Base case
* 36 % IRR, € 50 million NPV (@ 5 %) (calculated with a consensus silver
price of $14,9-20,0/Oz Ag)
* LOM CAPEX 40 M€ inclusive ore-sorting and capacity increase during
year 3 and ore-sorter
* Payback: less than 3 years from start of production
* Expected Life-of-Mine according to today’s reserves: 6 years
* 6 years’s EBITDA: € 95 million
Alternative silver prices
* 85 % IRR, € 124 million NPV (@ 5 %) (silver price of $28/Oz Ag)
* 11 % IRR, € 9 million NPV (@ 5 %) (silver price of $12.7/Oz Ag)
Management view estimate
* 40 % IRR, € 103 million NPV (@ 5 %) (calculated with a consensus
silver price of $ 14,9-20,0/Oz Ag)
* LOM CAPEX € 44 million inclusive underground ore-sorting and capacity
increase during year 3 with ore-sorter
* Payback: 3 years from start of production
* Estimated Life-of-Mine: 11 years (mineral reserves + 5 years from
Exploration Potential)
* 11 year’s EBITDA: € 194 million
Alternative silver prices
* 86 % IRR, € 223 million NPV (@ 5 %) (silver price of $ 28/Oz Ag)
* 15 % IRR, € 22 million NPV (@ 5 %) (silver price of $ 12.7/Oz Ag)
Base case
According to cash flow forecast, which is based on an average silver
price of $ 14,9 – 20,0 / Oz between the years 2016-2022, the Mine´s IRR
is estimated to 36% and NPV to € 50 million (@ 5%). Payback period from
start of production is estimated to be less than 3 years.
Table below: Estimated economic results according different metal price
estimates; 6 year’s production time. (CTS Engtec, 2016)
If the silver price 28 $/Oz is used, the estimated IRR is 85 % and NPV
is € 124 million (@ 5%). With silver price 12.7 $/Oz, the estimated IRR
is 11% and NPV is € 9 million € (@ 5%).
MINERAL RESERVES
The mineral reserves were estimated for each stope in conjunction with
the mine planning and the economic factors that was used showed a
profitable production. A summary of the mineral reserves are shown in
the table below.
Mineral reserves (ore) in the category of Proven and Probable are 2.76
million tonnes with a silver grade of 124 g/t Ag. The calculation
follows the Austral-asian JORC Code (2012).
Figure below: The mineral reserves, Exploration Potential and
mining-plan.
From these reserves mill-feed are 2.443 million tonnes and 312 tonnes
remains in stockpile as safety stock. The silver-content during the
first two planned production years will be about 143 g/t and the gold-
content will be about 0.4 g/t. During the third production year capacity
will be increased from 350,000 to 450,000 tonnes per annum in
conjunction with the updated environment permit.
Compared to previous estimate of the mineral reserves the silver grades
have increased with 22%. The amount of tonnage has decreased with 17 %,
which decreases the treatment costs per produced silver-ounce and makes
the project more robust against silver price variations.
Estimates are done with a “net smelter return cut-off” of 30 €/t for
underground-mining and 60 € /t for ore-feed. Ore- recovery in mining is
estimated to be 90 %. A side--rock dilution of 15 % in underground and
10 % in open-pit mining have been applied.
Management´s view and guesstimation
The Management´s case is based on the expectations of the Exploration
Potential below the current reserves. This guesstimation is based on
geological and geophysical information. However, it also includes a
large amount of uncertainties and can only be seen as an uncertain
projection of the future.
The Exploration Potential presented in the above picture has been
modelled from results of an electromagnetic SAMPO geophysical survey
down to 1 000 meters. Existing diamond-drillings with high
metal-contents on 500 and 550 meter levels support this Exploration
Potential, which has been estimated to be 10.3 million tonnes at 71.5
g/t Ag. Tentative grade-estimate and the mining-plan have been created
by using existing drill-hole data. A rough estimate is that from this
Exploration Potential area amount of mill feed could totally be 2.25
million tonnes with a grade of 144 g/t Ag. This would add another five
production years into the mining-plan, on top of existing mineral
reserves.
