Esperanza Provides San Luis Feasibility Update
28 June 2010 - 9:00PM
Marketwired Canada
Esperanza Silver Corp. (TSX VENTURE:EPZ)(PINK SHEETS:ESPZF) (EPZ) reports that
it has completed its preliminary review of the San Luis Feasibility Study
provided to it by Silver Standard Resources Inc., its joint-venture partner on
the Peruvian gold and silver project. Esperanza now anticipates a forthcoming
joint-venture meeting to discuss the study and determine the best path toward
production.
The Feasibility Study estimates an internal rate of return of 26.5% and a net
present value, discounted at 5%, of US$39.2 million using base case prices of
US$800/ounce gold and US$12.50/ounce silver. At near current prices
(US$1170/ounce gold and US$18.50/ounce silver) the rate of return is 58.0% and
the net present value is US$109 million.
Capital expenditures are estimated to be US$90.4 million (+/- 15%) for a 400
tonne/day underground mine with annual production of 78,000 ounces of gold and
1.86 million ounces of silver annually over its 3.5 year mine life.
Resources and Reserves
Resource and reserve grades were derived from a geologic block model provided by
Resource Evaluation Inc. and Resource Modeling Inc. in 2009. The block model
resource estimate used a cut-off grade of 6 g/t gold-equivalent based on a 65:1
gold-silver ratio and metals prices of US$600/troy ounce gold and US$9.25/troy
ounce silver. Metallurgical recoveries and net smelter returns were assumed to
be 100%.
In this resource estimate, measured and indicated resources totalled 484,000
tonnes grading 22.4 grams of gold and 578.1 grams of silver per tonne containing
348,100 ounces of gold and 9,003,300 ounces of silver (See the news release
dated December 2, 2008 and Updated Mineral Resource Estimate dated January 21,
2009 filed on SEDAR (www.sedar.com) respectively).
The following table summarizes the mineral reserves within the block model
resource estimate used in the Feasibility Study.
San Luis Project Mineral Reserve Summary - June 2010
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Gold Grade Silver Grade Contained Contained
Material Tonnes (g/t) (g/t) Gold Ounces Silver Ounces
-------------------------------------------------------------------------
Proven 56,279 28.26 604.45 51,136 1,093,690
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Probable 447,034 16.65 426.21 239,348 6,125,745
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Total 503,313 17.95 446.14 290,484 7,219,435
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The mineral reserves were estimated using metal prices of US$800/ounce gold and
US$12.50/ounce silver, metallurgical recoveries of 94.0% for gold and 90.0% for
silver and an operating cost of US$160.83 per tonne of ore processed to
determine a breakeven cut-off grade for reserves of 6.9 g/t gold-equivalent.
The mineral reserves were determined in accordance with CIM (The Canadian
Institute of Mining, Metallurgy and Petroleum) guidelines and only measured and
indicated resources as defined in National Instrument 43-101 Standards of
Disclosure for Mineral Projects of the Canadian Securities Administrators (NI
43-101) were used to calculate the proven and probable mineral reserve.
Operating and Financial Summaries
As presented in the Feasibility Study, the operating cost for the San Luis
Project is estimated at US$160.83/tonne of ore processed. The following table
summarizes the breakdown of operating costs:
Estimated Annual Operating Cost Summary - June 2010
--------------------------------------------------------------
Average Cost Unit Cost
Area (in US$) (in US$/tonne Ore)
--------------------------------------------------------------
Mine 8,613,713 59.00
--------------------------------------------------------------
Process 8,222,281 56.32
--------------------------------------------------------------
General & Administration 6,644,496 45.51
--------------------------------------------------------------
--------------------------------------------------------------
Total 23,480,490 160.83
--------------------------------------------------------------
--------------------------------------------------------------
The base case financial summary assumes recovered gold production of 270,031
ounces and silver production of 6,454,810 ounces over the life of the mine:
Base Case Financial Summary - June 2010
(in US$ where applicable)
-----------------------------------------------------------
Base case gold price $800
-----------------------------------------------------------
Base case silver price $12.50
-----------------------------------------------------------
Internal rate of return (IRR) 26.5%
-----------------------------------------------------------
Net present value - 0% $57.5 million
-----------------------------------------------------------
5% discount $39.2 million
-----------------------------------------------------------
10% discount $25.6 million
-----------------------------------------------------------
Sensitivities - June 2010
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NPV
Gold price Silver Price IRR (US$ in millions,
(US$/oz) (US$/oz) (%) 5% discount)
-------------------------------------------------------------------------
Base Case 800 12.50 26.5 39.2 million
-------------------------------------------------------------------------
3-year Average 955 14.76 40.2 68.2 million
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Spot 1,170 18.50 58.0 109.1 million
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Qualified Persons
William Pincus, CPG and President of Esperanza Silver Corp. is the qualified
person responsible for the contents of this news release.
