VANCOUVER, June 13 /CNW/ - Scorpio Mining Corporation (TSX:SPM) is
pleased to announce its receipt of robustly positive results from the
independent Pre-Feasibility Study ("PFS") completed on June 8th, 2007 on its
100% owned Nuestra Senora silver-zinc project located in the Sinaloa State of
Mexico. The results of the PFS which was completed by Genivar, an independent
qualified engineering company with the participation of other Qualified
Persons and companies, demonstrate that an underground bulk mining operation
at Nuestra Senora is economically viable. The study projects that the cash
cost of producing silver at the Nuestra Senora project, after accounting for
by-product credits, will be a negative US$0.98 per ounce produced using
discounted metal prices.
Peter J. Hawley, Chairman, CEO comments, "The PFS shows that the Nuestra
Senora project has robust economics with potential to increase mineral
reserves and resources. We are particularly pleased that the by product
credits more than cover the operating costs using discounted metal prices
which allows us to produce silver ounces at virtually no cost. If we were to
use current prices the project would become much more profitable with respect
to the silver spectrum. Company's management views this as a very conservative
study with opportunities to optimize the results going forward. We will
aggressively advance the project towards production in March of 2008."
Key project parameters within the study are as follows:
- Metal Prices - Metal prices used are below the current market prices.
- Dilution - A mining dilution factor of 10% with a US$30 value per
tonne mined was applied to the Main Zone and 15% dilution with a
US$30 per tonne value applied to the Hoag and Sept 9 Zones for the
purpose of reserve estimation.
- December 2007 to March 1, 2008 is the projected mill commissioning
- From the beginning of the production period, the mill will run
three months at 500 tonnes per day (TPD) and then increase to
- The Net Present Value ("NPV") and Internal Rate of Return ("IRR") are
based on current mineral reserves outlined over the life of mine
(LOM) as of April 22, 2007 and do not include additional conversion
of Resources to Reserves or additional delineation of resources. The
Company currently has five drills operating on the project.
- Definition of the mineral Reserves and Resources in the PFS were
subject to more stringent parameters for an "Ore Reserve"
calculation. The differences are mainly due to a higher percentage of
"ore" samples required for a cell to be classified as "ore", shorter
ellipsoid search radius, an interpolation of specific gravity, a
1 metre length of composites rather than 3 metres, an enhancement in
the cut-off grade, and the exclusion of over 5,800 underground chip
Filing of the final PFS report on SEDAR is expected within 14 days.
Scorpio Mining Corporation will provide notice of a conference call to discuss
these results and answer any questions.
- From May 2007 until the end of LOM operations, currently projected in
late 2013, a little less than 6 years, an after tax net cash flow of
US$59.5 million. Using June 5, 2007 metal prices, this figure would
increase to US$105.76 million. The entire production period does not
count possible future production resulting from the additional
resources outlined in Table 2.
- The Base Case Net Present Value ("NPV"), after tax, of
US$14.3 million and an Internal Rate of Return ("IRR") is 26.2%
(using US$11.00 per oz. for silver, US$1.25 per lb. for zinc,
US$0.50 for lead, US$2.25 for copper, 10% real discount rate,
$40.30/tonne operating costs (the operating costs include a
contingency factor of 7.5%).
- Current Metal Price NPV, after tax, of US$46.2 million and an IRR
of 60.7% (using a 10% real discount rate and $40.30/tonne operating
costs). Metal prices as of June 5, 2007, are US$13.63 per oz. for
silver, US$1.67 per lb. for zinc, US$1.04 per lb for lead,
US$3.26 per lb for copper.
- The Production Capital Expenditure (Cap Ex) is estimated to be
US$26.5 million incurred between May 2007 and the end of February
2008. The Cap Ex indicates a payback of nearly 3 years at a
production rate of 1,000 TPD.
- Mill throughput rate is projected at 350,000 tonnes per year with
average grades of 127.0 g/t silver, 2.97% zinc, 0.42% copper, 1.42%
lead and 0.12 g/t gold.
- Milling facility will have the possibility of easily increasing
throughput to 2,000 TPD if required.
- Estimated average annual production of 1.1 million ounces of silver,
18.0 million pounds of zinc, 1.80 million pounds of copper,
9.0 million pounds of lead at a rate of 1,000 TPD as per metals
payable contained in the concentrates.
- Production is expected to begin in March of 2008.
- Mineral Resource and Reserve estimates included in the PFS are up
to April 22, 2007. Since then, Scorpio has drilled an additional
6,300 metres, which will be included in a future updated reserve/
- Only the Nuestra Senora and Hoag/Sept 9 Zones were used in the study,
which does not include resources from the Santa Teresa, Santo
Domingo, Candelaria systems.
- The deposit(s) remain open and the Company is aggressively exploring
for additional resources and delineating current resources to convert
them into reserves.
- Currently the Company is looking at various commercial smelter terms
which could improve the net smelter returns received.
Estimated Reserves and Resources
Table 1: Mineral Reserves
Probable Tonnes Silver Zinc Lead Copper
Reserves (metric) (g/t) (%) (%) (%)
Main Zone 1,067,709 167 3.24 0.98 0.55
Hoag Zone 598,284 71 2.52 1.97 0.23
Sept 9 Zone 220,776 81 2.87 2.09 0.28
Total: 1,886,769 127 2.97 1.42 0.42
Note 1: The cut-off in situ value used to estimate the Mineral Reserve
above was US$80 per tonne.
