South America Snapshot: Eight companies exploring and developing new mines

The need for battery metals is propelling many projects in resource-rich South America, but gold and silver projects retain their appeal, too.

BEAR CREEK MINING

The Corani silver-zinc-lead project in southern Peru is shovel ready for 100% owner Bear Creek Mining (TSXV: BCM; US-OTC: BCEFK). It sits on the eastern peaks of the Andes between 4,800 and 5,200 metres above sea level.

The project has received all key permits to begin construction, and the environmental impact assessment has been approved. Life-of-mine agreements are also in place with supportive local communities.

Bear Creek began exploring Corani in 2005 and has identified proven and probable reserves of 139.1 million tonnes grading 50.3 grams silver per tonne, 0.9% lead and 0.59% zinc. In terms of contained metals, it contains 225 million oz. silver, 2.75 million lb. lead and 1.91 million lb. zinc.

Corani’s measured and indicated resources stand at 96.7 million tonnes grading 27.9 grams silver per tonne, 0.38% lead and 0.26% zinc, and inferred resources add 39.9 million tonnes grading 37.2 grams silver, 0.58% lead and 0.40% zinc.

The life of the Corani mine would be 15 years during which time 144 million oz. silver, 1.48 million lb. lead and 1.04 million lb. zinc would be produced. Average annual production would be 9.6 million oz. silver and the all-in sustaining cost on a by-product basis would be US$4.55 per oz. silver.

The pre-production capital cost was estimated in 2019 to total US$579 million, including US$59 million for the mine and US$234 million for the processing plant. Payback of the initial capex after taxes would be 2.4 years. The report used prices of US$18 per oz. silver, US95¢ per lb. lead and US$1.10 per lb. zinc.

After taxes, Corani has a net present value with an 8% discount of US$369 million and an internal rate of return of 22.9%.

Bear Creek raised $34.5 million for work at Corani last year. The mining and processing plans are being optimized and procurement is in progress. One of the major undertakings is a substation to supply power to the project and upgrade the supply to nearby communities. The company is also upgrading local roads.

In addition to Corani, Bear Creek is exploring northwest of Lima at the Maria Jose property where work is moving underground, and the company has optioned its Tassa silver-gold prospect to Teck Resources.

In December 2021, Bear Creek announced its intention to acquire the operating Mercedes gold-silver mine in Sonora, Mexico. It will make a cash payment of US$75 million and issue 24.73 million shares to current owner Equinox Gold to acquire a 100% interest. A second cash payment of US$25 million is due within six months of closing.

Bear Creek has a market capitalization of $140.7 million.

ERO COPPER

Ero Copper (TSX: ERO; NYSE: ERO) has two producing mines in Brazil and is developing a third. The flagship property is the MCSA mining complex, in which Ero holds a 99.6% interest, in Bahia state.

Production began 40 years ago at the MCSA mining complex, which incudes two underground mines (Pilar and Vermelhos) and one open pit (Surubim). The complex has at least a 12-year life remaining with annual production anticipated to be 101.4 million lb. of copper in 2022-24. Ore is processed by conventional crushing and flotation at the Caraiba mill next to the Pilar mine. It produces a concentrate grading 35% copper.

The mines at MCSA contain underground proven and probable reserves of 30 million tonnes grading 1.44% copper for 953.3 million lb. contained metal and proven and probable open pit reserves of 29.3 million tonnes grading 0.6% copper for 385.1 million lb. contained copper.

Reserves are included in resources which, for underground mining, are 69.4 million measured and indicated tonnes grading 1.46% copper for 2.23 billion lb. contained copper, plus 40.3 million inferred tonnes at 1.14% copper. Open pit resources are 35.3 million measured and indicated tonnes grading 0.59% copper for 457.5 million lb. contained copper, plus 3.0 million inferred tonnes grading 0.5% copper.

In 2019, Ero discovered what it called the ‘superpod’ below the known mineralization in the Pilar mine. Early drill results featured 51.8 metres grading 3.49% copper, including 33.4 metres at 4.96% copper, and 62.5 metres grading 1.65% copper, including 26.1 metres grading 2.37% copper.

