Operations / Peru / Quiruvilca

Quiruvilca (100% Ownership)

Location and Access

The Quiruvilca mine is located at an elevation of 3,800 metres in the department of La Libertad. Elevations in the area of the mine range from 3,450 metres to 4,075 metres above sea level. Today, Quiruvilca is Pan American's smallest operation and is considered a non-core asset.

The mine lies approximately 130 kilometers northeast of the coastal city of Trujillo, which is connected to the capital city of Lima via a paved all-weather highway. Access to the mine is by a 65-kilometre paved road, followed by 72 kilometers of gravel road.

In January of 2009, after a detailed review of all its mines, Pan American decided to initiate the process necessary to suspend operations at the Quiruvilca mine later that year. At that time, the financial crisis had rendered Quiruvilca's reserves uneconomic because after over 80 years of continuous operation, the mine has become increasingly reliant on base metals production, particularly zinc.

Precious metals recovered quickly and in the wake of zinc's renewed strength, Pan American continues operating the Quiruvilca mine, although it has reduced underground development, maximized existing developed ore and prioritized the most cost efficient areas of the mine, while it continues to methodically prepare the operation for a period of care and maintenance sometime in the medium-term. The Company believes that it could take approximately 6 to 8 months to complete the activities to put the mine on care and maintenance after a decision to close operations is made.

History

Quiruvilca is one of Peru's oldest mines, with mineralization first reported in the area in 1789. Small scale silver mining in the area was carried out from the 1870s until 1924. Asarco operated the mine for a brief period, after which the mine was shut down in 1931. The mine was re-opened in 1940 and has been in continuous operation since then. Initially, mining focused on the copper bearing veins on the property but, gradually, focus was shifted to veins in the zinc-lead zone. In March 1967, the mill started to treat complex ores producing copper, lead and zinc concentrates.

Pan American Silver acquired 80% of the outstanding voting shares in Mina Quiruvilca in 1995 and increased its interest in the mine to 99.9% of the outstanding voting shares and 99.8% of the total outstanding equity during the following year.

Geology

Quiruvilca is located at the west side of the Western Cordillera on the edge of the Calipuy Volcanic Formation, which consists of andesite flows and flow brecchias interlayered with thin basalt flows and tuffaceous lacustrine sediments.

In the mine area, mineralization is contained in a series of over 130 narrow veins filling fractures and faults. At least 75% of these veins have been in production at some point in time. Although narrow, the veins at Quiruvilca tend to have extensive lateral and vertical continuity within various structure types and their width varies from up to two metres in the central zone to stringers..

Mining

Access to the Quiruvilca Mine is from four adits driven into the side of the mountain. The underground workings cover an area 4 kilometres long by 3 kilometres wide and extend to more than 400 metres in depth. Locomotives are used to haul ore and waste from the stopes and development headings to ore and waste passes. Trolley locomotives with mine cars are used to transport ore from the ore passes on the 220 level to the crushing plant outside of the mine portal.

There are, on average, 60 active stopes at any given time, almost all using the cut and fill mining method. Approximately one-third of the stopes are typically in the drilling and blasting phase, one-third in the mucking phase and one-third in the filling phase. In stopes where hydraulic backfill is not available, or in places where the vein is very narrow and would not otherwise be economic, resueing is employed with the waste rock remaining in the stope as backfill. In all other stopes, tailings are used for backfill, poured from the hydraulic plant located near the Santa Catalina Tailings Impoundment.

Operating Highlights

Exploration

Exploration at Quiruvilca is conducted using a combination of diamond drilling and underground drifting. Two to three diamond drills are in continuous operation at the property, drilling holes between 50 and 350 metres in length. This is generally followed by underground drifting and cross-cutting at 70-metre spacing.

During 2010, Pan American focused on upgrading silver resources close to current production areas and completed 7,700 meters of diamond drilling. In 2011, exploration activities aim to continue replacing reserves in proximity to current mine operations.