Denarius Metals Announces Positive PEA Results for Its 100%-owned Zancudo Project in Colombia
Toronto, October 30, 2023 - Denarius Metals Corp. (TSXV: DSLV) (OTCQX: DNRSF) ("Denarius Metals" or the "Company") today announced the results of a Preliminary Economic Assessment ("PEA") for its 100%-owned Zancudo Project (the "Project"), which includes the historic producing underground Independencia Mine, located in the Municipality of Titiribi, Department of Antioquia, Republic of Colombia, approximately 30km southwest of Medellin. The PEA was prepared in accordance with the Canadian Institute of Mining Metallurgy and Petroleum ("CIM") Definition Standards incorporated by reference in National Instrument 43-101 ("NI 43-101") with an effective date of October 24, 2023.
Serafino Iacono, Executive Chairman and CEO of Denarius Metals, commented, "The PEA affirms the robust economic viability of our planned underground mining operation at our Zancudo Project, generating near-term production and cash flow from a long-life asset yielding attractive returns for our shareholders. Material will be mined by a local mining contractor commencing in 2024 and processed by the Company through conventional crushing and milling facilities, initially at a rate of 500 tonnes per day ("tpd") and increasing to 1,000 tpd in 2025, to generate a high-grade gold-silver concentrate. The PEA, based on the Mineral Resource estimate ("MRE") announced by the Company on September 5, 2023, envisions a 10-year mine life over which the Company expects to generate net revenue of approximately US$1.0 billion from the sale of approximately 576,000 payable ounces of gold and 8.8 million payable ounces of silver at a life-of-mine ("LOM") average all-in sustaining cost ("AISC") of US$1,059 per ounce of gold. The Zancudo deposit remains open for further expansion in all directions and we expect to commence a 10,000 meters drilling program by the end of this year."
Highlights of the Zancudo Project PEA
- The Zancudo Project PEA is based on an updated MRE, with an effective date of July 31, 2023 comprising 4.1 million tonnes grading 6.5 g/t gold and 107 g/t silver totaling 860,000 ounces of gold and 14.1 million ounces of silver. At a gold equivalent grade of 8.1 g/t, the Inferred Resources in the updated MRE represent a total of 1,060,000 gold equivalent ounces.
- Over the approximately 10.3-year mine life, production from the mining and processing of approximately 3.5 million tonnes of material containing 899,000 gold equivalent ounces is expected to recover 683,000 payable gold equivalent ounces through the sale of approximately 636,000 tonnes of high-grade gold-silver concentrates.
- Recoveries of 85% for gold and 87% for silver to concentrates from a three-stage crushing circuit.
- Initial CAPEX costs of US$14.8 million including a US$2.0 million contingency.
- AISC of US$1,059 per ounce of payable gold on a by-product credit basis.
- The Project incorporates local contract mining and is expected to stimulate the local economy, benefitting the Municipality of Titiribi and surrounding communities through direct and indirect employment at the Project, local sourcing of services and supplies and community programs funded by the Company.
- At long-term gold and silver prices of US$1,800 per ounce and US$22 per ounce, respectively, total LOM undiscounted after-tax Project cash flow from mining operations amounts to US$266.4 million. At a 5% discount rate, the net present value of the total LOM after-tax Project cash flow amounts to US$206.3 million. The Project has an after-tax internal rate of return of 287% and payback in 2025.
Please see "Cautionary Statement on PEA and Use of Inferred Resources" below for the limitations, explanations and cautionary language on the use of the PEA.
