Friday, October 04, 2013 11:58:46 AM
Silver Bull Completes Positive Preliminary Economic Assessment For the Sierra Mojada Project, Coahuila, Mexico
Vancouver, British Columbia - Oct. 1, 2013 - Silver Bull Resources, Inc. (TSX: SVB, NYSE MKT: SVBL) ("Silver Bull") is pleased to provide the results that will be reported in its Preliminary Economic Assessment ("PEA") for the Sierra Mojada Project in Coahuila, Mexico. The PEA was prepared by JDS Energy and Mining Inc. ("JDS") of Vancouver, British Columbia.
Highlights from the base case study of $23.50 per silver ounce and $0.95 per zinc pound include:
• Pre-tax Net Present Value ("NPV") at a 5% discount rate of $641.1 million and an Internal Rate of Return ("IRR") of 26.9%;
• After-tax NPV at a 5% discount rate of $463.9 million and IRR of 23.1%;
• After-tax payback of 2.9 years after plant start-up;
• Pre-production capital cost ("CAPEX") of $297.2 million including a 15% contingency;
• Sustaining Capital of $79.6 million over life of mine ("LOM") including a 15% contingency;
• An 18 year mine life, mining and processing 55.9 million tonnes of ore at 8,500tpd, averaging 73.4 grams per tonne ("g/t") silver and 2.79% zinc, and producing 98.4 million ounces of silver doré, and 982,000 tonnes of a high quality zinc concentrate (64% Zinc concentrate grade);
• An overall strip on the open pit of 5.6:1, with the first 5 years of Pit 1 having a lower strip of 3.6:1 (see Figure 1);
• An average payable silver production of 5.5 million ounces of silver per year with a LOM cash cost of $6.58 per ounce of silver, net of by-product credits.
• Years 2 to 6 will produce an average of 7 million ounces a year with a peak production of 9.3 million ounces of silver in year 2;
• The JDS Study does not take into account the potential mining of an additional 37 million tonnes of "lower" grade ore which lies immediately outside of the pit and has the potential to extend the current projected mine life.
Tim Barry, President and CEO of Silver Bull states, "We are very pleased with this Preliminary Economic Assessment. It shows the Sierra Mojada project as a robust, long life, low cost mining operation that will put it within the top quartile of global silver producing mines. We are fortunate to have a near surface high grade zone which will act as our starter pit and is expected to produce an average of 7 million ounces per year allowing for a fast payback on initial capital expenditures. It is also important to remember the significant upside on this project. A mineralized "lower" grade halo surrounds the core of the ore body that may be mined and be brought into the pit at a time in which we anticipate will be a higher metal price environment. This combined with obvious extensions of mineralization to the east, west and north coupled with the numerous regional showings suggest Sierra Mojada is part of a much larger mineralizing system."
A sensitivity table showing the NPV and IRR is shown below at different silver prices.
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Pre-Tax After-Tax
Ag Price Pre-Tax After-Tax Pre-Tax After-Tax Payback Payback
Per Ounce NPV ($M) NPV ($M) IRR IRR (Years) (Years)
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$16 $ 190.9 $ 135.3 11.7% 10.4% 7.0 7.0
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$18 $ 310.9 $ 225.7 15.9% 14.1% 4.9 4.9
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$20 $ 431.0 $ 312.4 20.0% 17.5% 3.6 3.7
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$22 $ 551.1 $ 399.0 23.9% 20.7% 2.9 3.1
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$23.50 $ 641.1 $ 463.9 26.9% 23.1% 2.7 2.9
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$25 $ 731.2 $ 528.8 29.7% 25.5% 2.6 2.7
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$28 $ 911.3 $ 658.7 35.3% 30.1% 2.3 2.4
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$30 $ 1,031.4 $ 745.2 38.8% 33.0% 2.1 2.2
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(i) assumed zinc price of $0.95 per pound zinc
Table 1: Capital Costs and Economic Highlights
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Summary of Results Unit Value
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Silver Cash Cost (Net of By-Products) $/oz 6.58
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Avg Operating Cash Flow during Production $M 92.0
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LOM Operating Costs $M 1,483
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LOM Operating Costs / tonne milled $/tonne milled 26.54
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Capital Costs
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Pre-Production Capital $M 260.7
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Pre-Production Contingency (15%) $M 36.5
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Total Pre-Production Capital Costs $M 297.2
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$/tonne milled 5.31
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Sustaining & Closure Capital $M 67.7
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Sustaining & Closure Contingency (15%) $M 11.9
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Total Sustaining & Closure Capital Costs $M 79.6
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$/tonne milled 1.43
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Total Capital Costs (incl. contingency) $M 376.8
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$/tonne milled 6.74
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(i) based on $23.50 per ounce silver price and $0.95 per pound zinc and
silver and zinc production as outlined in Table 2
Table 2: Mine Plan Highlights
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Summary of Results Unit Value
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Mine Plan
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Mine Life Years 18.0
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Total Milled M tonnes 55.9
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Total Waste M tonnes 310.8
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Strip Ratio w:o 5.6
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Average Plant Throughput tpd 8,500
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Average Head Grades
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Zn % 2.79%
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Ag g/t 73.39
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Production
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Total Zn Concentrate Produced dmt 982,354
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Average Zn Concentrate Produced dmt/yr 54,559
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Total Zn production M lbs 1,178.1
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Average Zn produced M lbs/yr 65.4
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Total Ag Dore Produced M oz 98.4
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Average Ag Dore Produced M oz/yr 5.5
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Resources
The initial mineral resource estimate was developed using MineSightTM software to create a partial block-model, with blocks sized 5 m x 5 m x 4 m. For the purpose of resource estimation, all assay intervals within the mineralized units were composited to two metres and grades were capped prior to estimation. All resources identified in the Lerchs Grossman (LG) optimized pit fell into the Indicated category and were reported in Silver Bull's NI43-101 resource report published on May 2, 2013.
