Release date- 20092012 – VANCOUVER, B.C. – Quaterra Resources Inc. and its 50% joint-venture partner Blackberry Ventures I, LLC, today announced that an independent preliminary economic assessment has concluded that their Nieves silver property in Zacatecas State, Mexico, has the potential to be developed as an open pit mine that would average more than five million ounces of silver production per year over a projected ten-year mine life.
The preliminary economic assessment (PEA), undertaken by M3 Engineering & Technology Corp. (M3) of Tucson, Arizona, sets out the following key project parameters:
An open pit centered on the Concordia vein that contains a total of 35.4 million tonnes. The pit is based on an indicated resource of 33.0 million tonnes at 50.1g/t silver and an inferred resource of 39.3 million tonnes at 32.0 g/t silver, using a cutoff of 15 grams.
Recovery of 55.5 million ounces of silver and 41,000 ounces of gold over the 10-year mine life at an average mining rate of 3.5 million tonnes per year. Silver recoveries of 86% were based on testwork completed to date.
Initial capital expenditure of US$231.6 million.
Average life-of-mine operating costs of $14.98 per ounce of payable silver.
An after tax net present value (NPV) of $77.1 million at an 8% discount rate and a base case silver price of $27 per ounce. The before tax NPV is $142.32 million. At a silver price of $32.40 the after tax NPV is $204 million. The project breaks even at a silver price of about $21.37 per ounce (about $15.25 after payback).
An after tax internal rate of return (IRR) of 15.7% with a 4.4-year pay back. The before tax IRR is 21.9% with a 3.4-year pay back.
‘The PEA confirms our expectation that Nieves is an attractive open pit silver project based on a conservative silver price,’ says Quaterra President and CEO Thomas Patton. ‘And it is highly leveraged to any upward movement in the silver price, with an after tax increase in net present value of about $23 million for every one dollar increase in silver above the base case.
Also, exploration and drilling provide good potential not only to expand the current pit but also to upgrade the San Gregorio inferred resource which was not included in this study.’
The San Gregorio inferred resource includes 16.3 million ounces of silver and 48,300 ounces of gold using a cutoff of 15 grams. In addition, one drill rig is currently on site testing gold-silver anomalies on the West Santa Rita vein and several other high-priority geophysical anomalies.
The Nieves project is located within the Mexican silver belt in Zacatecas State, Mexico, in a mining-friendly area of flat vacant land with excellent infrastructure including power and water. In June this year, Quaterra released a NI43-101-compliant resource estimate for mineralization associated with the Concordia and San Gregorio vein systems.
Updated Mineral Resource
The PEA is based on an indicated resource of 33.0 million tonnes at 50.1g/t silver and an inferred resource of 39.3 million tonnes at 32.0 g/t silver, using a cutoff of 15 grams. The NI43-101-compliant resource was completed by Caracle Creek International Consulting Inc. of Toronto, Canada, in June 2012.
The Nieves open pit straddles the Concordia vein and includes three pit phases. A 35.4-million tonne mineralized zone would be mined at a rate of 10,000 tonnes per day resulting in a ten year mine life and at a 5.4:1 (waste to ore) strip ratio.
The pit includes 28.3 million tonnes of higher grade material averaging 65 g/t silver and 0.045 g/t gold (at a cutoff of 30.5 g/t silver) and 7.1 million tonnes of lower grade material averaging 24 g/t silver (at a cutoff of 21.3 g/t silver). The San Gregorio zone was not included in the mine plan but may become viable with additional drilling.
The pit will be mined primarily using two 16.5-cubic meter hydraulic shovels loading 90-tonne haul trucks. A 12-cubic meter front end loader will be used as backup to the shovels and two diesel powered rotary drills will be used for production. The major support equipment will include three dozers, a grader, a pre-shear drill and a water truck.
Ore will be processed using primary crushing followed by grinding in a SAG/ball mill circuit. Ore will then be treated using conventional rougher/cleaner flotation. Following flotation, concentrate will be filtered and bagged for shipment and smelting within Mexico. A conventional tailing facility is planned at a location downgradient of the mineral processing site. Project infrastructure includes maintenance, warehousing, shop facilities, access roads, grid power and water wells.
The financial analysis is based on a silver price of $27 per ounce and a gold price of $1,300 per ounce, rounded numbers which are both less than the SEC-recommended three-year historical price through the end of August. The analysis includes deductions for all royalty payments and a contingency of 20%. No credits are assumed for lead or zinc.
A PEA should not be considered to be a pre-feasibility or feasibility study, as the economics and technical viability of the project have not been demonstrated at this time. It is preliminary in nature and includes inferred mineral resources that are considered too geologically speculative at this time to have economic considerations applied to them to be categorized as mineral reserves. Thus, there is no certainty that the production profile concluded in the PEA will be realized. Actual results may vary, perhaps materially.
Quaterra Resources Inc. (NYSE Amex: QMM; TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The Company uses in-house expertise and its network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large and/or high-grade base and precious metal deposits.
President and CEO
Quaterra Resources Inc.
Quaterra Resources Inc.