Table 1: Key Economic Parameters of the PEA
| Assumption / Results | 2023 PEA |
| Total tonnes processed over the LOM | 3,463,000 |
| Total waste mined over the LOM | 346,000 |
| Gold grade mined - LOM average (g/t) | 6.77 |
| Silver grade mined - LOM average (g/t) | 106.13 |
| Gold recovery - LOM average | 85% |
| Silver recovery - LOM average | 87% |
| Expected long-term gold price (US$/oz) | $1,800 |
| Expected long-term silver price (US$/oz) | $22 |
| Total gold production (payable ounces) | 575,514 |
| Total silver production (payable ounces) | 8,809,108 |
| LOM net revenue, after refining and treatment charges (US$ millions) | $1,021.3 |
| Initial capital costs (US$ millions) (Table 2) | $14.8 |
| Sustaining capital costs (US$ millions) | $5.2 |
| LOM operating costs and royalties (US$ millions) (Table 3) | $589.7 |
| LOM cash cost per ounce of gold (US$) (Table 3) | $1,050 |
| LOM AISC per ounce of gold (US$) (Table 3) | $1,059 |
| Mine Life | 10.3 Years |
| Average LOM process rate (tpd) | 925 |
| After-tax undiscounted LOM Project Cash Flow (US$ millions) | $266.4 |
| After-Tax NPV (5% discount) (US$ millions) | $206.3 |
| After-Tax IRR | 287% |
| Payback Period | 1.2 Years |
Note: Please see "Cautionary Statement on PEA and Use of Inferred Resources" below for the limitations, explanations and cautionary language on the use of the PEA.
Capital Costs
The estimated capital costs to bring the Project into operation in 2024 are based on an underground mining operation utilizing local contract mining. The local mine contractor is responsible for capital and operating development within the underground mine and will be compensated for such work through its mine operating contract with the Company. After an initial ramp up period, mineralized material will be processed at a rate of 365,000 tonnes per year in a conventional three-stage crushing and milling plant which will produce a saleable gold-silver concentrate.
The initial capital expenditure for the construction period is estimated at US$14.8 million, which includes US$2.0 million in contingency costs. An additional US$4.2 million is estimated for sustaining capital, principally associated with the crushing and milling facilities, over the LOM. The Company has also included US$1.0 million of expenditures in the first year of the LOM for a 10,000 meters exploration drilling campaign split between infill drilling and step-out drilling aimed to extend the current mineralization in the northern and central areas of the deposit.
Capital cost estimates are based on industry standards and were developed using quotes provided by mining contractors and specialists experienced in mining development in Colombia.
Table 2: Capital Costs
| Initial Capital Costs | Costs (US$) |
| Mine access rehabilitation (initial work excluded from mine contractor responsibility) | 29,000 |
| Access road | 2,492,000 |
| Crushing plant | 752,000 |
| Crushing plant electrical | 806,000 |
| Civil works | 325,000 |
| Processing plant | 5,284,000 |
| Tailings storage facility | 1,000,000 |
| Permitting | 408,000 |
| Indirect costs | 1,200,000 |
| Owner's costs, including lab and other site infrastructure | 500,000 |
| Total initial capital costs before contingency | 12,796,000 |
| Contingency | 2,000,000 |
| Total initial capital costs | 14,796,000 |
Note: Please see "Cautionary Statement on PEA and Use of Inferred Resources" below for the limitations, explanations and cautionary language on the use of the PEA.
Mining
The minable resource is accessed utilizing existing workings and new planned development including ventilation/secondary escapeways and rock handling systems. The minable resource will be extracted utilizing two mining methods, a modified re-sue shrinkage for the steeply dipping veins and traditional re-sue for the flat-lying mineralization. The majority of the re-sue waste is planned to remain underground reducing the requirement for surface waste facilities. Mining costs in the PEA are based on an agreement arranged between the Company and a local contract miner wherein the contractor will be paid for their services at a rate tied to actual gold production and spot gold prices.
Processing
Processing costs were built up using reagent consumptions from the metallurgical test work, scaled for the commercial operation using current market rates for the reagents. Labor costs were estimated using local wage structure with appropriate burden rates and staffing levels based on similar sized operations. Power costs were determined based on the equipment list installed power requirements and local grid power costs.
The Zancudo process scheme includes three-stage crushing followed by conventional grinding and product slurry conditioning. Processing of the conditioned slurry product will be followed by industry typical bulk sulfide flotation to produce a bulk sulfide concentrate for the recovery of gold and silver. The flotation concentrate will be thickened, filtered and readied for shipment. Flotation tailings will be thickened and filtered for disposal as dry-stacked material in the tailings storage facility (TSF).