Last October, results released for the upper levels of the Pilar mine featured 71.2 metres grading 3.55% copper, including 13 metres at 8.87% copper, and 61 metres grading 2.11% copper, including 1.8 metres of 3.92% copper.

The company enjoys a positive track record of mine life extensions and operational improvements at MCSA so it will deploy up to 20 drills this year. There is about 25% excess mill capacity that could be filled.

Ero also holds 97.6% of the NX gold mine in Mato Grosso state. The underground mine is a high-grade, shear-hosted quartz vein system accessed via a single decline. Ore is processed in a conventional three-stage crushing circuit, and a combination of gravity, flotation and carbon-in-pulp recovery.

The NX mine produces between 50,000 and 60,000 oz. of gold annually at an all-in sustaining cost of US$550 to US$650 per ounce. It currently has a six-year life at average annual production of 53,000 oz. gold.

The Santo Antonio vein is currently in production; it contains a probable reserve of 958,000 tonnes grading 9.01 grams gold per tonne for 277,000 oz. contained gold. Reserves are included in the indicated resource of 950,000 tonnes grading 10.56 grams gold per tonne and the inferred resource of 248,000 tonnes grading 2.99 grams gold.

The mill has about 40% unused capacity, so Ero has mounted an exploration program on the Matinha vein, with the intention to mine it. There the probable reserve is 146,000 tonnes grading 6.26 grams gold per tonne for 29,000 oz. contained gold. The reserve is within the indicated resource that totals 124,000 tonnes grading 8.55 grams gold per tonne and an inferred resource of 310,000 tonnes grading 10.47 grams gold per tonne.

Ero has ten drill rigs operating at the NX gold mine this year.

The company’s third project is the Boa Esperança copper project in Para state, for which the board gave the go-ahead for construction in mid-February. Construction is expected to begin by the middle of this year, and production is anticipated in the third quarter of 2024.

The Boa project has a mine life of 12 years, during which time it will produce a total of 717.9 million lb. copper.

Upfront capital costs will be about US$294 million to establish an operation capable of producing 59.5 million lb. annually. During the first five years, output will average 77.2 million lb. copper. After taxes, the project payback will be 1.4 years. Ero used a sliding scale for copper prices in its estimate: US$3.80 per lb. in 2024, US$3.95 per lb. in 2025, and US$3.40 per lb. in 2026 and beyond.

The Boa project has a post-tax net present value with an 8% discount of US$380 million and a post-tax internal rate of return of 41.8%

Open pit resources at Boa are 47.7 million measured and indicated tonnes grading 0.86% copper for 907.6 million lb. contained copper and 554.8 million inferred tonnes grading 0.65% copper for 7.9 million lb. contained copper. Contained within the measured and indicated category are proven and probable reserves of 43.1 million tonnes grading 0.83% copper for 786.2 million lb. copper.

There are no measured and indicated resources for the underground material, but it does have an inferred resource of 11 million tonnes grading 0.8% copper for 195.3 million lb. copper.

Ero Copper has a market capitalization of $1.6 billion.

HORIZONTE MINERALS

Horizonte Minerals (TSX: HZM; US-OTC: HZMMF) has two nickel projects in Brazil — the shovel ready Araguaia project and the pre-feasibility stage Vermelho.

Early works are already underway at the Araguaia ferronickel project in Para state, and more than half the financing has been secured. The goal is to develop an open pit laterite operation that delivers ore from a number of pits to a central processing facility for 28 years.

The plant will consist of a single rotary kiln electric furnace (RKEF). Full capacity would be 900,000 tonnes of dry ore per year from conventional open pit mining. Annual production would be 52,000 tonnes of ferronickel containing 32 million lb. nickel. Production is anticipated in late 2023 or early 2024.

Capex for Araguaia is estimated at US$443 million, which would be paid back after 4.2 years. Horizonte used a nickel price of US$14,000 per tonne.

