at the plant site (see Figure 5).

Communications will be provided via a microwave digital link from the project to an existing communications tower located in the nearby town of Moctezuma.

A 220-person camp equipped with kitchen, mess, change rooms and laundry will be constructed on site to the north of the processing plant and mine.

Transport of equipment and consumables to site will be achieved along Highway 14 which runs between the capital city of Sonora, Hermosillo to the southwest and the border town of Agua Prieta to the north. The zinc and lead concentrates can be transported 330km along the same highway route to the Port of Guaymas for export or on the internal highway system to Mexican smelters.

Figure 5: Project Layout



Azure has already received environmental approval for the development of a small-scale mine, processing plant and tailings facility involving the clearance of a surface area of up to five hectares. The Company will need to apply for this permit to be amended to allow for additional surface area clearance for an enlarged mining and processing operation.

A detailed environmental and permitting report has been completed by Delia Patricia Aguayo Hurtado of SEGEO, of Hermosillo, Mexico. The report incorporates the results of independent baseline studies into land use, regulatory regime, protected areas, climate, flora, fauna, soils, groundwater, waste rock geochemistry, atmospheric conditions and socioeconomic issues. No issues were identified that would prevent the development and operation of the project.

The Sonora region of Mexico has a long history of mining and there are reasonable expectations that a mine and processing operation could be developed at Oposura should (or when) future studies result in the definition of an Ore Reserve

The project area is covered by two privately-owned cattle ranches. Azure has agreements in place with both ranch owners. These agreements allow access for the Company and its mining, exploration and extraction contractors.

Complete Article: http://azureminerals.com.au/wp-content/uploads/2018/10/181015.pdf





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