At Silver Bull's request, JDS combined the partial model resource estimate into one standard block model compatible with Silver Bull's GEMSTM software. A small underground void was added in an area that had an overlap of solids within the silver ore body and resulted in a minor change in reportable silver grade and tonnes. JDS does not consider this change significant but it does support the recommendation for tighter geologic modeling.
The combined GEMS block model resources have been compared to the original LG optimized pit and are restated in Table 3 at the same 25g/t silver cut-off.
Table 3: Sierra Mojada Resources as of September 30, 2013(1), Silver and
Zinc
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Silver Silver Zinc Pounds
Cut-Off Grade Ounces Grade Zinc
(Ag g/t) Tonnage (g/t) (Moz) (%) (lbs)
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I greater than 100 g/t 13,553,000 170.1 74.1 1.59 476,081,000
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N greater than 80 g/t 19,205,000 146.2 90,3 1.57 662,915,000
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D greater than 65 g/t 25,318,000 128.3 104,5 1.54 860,189,000
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I greater than 55 g/t 31,321,000 115.2 116 1.50 1,035,550,000
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C greater than 45 g/t 39,949,000 101.0 129,8 1.44 1,266,764,000
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A greater than 35 g/t 52,560,000 86.3 145.8 1.39 1,613,697,000
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T greater than 25 g/t 71,208,000 71.4 163.6 1.39 2,184,270,000
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E greater than 15 g/t 95,566,000 58.2 179.1 1.36 2,873,033,000
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D greater than 0 g/t 127,722,000 45.7 187.8 1.80 5,068,527,000
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Note: Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
The methodology used is consistent with the Canadian Institute of Mining and Metallurgy ("CIM") definitions referred to in National Instrument 43-101. Note however that the assumptions for the LG pit were based on different parameters than those of the PEA which is now an NSR-based block model.
In addition to silver and zinc resources, lead and copper resources were estimated although lead and copper were not considered in the PEA. Results of on-going testwork focused on the economic recovery of lead were not available at the time the PEA was completed.
NSR/Mining Model Construction
Once sufficient work was completed on metallurgical testing for the Sulphidization-Acidification-Recycle-Thickening (SART) process, updated silver and zinc recoveries and operating cost estimates were collated for the PEA analyses to follow. The Net Smelter Return (NSR) model is based on the in situ resources for these two metals.
Results of on-going test work which focused on the economic recovery of lead were not available at the time the PEA was completed, and copper added no significant value anywhere in the envisioned process stream. Lead and copper have been excluded from the NSR model.
JDS constructed a (NSR) block model from the combined block model described above. The NSR model equates the block value to US$ to allow a Whittle™ economic optimization of the resource. The defining variables used for this work are summarized in Table 4 below.
Table 4: Parameters used to create the NSR model for the Sierra Mojada
Deposit
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Parameter Unit US$
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Ag price US$/oz $23.50
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Zn price US$/lb $1.10
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Exchange rate US$:CDN$ 1.00
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Ag recovery % 75
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Overall Zn recovery from Ore % 41
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Zn recovery from SART % 99
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Zn concentrate grade % 64
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Ag payable % 99.5
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Zn payable % 85
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Zn smelting cost US$/tonne $212.00
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Zn haul cost US$/tonne $20.00
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Zn insurance US$/dmt $0.02/100
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Zn losses 30% of NIV $0.5/100
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Zn Price Participation(i) US$/dmt $5.66
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Ag refining US$/oz $0.225
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Ag haul US$/oz $0.15
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Ag insurance US$/dmt $0.12
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Zn dilution factor 1.00
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Ag dilution factor 1.00
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Short tons to pounds 2000
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Lbs to metric tonnes 2204.6
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(i) Based on Zn price of US $0.95/lb
Mining
The mine plan developed for the PEA mines the Sierra Mojada deposit in a series of five phases which have been scheduled targeting ore of the highest value early in mine life. This is done to accelerate capital payback and maximize cash flow.
Figure 1. Image showing the staged zones of the open pit and the years these zones will come into effect.
Standard open pit mining methods are utilized involving typical drilling, blasting, and material movement using shovels and trucks. The fleet required to mine all potential ore-grade material and associated waste has been identified with the primary fleet and ancillary/support equipment prices obtained from recent quotes. The primary fleet quoted consists of Caterpillar 777G trucks, 992K wheel loaders, D10T and D9T track dozers, MD6290 and MD6540 rotary drills, and Komatsu PC2000 front shovels.