The after-tax economics are robust with a net present value (NPR) with an 8% discount (8%) of US$401 billion and an internal rate of return (IRR) of 20.1%. There would be a net cash flow of US$1.6 billion.

Horizonte has outlined proven and probable reserves of 119.3 million tonnes grading 1.69% nickel and 17.15% iron. Reserves are contained within 1.5 billion measured and indicated tonnes grading 1.27% nickel and 18.91% iron (3.4 billion lb. contained nickel), plus 12.9 million inferred tonnes grading 1.19% nickel and 20.21% iron (339.5 million lb. contained nickel).

Resources are sufficient to take the Araguaia project beyond its initial 28-year life with the addition of a second RKEF plant. This would double output for an additional 26 years.

The expansion would be financed through operational cash flow with no additional capital outlay. It carries an after-tax NPV (8%) of US$741 million and an IRR of 23.8%.

The Vermelho nickel-cobalt project, also in Para state, was first investigated by Vale. Despite producing a positive feasibility study, Vale put it on hold when it bought Inco in 2005. Horizonte acquired 100% of Vermelho in 2017.

Horizonte produced a positive prefeasibility study in 2019 for a somewhat smaller and lower-cost project than Vale planned. The open pit laterite mine includes two pits, a concentrator, high-pressure acid leaching (HPAL), and a refinery. Over a projected 38-year life, it would produce 2 billion lb. nickel contained in nickel sulphate, 79.4 million lb. cobalt sulphate, and 4.48 million tonnes of a saleable kieserite by-product.

Annual production would be 25,000 tonnes of nickel and 1,250 tonnes of cobalt from the HPAL.

Total pre-production capital costs would be US$2.3 billion, including US$10.8 million for the pit and US$1 billion (in two stages) for the plant.

Vermelho has an after tax NPV (8%) of US$1.7 billion and an IRR of 26.3%. Net cash flow is estimated to be US$7.3 billion.

Measured and indicated resources are 145.7 million tonnes grading 1.05% nickel (for 3.4 million lb.) and 0.05% cobalt (for 170,400 lb.). The inferred resource is another 3.1 million tonnes grading 0.96% nickel (for 63,900 lb.) and 0.04% cobalt (for 3,100 lb.). No reserves have yet been calculated.

Horizonte has relied heavily on metallurgical testing done by the former owner. It intends to build the processing plant in two stages. It will have an initial autoclave capacity of 1 million tonnes per year. After three years, a second process train will be added, doubling capacity.

Horizonte has a market cap of $407 million.

JOSEMARIA RESOURCES

Josemaria Resources (TSX: JOSE; US-OTC: JOSMF) is advancing what it hopes will be the world’s next major copper producer — the Josemaria copper-gold project in San Juan province of Argentina, 9 km east of the boarder with Chile.

The company says the project is on track to become a low-risk open pit mine with a rapid payback. There are up to 6.7 million lb. copper, 7 million oz. gold and 31 million oz. silver waiting in the reserves. The project has proven and probable reserves of 1 billion tonnes grading 0.3% copper, 0.22 gram gold per tonne and 0.94 gram silver per tonne.

As for sulphide resources using a 0.1% copper-equivalent cut-off, the measured and indicated category contains 1.2 billion tonnes grading 0.19% copper, 0.21 gram gold and 0.9 gram silver per tonne (0.41% copper-equivalent). This category contains an estimated 7.4 billion lb. copper, 2.3 million oz. gold and 18.6 million oz. silver. The inferred resource is 704 million tonnes grading 0.19% copper, 0.1 gram gold and 0.8 gram silver (0.25% copper-equivalent).

There is also a small measured and indicated oxide resource using a 0.2% copper-equivalent cut-off. It totals 41 million tonnes grading 0.31 gram gold per tonne and 1.2 grams silver per tonne. In terms of contained metal, the estimate is 410,000 oz. gold and 1.6 million oz. silver but no copper.

The Josemaria deposit was first staked in 1999, and the discovery made in the 2004-05 exploration program. Production is expected in 2025.

