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San Vicente

OVERVIEW

San Vicente is an underground silver-zinc mine located in the department of Potosí, in   Southern Bolivia. Pan American holds a 95% interest in PASB (Pan American Silver Bolivia). The remaining 5% of PASB is owned by an affiliate of Trafigura Baheer B.V. PASB owns a 50% joint venture interest in, and is the operator of, the San Vicente project. The remaining interest in the joint venture project is held by Corporación Minera de Bolivia (“COMIBOL”), the Bolivian state mining company.

Silver, zinc, and lead mineralization is present as epithermal veins, replacements in brecciated conglomerates, and mineralization in dacitic dykes. Shrinkage stoping is the mining method for narrow vein stopes while sub level long hole mining is used in areas where the veins and structures are more than about 2 meters wide.

Ore is treated by primary crushing, semi-autogenous and ball mill grinding, concentrating in a flotation circuit, and is then thickened and dewatered to produce silver in zinc and copper concentrates. The nominal mill capacity is 750 tonnes per day. In 2013 the mine processed 0.3 million tonnes of ore, producing 4.0 million ounces of silver, 6,200 tonnes of zinc, and 600 tonnes of lead.

OPERATING UPDATE

 During 2013, Pan American’s 95% interest in San Vicente’s production was 4.0 million ounces of silver, 6,200 tonnes of zinc and 600 tonnes of lead.  Silver production rose by 6% compared to 2012 due to higher throughput rates and improved recoveries. Zinc and lead production also improved from 2012 by 26% and 31%, respectively.

San Vicente’s 2013 consolidated cash costs of $15.51 per ounce of silver, net of by-product credits, were 18% lower than in 2012 as a result of lower operating costs, higher by-product credits on account of higher base metals production and increased silver production. The decline in operating costs was driven by lower royalties paid as royalty payments were in direct correlation with lower metal prices. 

In 2013, sustaining capital expenditures at San Vicente totaled $8.2 million and were primarily invested in mine development, underground mobile equipment overhauls and exploration.

2014 FORECAST

In 2014, we expect to produce 3.9 to 4.0 million ounces of silver, 5,500 to 6,000 tonnes of zinc and 450 to 500 tonnes of lead at San Vicente. Cash costs are forecast to be $15.09 to $15.59 per ounce of silver, net of by-product credits.

With a tailings dam raise completed in 2013, the capital expenditure budget for 2014 of $6.0 million is significantly reduced from 2013’s levels. The main sustaining capital investments in 2014 include mine development and underground mine equipment overhauls and replacements. We also anticipate spending $0.4 million to complete 4,600 metres of diamond drilling to expand the current known limits of the mineral resources and reserves and to infill the drilling pattern to upgrade the confidence categories of existing mineral resources and reserves.

Mineral Reserves and Resources

San Vicente Mineral Reserves 1, 2, 3

Reserve Category Tonnes (Mt) Grams of Silver per tonne Contained Ag (Moz) % Zinc % Lead
Proven 2.1 413 28.1 2.85 0.35
Probable 0.7 406 9.4 2.55 0.34
TOTAL 2.8 411 37.5 2.78 0.35

Notes:

1. Estimated using a price of $22 per ounce of silver, $1,850 per tonne of zinc and $1,950 per tonne of lead.

2. Mineral Reserve estimates for the San Vicente mine were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., and Martin G. Wafforn, P.Eng., as Qualified Persons as that term is defined in NI 43-101.

3. Tonnes are shown for 100% of the San Vicente property. Pan American has a 95% interest in PASB.

Management estimates that the Measured and Indicated mineral resources at the San Vicente mine, as at December 31, 2013, are as follows:

San Vicente Mineral Resources 1, 2, 3, 4

Resource Category Tonnes (Mt) Grams of Silver per tonne Contained Ag (Moz) % Zinc % Lead
Measured 0.5 117 1.9 2.16 0.19
Indicated 0.2 129 0.9 1.47 0.12
Inferred 3.1 330 33.2 2.53 0.28

Notes:

1. These mineral resources are in addition to San Vicente mineral reserves.

2. Estimated using a price of $22 per ounce of silver, $1,850 per tonne of zinc and $1,950 per tonne of lead.

3. Mineral resource estimates for San Vicente were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., who is a Qualified Person as that term is defined in NI 43 101.

4. Tonnes are shown for 100% of the San Vicente property. Pan American has a 95% interest in PASB.

 

In early 2009, a new constitution was enacted in Bolivia that further entrenches the government’s ability to amend or enact certain laws, including those that may affect mining. On May 1, 2011 Bolivian President Evo Morales announced the formation of a multi-disciplinary committee to re-evaluate several pieces of legislation, including the mining law and this has caused some concerns amongst foreign companies doing business in Bolivia due to the government’s policy objective of nationalizing parts of the resource sector. However, Mr. Morales made no reference to reviewing or terminating agreements with private mining companies. Operations at San Vicente have continued to run normally under Pan American’s administration and it is expected that normal operations will continue status quo. Pan American will take every measure available to enforce our rights under our agreement with COMIBOL, but there is no guarantee that governmental actions will not impact the San Vicente operation and its profitability. Risks of doing business in Bolivia include being subject to new higher taxes and mining royalties (some of which have already been proposed or threatened), revision of contracts, and threatened expropriation of assets, all of which could have a material adverse impact on our operations or profitability.

Mineral reserve estimates are based on a number of assumptions that include metallurgical, taxation and economic parameters. Increasing costs or increasing taxation could have a negative impact on the estimation of mineral reserves. There are currently no known factors that may have a material negative impact on the estimate of mineral reserves or mineral resources at San Vicente.

Technical Report
HIGHLIGHTS
Name San Vicente
Location Sud-Chichas Province, Bolivia
Mine Type Underground
Ownership 95.0%
Products Silver rich zinc and lead concentrates
Capacity 750 tpd
Deposit Type Epithermal veins
Location
SanVicenteMap