Table 3: Operating Costs
| Operating Costs | LOM (US$M) | Per Oz Au (US$) |
| Mining | 435.1 | 756 |
| Processing | 57.6 | 100 |
| Site administration and social programs | 16.1 | 28 |
| Shipping and port handling | 31.4 | 55 |
| Royalties | 49.6 | 86 |
| Total operating costs and royalties | 589.7 | 1,025 |
| Refining and treatment charges | 208.4 | 362 |
| Less: silver by-product credits | (193.8) | (337) |
| Total cash costs | 604.3 | 1,050 |
| Sustaining capital and exploration | 5.2 | 9 |
| All-in sustaining costs | 609.5 | 1,059 |
Note: Please see "Cautionary Statement on PEA and Use of Inferred Resources" below for the limitations, explanations and cautionary language on the use of the PEA.
A summary of the key operating and financial metrics over the approximately 10.3-year mine life of the Zancudo Project according to the PEA is set out in Table 4 below.
Table 4: LOM Operating and Financial Data
| Year | Production3 | Net Revenue4 | Operating Costs & Royalties5 | Operating Cash Flow6 | Sustaining Capex | Initial Capex7 | Project Cash Flow | AISC8 | |
| Gold | Silver | ||||||||
| Kozs | US$ Millions | ||||||||
| 2023 | - | - | - | - | - | - | 6.2 | (6.2) | N/A |
| 2024 2 | 34 | 167 | 61.2 | 33.8 | 12.5 | 0.2 | 8.6 | 3.7 | 1,007 |
| 2025 | 76 | 1,118 | 132.3 | 75.5 | 37.3 | 1.4 | - | 35.9 | 1,067 |
| 2026 | 75 | 1,104 | 130.5 | 74.6 | 37.7 | 0.5 | - | 37.2 | 1,058 |
| 2027 | 66 | 990 | 116.3 | 67.3 | 32.5 | 0.5 | - | 32.0 | 1,070 |
| 2028 | 62 | 932 | 109.3 | 63.7 | 30.4 | 0.5 | - | 29.9 | 1,078 |
| 2029 | 60 | 956 | 105.7 | 61.3 | 29.7 | 0.5 | - | 29.2 | 1,062 |
| 2030 | 57 | 977 | 102.7 | 59.2 | 29.0 | 0.5 | - | 28.5 | 1,047 |
| 2031 | 54 | 948 | 97.5 | 56.3 | 28.2 | 0.5 | - | 27.7 | 1,046 |
| 2032 | 45 | 797 | 81.7 | 48.5 | 22.4 | 0.5 | - | 21.9 | 1,076 |
| 2033 | 45 | 795 | 81.5 | 48.0 | 22.3 | 0.1 | - | 22.2 | 1,059 |
| 20349 | 2 | 25 | 2.6 | 1.5 | 4.4 | - | - | 4.4 | 1,027 |
| Total | 576 | 8,809 | 1,021.3 | 589.7 | 286.4 | 5.2 | 14.8 | 266.4 | 1,059 |
Notes:
1All figures are rounded to reflect the relative accuracy of the estimate.
2Includes production and cash flow from early-stage mining operations and sale of run-of-mine ("ROM") material during the construction period. Processing plant operations and sale of gold-silver concentrates commencing November 1, 2024.
3Production represents payable gold and silver from the sale of ROM material and concentrates.
4Net revenue is based on spot gold and silver prices of US$1,800 and US$22 per ounce, respectively, and is shown net of refining and treatment charges.
5Refer to Table 3.
6Operating cash flow is shown after working capital adjustments and income taxes.
7Refer to Table 2.
8AISC is a non-IFRS measure and is calculated on a by-product credit basis by deducting revenue from silver production from the sum of operating costs and royalties, refining and treatment charges and sustaining capex, divided by the number of gold ounces produced.
9Ending January 31, 2034.
10Please see "Cautionary Statement on PEA and Use of Inferred Resources" below for the limitations, explanations and cautionary language on the use of the PEA.
Mineral Resources
The PEA is based on the MRE announced by the Company on September 5, 2023 for the Zancudo deposit with an effective date of July 31, 2023. The MRE is based on the most recent interpretation of ten geological domains of the Project. Five domains representing the sub-horizontal Manto and five domains representing various steeply dipping mineralized veins throughout the Project. These mineralized zones have been analyzed for grade capping and compositing for statistical analysis, geostatistical analysis, block modeling and grade interpolations using industry accepted standards. Mineral resources in this news release were estimated in accordance with the Canadian Institute on Mining, Metallurgy and Petroleum ("CIM") Definition Standards for Mineral Resources and Reserves, prepared by the CIM Standing Committee on Reserve Definitions and adopted by the CIM Council on May 14, 2014. The total MRE for the Zancudo deposit has been classified as inferred mineral resources.