The Josemaria feasibility study examined a 152,000 tonne-per-day mine and mill with a 19-year life. Over the life of the mine, average annual production would be 249.1 million lb. copper, 331,000 oz. gold and 1.2 million oz. silver. During the first three years of operation, copper and silver production would be about 20% higher and gold production would be almost 50% higher. All-in cash costs (excluding closure) are anticipated to be US$1.55 per lb. copper-equivalent.

The pre-production capital expenditure is estimated at US$3.1 billion, followed by sustaining capex of US$940 million. Payback would occur in 3.8 years from the start of production. Prices used in the study were US$3.00 per lb. copper, US$1,500 per oz. gold, and US$18 per oz. silver.

The project has a net present value with an 8% discount of US$1.5 billion and an internal rate of return of 15.4% after taxes.

The 2021-22 field season is busy with a 65,000-metre drill campaign to de-risk the project, convert resources, and bore deep holes to test for extensions of the deposit. As part of the de-risking, mineralogical and geotechnical data will be used to optimize the production profile.

The company has acquired a highly prospective exploration property adjacent to the Josemaria deposit where previous work identified a large porphyry target. This year, soil sampling, mapping, geophysics and targeted drilling are planned.

Josemaria recently joined the Lundin Group, a portfolio of companies producing a variety of commodities in over 20 countries.

Josemaria Resources has a market capitalization of $640 million.

LITHIUM AMERICAS

Lithium Americas (TSX: LAC; NYSE: LAC) is on track to put its Cauchari-Olaroz lithium brine project into production within the year in the Jujuy province of northern Argentina. The project is fully permitted, and all the major equipment and bulk materials have arrived on site.

Lithium Americas began exploring for lithium in 2009, ran a demonstration recovery plant two years later, and completed a feasibility study in 2012. The company attracted a major investor in 2020, and Cauchari-Olaroz is now a joint venture of Lithium Americas (44.8%), Ganfeng Lithium (46.7%), and JEMSE, the state-owned mineral explorer of Argentina, (8.5%).

Cauchari-Olaroz is to be developed in two stages. With the first phase close to commissioning, construction of the second phase is expected to begin this year.

The first phase of the project is based on proven and probable reserves estimated to be 1.1 million cubic-metres of drainable brine with an average concentration of 607 mg lithium per litre for 366,700 tonnes of contained lithium. The measured and indicated resources are 6.3 billion cubic-metres with an average concentration of 592 mg lithium per litre, for 3.7 million tonnes of contained lithium, and the 1.5 billion cubic-metre inferred resource (at the same concentration) contains 887,300 tonnes of lithium metal.

The reserves give the Cauchari-Olaroz a first stage life of 40 years producing 24,000 tonnes of lithium carbonate annually. Operating costs per tonne of lithium carbonate are expected to be US$3,379, compared to the current lithium carbonate price, which hovers around US$40,000 per tonne.

Initial capital costs are expected to be about US$641 million for development of the brine fields, evaporation ponds, recovery plant and all other costs. Operating costs will be US$143.2 million per year. Using a conservative lithium carbonate price of US$12,000 per tonne, payback is expected in two years and ten months after the start of production.

After taxes, Cauchari-Olaroz has a projected net present value at an 8% discount rate of US$1.96 billion and an internal rate of return of 45.2%.

Lithium Americas is also advancing the Pastos Grandes project. It acquired the project in December 2021 when it bought Millennial Lithium. The former owner had invested US$40 million in the project. The property is located in Salta province about 100 km from the Cauchari-Olaroz project.

There are 22 exploration and monitoring wells, four pumping test production wells, pilot ponds, a pilot plant and a year-round camp supported by a hybrid solar power system. A feasibility study was produced in 2019 by the previous owner for a phased, conventional brine operation capable of producing about 24,000 tonnes of lithium carbonate annually for 40 years.