According to cash flow forecast, which is based on an average silver
price of $ 14.9 – 20.0 / Oz between the years 2016-2022, the Mine’s
project IRR is estimated to 40% and NPV to € 103 million (@ 5%).
Payback-period from the start of production is estimated to be 3 years.
Table below: Estimated economic results according different metal price
estimates; 11 year’s production time. (CTS Engtec, 2016)
If the silver price 28 $/Oz is used, the estimated IRR is 86 % and NPV
is € 223 million (@ 5%). With silver price 12,7 $/Oz, the estimated IRR
is 15 % and NPV is € 22 million (@ 5%).
The updated economic figures have been prepared, compiled, evaluated and
approved by the independent consulting company, CTS Engtec Oy.
Jouni Kankkunen MSc (Mining), MAusIMM, and Ilkka Tuokko, MSc (Geology),
MAusIMM have compiled and reviewed the plans and estimated the figures
for the Management´s view. Ilkka Tuokko is one of the Management team
and is not an independent consultant.
\"During the last two years we have been active and implemented measures
to respond to requirements that the new silver price level sets for the
Silver Mine project. I am pleased to be able to present updated economic
figures based on mineral reserves along with the Management´s estimate
for the project. The figures show the increase the project’s resistance
in periods of low silver prices.
The report also shows the Management’s view about the future for the
Silver Mine´s project after Proven and Probable mineral reserves have
been mined during the first six production years.
The Management look positively towards the future of Silver Mine and I
am confident that we can achieve the plans that have been set for us”,
says Timo Lindborg, CEO.
Stockholm 3th March 2013
Sotkamo Silver AB (publ)
Timo Lindborg, CEO
About Sotkamo Silver AB:
Sotkamo Silver AB´s business concept is to exploit mineral deposits in
the Nordic countries with regards to human society and environment.
Sotkamo Silver owns, through its subsidiary mineral deposits, which
contains silver and gold in Finland. The Company’s main development
project is the Silver Mine project in the municipality of Sotkamo.
Sotkamo Silver applies SveMin’s & FinnMin’s respective rules of
reporting for public mining & exploration companies. Sotkamo Silver
has chosen to report mineral resources and mineral reserves according to
the internationally accepted JORC or NI 43-101-code. The company applies
International Financial Reporting Standards (IFRS) as approved by the
European Union.
The ticker symbol is SOSI in NGM and SOSI1 in NASDAQ OMX Helsinki.
ISIN-code for Sotkamo Silver shares is SE0001057910.
Read more about Sotkamo Silver on www.sotkamosilver.com or www.silver.fi
For further information: Timo Lindborg, CEO, tel. +358 40 508 3 507
The official Stock Exchange Release is given in Swedish and there may be
slight differences in the translated versions.
Important information
Publication or distribution of press releases in certain jurisdictions
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This press release may not be released, published or distributed,
directly or indirectly, in or into Australia, Canada, Hong Kong, Japan,
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violation of the United States Securities Act of 1933 (\"Securities
Act\"), as amended, or applicable laws of other jurisdictions.
Statements in this press release, which are not purely historical facts,
including without limitation statements regarding future estimates,
plans, objectives, assumptions or expectations of future performance are
“forward - looking statements.
Please note that such forward - looking statements involve known and
unknown risks and uncertainties that could cause actual results and
future events to differ materially from those anticipated in such
statements. Such risks and uncertainties include fluctuations in metal
prices, unpredictable results of exploration activities, uncertainties
inherent in the estimation of mineral reserves and resources,
fluctuations in the costs of goods and services, problems associated
with exploration and mining operations, changes in legal, social or
political conditions in Finland, Sweden and Norway and lack of
appropriate funding, all of which could among other things, prevent any
of the forward looking statements in this presentation from coming to
fruition or lead to a delay in the development of mining operations .
