Manantial Espejo

Manantial Espejo

Manantial Espejo is an open pit and underground silver-gold mine located in Santa Cruz, Argentina and is 100% owned by Pan American.

Highlights

  • Location: Santa Cruz, Argentina
  • Mine Type: Open Pit/Underground
  • Ownership: 100%
  • Products: Silver and gold doré
  • Capacity: 2,000 tpd
  • Deposit: Epithermal veins, breccias, and stockworks
Manantial Espejo Map

Silver and gold mineralization is present as epithermal veins, vein breccias, sheeted and stockwork veining, and minor disseminations.

Ore is mined at Manantial Espejo using a combination of conventional open pit and underground mining methods. The surface mining operations uses trucks and front end loaders and track shovel loading equipment. The underground mining operations use either long-hole, cut and fill, or shrinkage methods.

Ore is treated by conventional crushing, grinding, concentration, agitation leaching, thickening, Merrill Crowe zinc precipitation, and silver and gold doré production from melting of the Merrill Crowe precipitate. The nominal treatment rate at design capacity is 2,000 tpd of ore.

Operating Update

In 2015, we processed approximately 774,900 tonnes of ore with metallurgical recoveries of 91.6% silver and 94.9% gold, producing 3.6 million ounces of silver and 77,300 ounces of gold. Silver production in 2015 was 4% less than in 2014 due to lower throughput caused by a two week shut down of the open pit operations in the second quarter of the year. The mine achieved record gold production during 2015 due to significantly higher gold grades with the mine sequencing into the final mineralized zone of the Maria open pit.

In 2015, cash costs per payable ounce of silver at Manantial Espejo decreased by 28% compared to 2014 due to substantial productivity improvements that drove unit operating costs per tonne lower, while the 10% increase in gold production was mostly offset by the 8% lower gold price.

2015 all in sustaining costs per silver ounce sold (“AISCSOS”) increased 5% to $18.81 from $17.93 in 2014, due largely to production costs increases from an $18.0 million increase in negative net realizable value (“NRV”) adjustments to inventories, and a 5% reduction in silver sales volumes which more than offset the benefits of a 47% reduction in sustaining capital expenditures, and a 5% increase in by-product credits with the significant increase in gold production. Inventory NRV adjustments increased production costs by $22.8 million in 2015 and reduced production costs by $4.8 million in 2014.

For a more detailed discussion of cash costs and AISCSOS and their calculations, readers should refer to the “Alternative Performance (non-GAAP) Measures”, section of the Company’s Management’s Discussion & Analysis for the year ended December 31, 2015.

2016 Forecast

The open pit operation is scheduled to end in mid-2016 and will affect grades and production thereafter. Plant throughput is expected to increase by 3% to 10% in early 2016, while additional material from stockpiles will be processed to compensate for the reduced open pit ore feed, along with additional ore production from the underground mine. The increased throughput is expected to offset the decline in open pit mining and result in forecasted 2016 silver production of between 3.60 million and 3.75 million ounces, which is consistent with the 3.6 million ounces produced in 2015. The increased tonnage, however, does not offset the expected 18% to 19% decline in gold grades resulting in a forecasted decrease in gold production of between 12% and 16% to between 64,600 and 68,100 ounces in 2016 from the 77,300 ounces produced in 2015.

Under the assumption that the devaluation of the Argentine peso will keep pace with local inflation rates during 2016, we expect that production costs will decrease from productivity improvements and the decommissioning of open pit mining activities by mid-2016. The effect of these reductions is expected to be offset by non-cash inventory variations from the drawdown of stockpiles in the calculations of cash costs. In 2015, stockpile inventory build-up reduced operating costs by $8.7 million, while in 2016 we expect to process stockpiles adding $9.1 million of non-cash charges to cash costs. The aggregate expected effect of these net cost increases, along with decreased gold production, is an increase in cash costs to $9.25 to $10.75 per payable ounce of silver from the $7.33 per ounce reported for 2015.

Sustaining capital expenditure in 2016 is expected to be between $2.0 million and $2.5 million, a significant decrease from the $14.1 million spent in 2015. The majority of the decrease is a result of no open pit pre-stripping activities in 2016. The majority of the 2016 sustaining capital budget is for brownfield exploration.

AISCSOS at Manantial Espejo for 2016 is expected to be between $10.00 and $11.10, a significant decrease from the $18.81 AISCSOS reported in 2015 due mainly to the lower sustaining capital and lower net realizable value adjustments than those incurred in 2015.

For a more detailed discussion of cash costs and AISCSOS and their calculations, readers should refer to the “Alternative Performance (non-GAAP) Measures”, section of the Company’s Management’s Discussion & Analysis for the year ended December 31, 2015.

Cautionary Note Regarding Forward Looking Statements

Mineral Reserves & Resources

Management estimates that mineral reserves at the Manantial Espejo mine, as at December 31, 2015, are as follows:

Manantial Espejo Mineral Reserves1,2

Reserve Category Tonnes (Mt) Grams of Silver per tonne Grams of Gold per tonne
Proven 2.5 120 1.60
Probable 0.3 262 3.90
TOTAL 2.7 135 1.84

Notes:

  1. Estimated using prices of $14.50 per ounce of silver and $1,100 per ounce of gold for planned 2016 production, then using $17.00 per ounce of silver and $1,180 per ounce of gold.
  2. Mineral reserve estimates for Manantial Espejo were prepared under the supervision of, or were reviewed by Martin Dupuis, P.Geo., and Martin G. Wafforn, P.Eng., who are Qualified Persons as that term is defined in NI 43-101.

Management estimates that mineral resources at the Manantial Espejo mine, as at December 31, 2015, are as follows:

Manantial Espejo Mineral Resources1,2

Resource Category Tonnes (Mt) Grams of Silver per tonne Grams of Gold per tonne
Measured 0.9 99 1.14
Indicated 0.5 188 1.84
Inferred 0.5 208 2.64

Notes:

  1. These mineral resources are in addition to mineral reserves. Estimated using prices of $25 per ounce of silver and $1,400 per ounce of gold.
  2. Mineral resource estimates for Manantial Espejo were prepared under the supervision of, or were reviewed by Martin Dupuis, P.Geo., and Martin G. Wafforn, P.Eng., who are Qualified Persons as that term is defined in NI 43-101.

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 Manantial Espejo.

Click here to see Pan American’s full mineral reserves and resources at December 31, 2015
Mineral reserves and resources are as defined by the Canadian Institute of Mining, Metallurgy and Petroleum.
Mineral resources that are not mineral reserves have no demonstrated economic viability.
Cautionary Note to US Investors