Table 5: Zancudo Inferred Mineral Resource Estimate - Effective date July 31, 2023
| Cut-off Grade | Tonnes (kt) | Grade | Material Content | ||||
| Au (g/t) | Ag (g/t) | AuEq (g/t) | Au (koz) | Ag (koz) | AuEq (koz) | ||
| 4 g/t AuEq | 4,100 | 6.53 | 107 | 8.1 | 860 | 14,090 | 1,060 |
Cautionary Statement on PEA and Use of Inferred Resources
Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral resources will be converted to mineral reserves. The PEA is preliminary in nature, includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. The PEA is based on mine plan tonnages and mill feed schedules, derived from the MRE. The PEA was prepared to allow the Company to evaluate whether underground mining at the existing Independencia Mine would be economically viable and is subject to the assumptions and qualifications expressed in this press release and those that immediately follow. Mineral resources are assumed to be mined underground. The cut-off grade is based on mining costs of US$105/tonne, processing costs of US$42/tonne, general and administrative costs of US$21/tonne and royalties of 3.2%. The gold selling price used was US$1,850/oz and the silver selling price used was UD$23/oz. Gold recovery was assumed to be 75% and silver recovery was assumed to be 80%. Gold equivalent grade ("AuEq") was calculated by the formula "Au *Au Recovery (75%) * AuPrice + Ag *Ag Recovery (80%) * AgPrice)) / (Au Recovery (75%) *Au Price".
Qualified Person
Mr. Scott E. Wilson, CPG, President of Resource Development Associates Inc., is an independent consulting geologist specializing in Mineral Reserve and Resource calculation reporting, mining project analysis and due diligence evaluations. Mr. Wilson conducted a personal inspection of the Zancudo Project on September 15 and 16, 2023. Mr. Wilson has over 34 years of experience in the mining industry and is a Registered Member (#4025107RM) of Society for Mining, Metallurgy and Exploration, Inc. Mr. Wilson and Resource Development Associates Inc. are independent of the Company under NI 43-101.
Mr. Wilson is acting as the Qualified Person, as defined in NI 43-101, for the overall technical report, and the mineral resource estimate; Mr. Wilson has reviewed and approved the scientific and technical information disclosed in this press release.
The PEA is preliminary in nature and it includes inferred resources that are considered too speculative to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the estimates presented in the PEA will be realized. The PEA will be supported by a NI 43-101 independent report which will be published and filed on SEDAR+ at www.sedarplus.ca and Denarius Metal's website at www.denariusmetals.com within 45 days of the issuance of this news release.
About Denarius Metals
Denarius Metals is a Canadian junior company engaged in the acquisition, exploration, development and eventual operation of polymetallic mining projects in high-grade districts, with its principal focus on the Lomero Project in Spain. The Company signed a definitive option agreement with Europa Metals Ltd. in November 2022 pursuant to which Europa has granted Denarius Metals two options to acquire up to an 80% ownership interest in the Toral Zn-Pb-Ag Project, Leon Province, Northern Spain. The Company's 100%-owned Zancudo Project in Colombia provides an opportunity to develop near-term production and cash flow through local contract mining and long-term growth through exploration.
Additional information on Denarius Metals can be found on its website at www.denariusmetals.com and by reviewing its profile on SEDAR+ at www.sedarplus.ca.
Cautionary Statement on Forward-Looking Information
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release contains "forward-looking information", which may include, but is not limited to, statements with respect to Mineral Resource estimates, total revenue, AISC, future production, capital expenditures and projected financial results, future precious metals prices, future exploration and the timing and commencement of any of the foregoing, in addition to its anticipated business plans or strategies. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Denarius to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those anticipated in these forward-looking statements are described under the caption "Risk Factors" in the Company's Annual Information Form dated April 21, 2023 which is available for view on SEDAR+ at www.sedarplus.ca. Forward-looking statements contained herein are made as of the date of this press release and Denarius disclaims, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.
For Further Information, Contact:
Michael Davies
Chief Financial Officer
(416) 360-4653
investors@denariusmetals.com
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/185573