The total initial capital expenditure would be US$448.2 million with a large portion of the amount (US$115 million) being spent to establish the evaporation ponds. Operating costs for the first phase of the project would be US$3,377 per tonne lithium carbonate and for the second phase would be US$3,388 per tonne. Payback would occur in the fifth year after production begins. Battery-grade lithium carbonate prices were assumed to be US$13,050 per tonne.

Pastos Grandes has an NPV (8% discount rate) of US$1 billion and an IRR of 24.2%, both figures calculated post-tax.

The measured and indicated resources at Pastos Grandes are 1.8 billion cubic-metres averaging 427 mg lithium per litre for 774,000 tonnes of lithium metal. There is also an inferred resource estimated to be 3.5 million cubic-metres at 427 mg lithium per litre containing 150,000 tonnes of lithium metal. Potassium also occurs in the brine and presents in the resources at concentrations of 4,440 mg per litre and 4,457 mg per litre, respectively.

Although the environmental permit has been received, Lithium Americas has not released a timeline for taking Pastos Grandes to production.

Outside South America, Lithium Americas owns the Thacker Pass lithium project in Nevada in the United States.

Lithium Americas has a market cap of $4.7 billion.

SERABI GOLD

Serabi Gold (TSX: SBI; US-OTC: SRBIF) is focused on gold projects in Brazil. It has two producing mines (Palito and Sao Chico) and the Coringa development project in the country’s Para state.

The Palito gold mine was in production from 2004 to 2008, when it was placed on care and maintenance. Commercial production resumed in mid-2014. The Sao Chico mine was acquired in 2013 and commercial production began early in 2016.

The mines are underground and use long hole and selective stoping methods. Ore from both mines is processed at Palito in a 500 tonne-per-day plant with an ore sorter, conventional flotation and carbon-in-pulp circuits. Gold is recovered both as doré bars and in concentrate.

Serabi gives 2022 guidance of about 45,000 oz. gold for Palito and Sao Chico. They have proven and probable reserves of 284,053 tonnes grading 6.76 grams gold per tonne for 61,700 oz. contained gold.

At Coringa, as many as 322,600 oz. of gold have been recovered by artisanal miners, but it has not otherwise been developed. Mineralization at Coringa is very similar to Palito. It is associated with a shear-vein system with a strike length of over 7 km. Gold is almost exclusively associated with quartz-sulphide veining similar to veins found in orogenic gold deposits. After numerous metallurgical tests, Serabi believes gold recovery will be 94% to 96% from a 750 tonne-per-day plant. Tailings will be dry-stacked.

Serabi acquired the project from Anfield Gold in 2017, and released a preliminary economic assessment two years later. The PEA was based on 735,000 indicated tonnes grading 8.24 grams gold per tonne for 195,000 contained oz. of gold and 1.6 million inferred tonnes grading 6.54 grams gold per tonne for 346,000 contained oz. gold.

The study outlined an underground mine with a life of nine years and average annual production of 38,000 oz. gold at an all-in sustaining cost of US$852 per ounce.

Pre-production capital costs are estimated to be US$24.7 million, followed by US$9.2 million for sustaining costs. Payback (at a gold price of US$1,450 per oz.) would occur 2.3 years after production begins. The company expects production to start in 2023.

Coringa has a post-tax net present value with a 5% discount rate of US$79.6 million and a post-tax internal rate of return of 46%. At a gold price of US$1,450 per oz., the project would have an after-tax cash flow of US$114 million per year.

Serabi Gold has a market capitalization of $76.8 million.

SIGMA LITHIUM RESOURCES

Sigma Lithium Resources (TSXV: SGML; NYSE: SGML) has a single lithium development project in Gerais state, Brazil. The focus of activity is the 100%-owned Grota do Cirilo hard rock project, which the company says is the largest in South America.

The Grota do Cirilo project has been producing 6% spodumene concentrate on a pilot scale since 2018. Beginning this year, the commercial plant will produce 33,000 tonnes of lithium carbonate-equivalent annually in phase one. Xuxa will be the first deposit mined.