Note 2: The Mineral Reserves were estimated after allowing for the
following factors: Dilution: 10% for the Main Zone and 15% for
the Hoag/Sept 9 Zones; Ore recovery: 75% for the Main Zone, 85%
for the Hoag and 95% for the Sept 9 Zone and this recovery takes
into account the pillars left in place.
Note 3: Average ore densities were estimated at 3.15 t/m3.
Note 4: The effective date of the Mineral Reserve estimate described
above is April 22, 2007.
Table 2: Remaining Estimated Mineral Resources after Reserves
Resources Tonnes Silver Zinc Lead Copper
Category (metric) (g/t) (%) (%) (%)
Measured 369,352 325 4.93 2.21 0.90
Indicated 361,441 315 5.04 2.33 0.80
Total: 730,793 320 4.99 2.27 0.85
Inferred 816,851 194 3.28 1.75 0.49
Note 1: The effective date of the Mineral Resources estimate described
above is April 22, 2007.
Note 2: The above mineral resources are exclusive of the Mineral Reserves
quoted in table 1 above.
Note 3: Under NI 43-101, Inferred Resources are not included in studies
of mine economics.
Note 4: Mineral resources are not reserves and do not have demonstrated
- Estimated Resources
For the purpose of the mineral Resources in the PFS more stringent
parameters than those previously calculated were applied. This includes:
- Base case metal values used were, US$11.00 per oz. for silver,
US$1.25 per lb. for zinc, US$0.50 for lead, US$2.25 for copper.
- All calculations were made using Gemcom software, MS Access, Sages
- Capping grade factors were applied and a US$80 per tonne cut-off
grade applied to determine the qualification of "ore" - waste.
- The sample composites were at a length of 1 metre with respect of
qualification ("ore" - waste) before interpolation.
- A block model with cell sizes of 2 x 2 x 5 metre was interpolated
using the inverse of the square of the distance using samples in the
research ellipsoids. The closest composite within a range of
10 metres was classified as Measured, the closest composite between
10 and 20 metres was classified as Indicated and closest sample from
20 to 30 metres classified as Inferred.
- A specific gravity overall of 3.15 t/m3 was applied to all
- All known underground excavations material was subtracted from the
gross calculated material resource.
- Estimated Reserves
The Resource block model was then submitted to a team of specialists with
the mandate to identify recoverable resources, mining method, dilution factor,
pillar location etc. This includes:
- All calculations were made using Gemcom software, MS Access, Sages
2001, Promine and NCSS.
- The team used an US$80 per tonne cut-off.
The resource estimate for the PFS was prepared by Denis Boivin, P.Geo.,
and was supervised and validated by independent Qualified Person Christian
d'Amours, Eng., President of Géopointcom Inc. It is an update from the
estimate contained in the Company's technical report dated February 5th 2007
prepared by independent Qualified Person, Denis Boivin. It was prepared using
data available up to April 22nd, 2007. As of April 22nd 2007, a total of
74,169 metres of diamond drilling had been performed on the property. Since
April 22nd, a further 6,300 metres of diamond drilling has been performed.
Michel Garon, Eng. and Christian d'Amours P.Geo., are the Qualified
Persons who have reviewed and approved the technical information in this news
release on behalf of the Company.
Scorpio intends to file a National Instrument 43-101 technical report
regarding the pre-feasibility study within 14 days.
ON BEHALF OF SCORPIO MINING CORPORATION
Peter J. Hawley
Chairman & CEO
This news release includes certain statements that may be deemed
"forward-looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and applicable Canadian securities
legislation. Forward-looking statements include, but are not limited to,
statements with respect to the future price of silver, zinc, copper, lead and
gold, the timing of exploration activities, the mine life of the Nuestra
Senora Project, the economic viability and estimated internal rate of return
of the Nuestra Senora Project, the estimation of mineral reserves and mineral
resources, the results of drilling, estimated future capital and operating
costs, projected mineral recovery rates and Scorpio Mining Corporation's
commitment to, and plans for developing the Nuestra Senora Project. Generally,
these forward-looking statements can be identified by the forward-looking
terminology such as "plans", "expects"' or "does not expect", "is expected",
"budget", "scheduled", "estimates", "projects", "intends", "anticipates", or
"does not anticipate", or "believes", or "variations of such words and phrases
or state that certain actions, events or results "may", "can", "could",
"would", "might", or "will" be taken", "occur" or "be achieved".
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause the actual results, level of
activity, performance or achievements of Scorpio Mining Corporation to be
materially different from those expressed or implied by such forward-looking
statements, including but not limited to: risks related to the exploration and
potential development of the Nuestra Senora Project, risks related to
international operations, the actual results of current exploration
activities, conclusions of economic evaluations, changes in project parametres
as plans continue to be refined, future prices of silver, zinc, copper, lead
and gold, as well as those factors discussed in the sections relating to risk
factors of our business filed in Scorpio Mining Corporation's required
securities filings on SEDAR, including its Annual Information Form date March
27, 2007. Although Scorpio Mining Corporation has attempted to identify
important factors that could cause results to differ materially from those
contained in forward-looking statements, there may be other factors that cause
results to be materially different from those anticipated, described,
estimated, assessed or intended.
There can be no assurance that any forward-looking statements will
provide accurate, as actual results and future events could differ materially
from those anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements. Scorpio Mining Corporation
doses not undertake to update any forward-looking statements that are
incorporated by reference herein, except in accordance with applicable
For further information:
For further information: Glenn Little, Jackson Little Holdings Ltd:
(604) 930-4375, 1-888-930-4375, Email: email@example.com; Rich Kaiser,
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