• 35 % IRR, 30 M€ NPV (@ 8 %) (calculated with a silver-price of $ 21,5 /Oz
Ag)
• LOM CAPEX 32 M€ inclusive capacity-increase during year 3
• The Mine: 3.3 million tons mineral reserves
• Payback: less than 3 years from production-start
• Expected Life-Of-Mine according to the today’s reserves: 8-10 years
• EBITDA-margin 46 % (first 4 years)
Sotkamo Silver (NGM: SOSI) has completed an updated Bankable Feasibility Study
for the company's Silver Mine-project in Sotkamo, Finland. The study shows
acceptable profitability, even at silver-prices under current levels.
Production is expected to start late 2015 or early 2016. Calculations are based
on new information of ore-reserves, present costs, new mining-schedule and on
latest quotes from suppliers and construction- and entrepreneurial-companies.
According to cash flow forecast, which is based on an average silver- price of
$ 21.5 / Oz between the years 2016-2025, the Mine´s project IRR is estimated to
35% and NPV to 30 million (@ 8%). Pay-back period from production-start is
estimated to be less than 3 years.
Ore reserves are total 3.36 million tons with an average silver-content of 102
g/ton. The silver-content during the first four planned production-years will
be between 120-130 g/ton and the gold-content will be about 0.4 g/ton. During
the third production-year capacity will be increased from 350,000 to 450,000
tons per annum in conjunction with the updated environmental-permit.
If the silver-price 28 $/oz is used, the estimated IRR is 61 % and NPV is 59
million € (@ 8%). With silver-price15 $/oz, the estimated IRR is 8% and NPV is
0,2 million € (@ 8%).
The updated study has been prepared, compiled, evaluated and approved by the
independent consultant-group, CTS Engtec Oy.
Jouni Kankkunen MSc (Mining), MAusIMM, has compiled the mining plan and
ore-reserve estimate. Outotec (Finland) Oyj has, carried out a review on the
mine-technology, the Silver Mine’s mine-plan and the mineral-reserve estimates
for the Feasibility Study. This review was performed by Pekka Loven, MSc
(Mining), MAusIMM (CP) at Outotec (Finland) Oyj. He is a Competent Person under
the Joint Ore Reserves Committee (JORC, 2012). The updated mineral reserves
(ore) are based on information from the completed Bankable Feasibility Study
and information from Sotkamo Silver.
MINERAL RESERVES
Mineral-reserves were estimated for each stope in conjunction with the
mine-planning, and by applied the economic factors that show a profitable
production. A summary of the ore- reserves are shown in the table below.
(For table, see attached file)
Mineral-reserves (ore) in the category of Known and Probable are 3.336 million
tons with a silver-grade of 102 g/t Ag. The calculation follows the Australian
JORC Code (2012).
In comparison with the previous mineral-reserve estimate total, amount of
silver in proven and probable mineral-reserves have increased by 33 percent to
10,940,026 troy ounce silver, which means 12 % increase in tonnage and 18 % in
silver-content. The silver- content during the planned first four
production-years will be between 120-130 g/ton and the gold-content will be
about 0.4 g/ton. During the third production-year capacity will be increased to
450 000 tons per year in conjunction with the updated environmental-permit.
Figure below: The ore-reserves and mining-plan.
[sotkamo_bi]
A summary of the economic calculation (consensus pricing) are presented in the
table below:
┌──────────────────────────────────────────────┐
│Silver Mine Economic Summary 24.03.2014 │
├──────────────────────────────┬────────┬──────┤
│Parameter │Units │Value │
├──────────────────────────────┼────────┼──────┤
│Ore Mined LOM │kt │3 350 │
├──────────────────────────────┼────────┼──────┤
│Zinc Recovered │t │21 800│
├──────────────────────────────┼────────┼──────┤
│Lead Recovered │t │9 400 │
├──────────────────────────────┼────────┼──────┤
│Gold Recovered │oz │28 250│
├──────────────────────────────┼────────┼──────┤
│Silver Recovered │1 000 oz│9 500 │
├──────────────────────────────┼────────┼──────┤
│Total Tax LOM (base case) │€M │9 │
├──────────────────────────────┼────────┼──────┤
│Total Operating Costs LOM │€M │123 │
├──────────────────────────────┼────────┼──────┤
│Total Capital Expenditure LOM │€M │32 │
├──────────────────────────────┴────────┴──────┤
│Silver Price Forecast 15 $/Oz │
├──────────────────────────────┬────────┬──────┤
│Total Revenue (NSR) LOM │€M │156 │
├──────────────────────────────┼────────┼──────┤
│Operating Free Cash Flow LOM │€M │32 │
├──────────────────────────────┼────────┼──────┤
│EBITDA first 4 years average/y│€M │7 │
├──────────────────────────────┼────────┼──────┤
│EBITDA first 4 years average │% │31 │
├──────────────────────────────┼────────┼──────┤
│NPV 8% (before tax) │€M │0.2 │
├──────────────────────────────┼────────┼──────┤
│IRR (before tax) │% │8 │
├──────────────────────────────┼────────┼──────┤
│Payback Period │Years │- │
├──────────────────────────────┴────────┴──────┤
│Silver Price Forecast 21,5 $/Oz │
├──────────────────────────────┬────────┬──────┤
│Total Revenue (NSR) LOM │€M │198 │
├──────────────────────────────┼────────┼──────┤
│Operating Free Cash Flow LOM │€M │75 │
├──────────────────────────────┼────────┼──────┤
│EBITDA first 4 years average/y│€M │14 │
├──────────────────────────────┼────────┼──────┤
│EBITDA first 4 years average │% │46 │
├──────────────────────────────┼────────┼──────┤
│NPV 8% (before tax) │€M │30 │
├──────────────────────────────┼────────┼──────┤
│IRR (before tax) │% │35 │
├──────────────────────────────┼────────┼──────┤
│Payback Period │Years │2 │
├──────────────────────────────┴────────┴──────┤
│Silver Price Forecast 28 $/Oz │
├──────────────────────────────┬────────┬──────┤
│Total Revenue (NSR) LOM │€M │241 │
├──────────────────────────────┼────────┼──────┤
│Operating Free Cash Flow LOM │€M │117 │
├──────────────────────────────┼────────┼──────┤
│EBITDA first 4 years average/y│€M │17 │
├──────────────────────────────┼────────┼──────┤
│EBITDA first 4 years average │% │53 │
├──────────────────────────────┼────────┼──────┤
│NPV 8% (before tax) │€M │59 │
├──────────────────────────────┼────────┼──────┤
│IRR (before tax) │% │61 │
├──────────────────────────────┼────────┼──────┤
│Payback Period │Years │1.5 │
└──────────────────────────────┴────────┴──────┘
The calculations are done with a "cut-off" of 35 €/ton in underground-mining
and 25 €/ton in open-pit mining. The ore-reserve has a recovery of 90 % with a
waste-rock dilution of 15 % in underground-mining and 10% in open-pit mining.
The silver-content in the diluted side-rock has been estimated to 31.3 ppm Ag.
"This update of the feasibility study along with the increase in ore reserves,
the amount of silver in the ore, and our new mining-schedule, increase the
project’s resistance in periods of low silver-prices. The report also shows
that it is relatively easy to increase high content ore-reserves from inferred
to probable mineral recourses. As to this background, I look positively towards
the nearest future and I am confident that we can achieve the plans that have
been resolved”, says Timo Lindborg, CEO.
Stockholm 24th March 2014
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 ore 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.