The Base Case economics utilizes a leased mining fleet over the life of mine with realistic market terms expected from equipment dealers in Mexico at a 7% interest rate. Mining costs per tonne are based solely on fleet operating costs. Leasing costs are applied separately and included in overall operational costs.
In Year 2 of mine operations, a contractor fleet will be used to supplement pre-stripping of Phase 3. The additional waste stripping required in Year 2 is short-lived and does not justify the purchase of additional equipment. This also creates the ability to backfill Phase 1 beginning in Year 5 and Phase 2 in Year 13 without affecting ore delivery to the plant -- effectively maximizing backfill potential and minimizing surface area required for waste rock storage and also minimizing haulage costs. Mining Phases 3, 4, and 5 during Years 15 through 17 will also require assistance by contractor mining. Contractor costs have been assumed to be equal to owner mining costs plus 20% and have been incorporated into the economic model based on projected contractor unit requirements.
Processing
A planned Sierra Mojada process plant is designed to process polymetallic mineralization at a rate of 8,500 tonnes per day. The process facility will consist of a primary crushing plant, grinding circuit, agitation leaching for silver recovery and a Bio-SART plant that not only produces a high-grade zinc concentrate but also recovers an estimated 95% of cyanide used in leaching for re-use. The process plant will operate two shifts per day and 365 days per year with an overall availability of 92%. The process plant will produce silver doré and zinc concentrate as separate saleable products.
Infrastructure
The Sierra Mojada project is accessible by paved highway and there is a rail line in use nearby that could be extended to the conceptual plant site location for delivery of bulk supplies and transport of zinc concentrates. Power can be provided either through the national grid which would require extending main transmission lines to the site, or generators located at site or off site. Diesel and natural gas generation were considered, and the choice of natural gas generators located proximal to an existing natural gas supply line in combination with lower-voltage transmission lines to site was deemed a reliable, lowest cost option among the alternatives considered. Make-up water supply is planned to be sourced from regional groundwater sources.
Capital Costs
The initial capital requirement for the Project is estimated to be US$297.2 M, as detailed in Table 5.
Table 5: Sierra Mojada Pre-production Capital Costs as of September 30, 2013
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Pre-Production Capital Costs $M
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Pre-Stripping 10.9
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Mining Equipment 10.5
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Site Development 4.8
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Crushing & Coarse Ore Stockpile 14.2
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Processing Plant 69.2
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Tailings 9.4
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On-Site Infrastructure 24.3
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Off Site Infrastructure 39.2
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Project Indirects 38.4
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Engineering & EPCM 29.9
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Owner's Costs 5.6
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Pre-Production Lease Payments 4.3
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Total Pre-Contingency Initial Capital Costs 260.7
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Contingency 36.5
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Total Pre-Production Capital Costs 297.2
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The Project has a total sustaining capital requirement of $60.9M. Closure costs amount to $6.8M. Contingency for sustaining and closure capital amounts to $11.9M.
Operating Costs
Total operating costs per tonne ore milled for the Project are outlined in Table 6.
Table 6: Sierra Mojada Operating Costs
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Operating Cost $/tonne milled
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Mining ($1.68 per tonne mined) 11.03
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Processing 11.55
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G&A 1.39
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Leasing 2.57
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Total Operating Cost 26.54
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Financial Analysis and Sensitivities
Using a silver price of $23.50/oz and a zinc price of $0.95/lb, the study yields a pre-tax NPV5% of $641.1 million and IRR of 26.9% with a payback period of 2.7 years. After-tax NPV5% amounts to $463.9 million and an IRR of 23.1% with a payback of 2.9 years.
Table 7: Project NPV Sensitivity to Discount Rate
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Discount Rate Pre-Tax NPV After-Tax NPV
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0% 1,280.5 945.4
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5% 641.1 463.9
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7% 491.1 350.3
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8% 430.2 304.0
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10% 329.9 227.7
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Technical Report
A NI 43-101 Technical Report will be filed within 45 days on SEDAR (www.sedar.com)as well as the Silver Bull corporate website: www.silverbullresources.com.
Qualified Persons
The PEA was conducted under the overall review of Gordon Doerksen, P. Eng. of JDS Energy and Mining Inc. of Vancouver, British Columbia with the following Qualified Persons contributing to their respective sections:
Gordon Doerksen P. Eng., Project Director, JDS Energy and Mining Inc.
Greg Blaylock P. Eng., Associate, JDS - Mine, Process, and Infrastructure Capital Costs
Allan Reeves P.Geo.,
Bill Pennstrom QP Metallurgy, President Pennstrom Consulting Inc. -- Process Flow Sheet Development and Operating Costs
On behalf of the Board of Directors
"Tim Barry"
Tim Barry, MAusIMM
Chief Executive Officer, President and Director
INVESTOR RELATIONS:
Matt Hallaran
+1 604 336 8096
info@silverbullresources.com
http://www.silverbullresources.com/s/news.asp?ReportID=606026
Dan 
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