To double output to 66,000 tonnes in the second phase, the Barreiro deposit will also be mined. The prefeasibility study for phase two is underway with increased production beginning as early as a year from now.

Phase one of the Grota do Cirilo project has measured and indicated resources in the Xuxa deposit of 17.4 million tonnes at an average grade of 1.55% lithium oxide and an inferred resource of 3.8 million tonnes grading 1.58% lithium oxide using a 0.5% lithium oxide cut-off. The proven and probable reserves are 13.8 million tonnes grading 1.46% lithium oxide.

The second phase of the Grota do Cirilo project is based on the Barreiro deposit, which has measured and indicated resources of 20.5 million tonne grading 1.43% lithium oxide and an inferred resource of 1.9 million tonnes grading 1.44% lithium oxide. Mining this deposit will add 13 years to the life of the project.

The cash cost of producing a tonne of product is estimated to be US$342 per tonne, including transportation. With the start of phase two, cash costs are expected to be US$360 per tonne, compared to an estimated selling price of US$750 per tonne.

The initial capital cost was forecast to come in at US$136 million through phase two. The capital cost of the phase two expansion is US$44.5 million with a payback period of 0.4 years.

The net present value with a discount of 8% for phase two is US$442 million, compared to the NPV for the first phase of US$395 million. The internal rate of return is 208%. The larger project will have an after-tax free cash flow of US$60 million annually.

Construction for phase one is advancing. Civil construction and engineering are underway. Long lead items, such as the electric transformers, crushers, thickeners, tailings stackers, water treatment, magnetic separators, and control system hardware have been ordered. The company is also in negotiations for engineering, procurement and construction management services as well as contractors to develop and operate the first mine.

Sigma says it is taking care to build green technology into the Grota do Cirilo project. No hazardous chemicals will be used in processing, and 100% of the water will be recirculated. Tailings will be dry-stacked. When phase two begins, 100% of the power will be supplied by hydroelectric facilities.

Sigma Lithium has offtake agreements with Mitsui and LG, both of which will accept concentrate and then manage chemical conversion into battery-grade material. The contracts have take-or-pay provisions linked to lithium hydroxide prices.

Sigma Lithium has a market capitalization of $1.2 billion.

SOUTH STAR BATTERY METALS

South Star Battery Metals (TSXV: STS; US-OTC: STSBF) is developing the Santa Cruz graphite project in Bahia state, Brazil, which the company says is the second-largest flake graphite producing district in the world with over 80 years of continuous operation.

Production is to begin this year from a 5,000 tonne-per-year concentrate plant that will be built at a cost of US$8 million. There is a second phase of the project that will take output to 25,000 tonnes of concentrate annually in the fourth year at an additional cost of US$27 million.

The payback of the initial capital investment will take four years, while the post-tax free cash flow is estimated to be US$129 million over the project life.

At full production, the planned open pit at Santa Cruz has a life of 12 years. The average operating cost per tonne of concentrate is expected to be US$396 over the life of the project. Compare that to the average weighted price used in the prefeasibility study of US$1,287 per tonne.

The post-tax net present value with a discount rate of 5% is US$81.2 million with an internal rate of return of 35%.

The Santa Cruz deposit is open along strike and at depth. So far the measured and indicated resources are estimated to be 14.9 million tonnes grading 2.29% carbon for 341,240 tonnes of in situ graphite. The inferred resource is 7.9 million tonnes at 2.32% carbon for 183,550 tonnes of in situ graphite.

Proven and probable reserves total 12.3 million tonnes grading 2.4% total carbon for 295,400 tonnes of contained graphite.

South Star says one of the advantages of its project is the high percentage of large flakes — 63% of the concentrate contained jumbo to large flakes that were screened at +80 mesh. Such natural flakes command a premium price of US$1,400 per tonne, compared to medium flake at US$1,200 per tonne and small flake at US$800 per tonne.

The company also has a graphite project in the U.S. state of Alabama for which it is preparing an initial resource estimate this year.

South Star Battery Metals has a market cap of $26.6 million.