The Feasibility Study for the San Luis Project was prepared for the joint
venture partners. Upon completion of the Feasibility Study, a NI 43-101
Technical Report was also prepared. The Technical Report is titled "Technical
Report for the San Luis Feasibility Study" and will be filed on SEDAR as
required. The Qualified persons for this Technical report are:
-- Steve Milne, Milne & Associates, Inc., Tucson, Arizona - mineral
reserves and review of mine design, planning and costs;
-- Michael Lechner, Resource Modeling Incorporated, Tucson, Arizona, and
Donald Earnest, Resource Evaluation Inc., Tucson, Arizona - block model
resource estimate and drilling validation;
-- Clint Strachan, MWH Americas, Inc., Fort Collins , Colorado - tailings
storage facility and water collection facilities design;
-- Mike Robb, RR Engineering, Albuquerque, New Mexico - overall study
coordination, review, coordination and financial models; and
-- Chris Kaye, Mine & Quarry Engineering Services Inc., San Mateo,
California - mill and infrastructure.
About Esperanza
Esperanza is a gold and silver company focused on advancing the development of
its two principal properties: the 100%-owned Cerro Jumil gold project in Morelos
State, Mexico and the San Luis gold and silver joint venture in Peru. It also
holds an extensive portfolio of exploration properties in Mexico and Peru.
SAFE HARBOR: Some statements in this release are forward-looking in nature. The
United States Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. Such statements include
statements as to the potential of the San Luis property, the ability to finance
further exploration, permit drilling and other exploration work, and the
availability of drill rigs. The forward-looking statements involve risks and
uncertainties and other factors that could cause actual results to differ
materially, including those relating to exploration and bringing properties into
production. Please refer to a discussion of some of these and other risk factors
in Esperanza's Form 20-F filed with the U.S. Securities and Exchange Commission.
The forward-looking statements contained in this document constitute
managements' current estimates as of the date of this release with respect to
the matters covered herein. Esperanza expects that these forward-looking
statements will change as new information is received and that actual results
will vary, possibly in material ways. Forward-looking statements are based on
the beliefs, expectations and opinions of management on the date the statements
are made, and the company does not assume any obligation to update
forward-looking statements if circumstances or management's beliefs,
expectations or opinions should change. For these reasons, investors should not
place undue reliance on forward-looking statements.
RESOURCES: The terms "measured resource", "indicated resource" and "inferred
resource" used in this news release are Canadian geological and mining terms as
defined in accordance with National Instrument 43-101, Standards of Disclosure
for Mineral Projects of the Canadian Securities Administrators under the
guidelines set out in The Canadian Institute of Mining, Metallurgy and Petroleum
(the "CIM") Standards on Mineral Resources and Mineral Reserves, adopted by the
CIM Council as may be amended from time to time by the CIM. Mineral resources
that are not mineral reserves do not have demonstrated economic viability. We
advise U.S. investors that while such terms are recognized and permitted under
Canadian regulations, the SEC does not recognize them. U.S. investors are
cautioned not to assume that any part or all of the mineral deposits in the
measured, indicated, and inferred categories will be converted into reserves.
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