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San Luis Project
Two Mineralized Systems DiscoveredThe San Luis property is an emerging mineralized district in central Peru. To date, two separate systems have been discovered: the Ayelén high-grade gold/silver vein system and the BP Zone, a potential silver/base-metal porphyry deposit. The Ayelén vein is the focus of the feasibility study as it presents the best opportunity for near-term production on a significant scale. The property encompasses over 32,000 hectares of mineral concessions with good road access to nearby population centers. Elevations range from 3,800 meters to 4,700 meters. The Ayelén System - A Modern Bonanza SystemHigh-grade gold and silver veins are hosted within Tertiary-age volcanic rocks of the Calipuy Formation. Six separate veins were originally identified on surface and a seventh that does not outcrop was discovered by drilling. Ongoing prospecting has identified additional outcropping veins. Bonanza-grade mineralization (greater than 1 ounce gold per ton) was originally identified in trenches along the length of the Ayelén and the adjacent Inés veins. A 25,000 meter drill campaign during late 2006 and 2007 confirmed mineralization in the subsurface and defined the deposit. Current resources have been estimated to be:
Feasibility Study CompletedSilver Standard, the project's operator, has completed the feasibility study and estimted capital expenditures to be US$90.4 million (+/- 15%) for a 400 tonne/day underground mine with annual production of 78,000 ounces of gold and 1.86 million ounces of silver annually over its 3.5 year mine life. A "Base-Case" economic evaluation was completed assuming metal prices of $800 per ounce of gold and $12.50 per ounce of silver. This showed a 26.5% internal rate of return.
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| Base case gold price | $800 |
| Base case silver price | $12.50 |
| Internal rate of return (IRR) | 26.5% |
| Net present value – 0% | $57.5 million |
| 5% discount | $39.2 million |
| 10% discount | $25.6 million |
Sensitivities – June 2010
| Gold price (US$/oz) |
Silver Price (US$/oz) |
IRR (%) |
NPV (US$ in millions, 5% discount) |
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| Base Case | 800 | 12.50 | 26.5 | 39.2 million |
| 3-year Average | 955 | 14.76 | 40.2 | 68.2 million |
| Spot | 1,170 | 18.50 | 58.0 | 109.1 million |
The BP Zone – A Potential Porphyry System
The BP Zone lies approximately six kilometers southeast of Ayelén. It is contained within the joint-venture property and represents a separate area of porphyry-style mineralization distinct from the Ayelén area of epithermal-vein mineralization.
The BP Zone was originally recognized through alteration mapping and stream sediment geochemistry. A follow-up program identified large areas where surface grab samples yielded significant base-metals (up to 2.2% copper and 11% zinc) together with precious-metals anomalies. The program was followed by a detailed geophysical study that yielded numerous other anomalies.
The area is characterized by one or more mineralized hydrothermal breccias with identified outcrop dimensions of approximately 250 by 450 meters. The breccias contain pervasively altered fragments of volcanic rock with a sulfide-bearing matrix. The rock-chip sampling determined areas of distinct, yet overlapping, copper, zinc and lead mineralization. Anomalous silver and gold was also found.
An initial discovery drill program focused on defining the extent of the hydrothermal breccia and other nearby mineralization. A silver, base metal rich deposit is emerging. Drill results include:
- 127 meters containg 47 g/t Silver, 2.4% Zinc and 2.5% Lead
- 72 meters containg 45 g/t Silver and 0.4% Copper
- 83 meters containg 27 g/t Silver, 5% Zinc and 1.6% Lead
The Qualified Person (QP), as defined by NI 43-101, for the San Luis project, is Kenneth C McNaughton, M.A.Sc., P.Eng., vice president, exploration, Silver Standard Resources Inc.