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Sierra Metals (SMTS)

Filed: 5 Nov 20, 7:00pm

 

Exhibit 99.1

 

 

 

Preliminary Economic Assessment, Bolivar Mine, Mexico

 
 

Effective Date: December 31, 2019

Report Date: October 19, 2020

 

Prepared for

 

Sierra Metals Inc.

 

Signed by Qualified Persons:

 

Américo Zuzunaga Cardich, Sierra Metals Inc., Vice President Corporate Planning

Cliff Revering, P. Eng., SRK Principal Consultant (Resource Geology)

Carl Kottmeier, B.A.Sc., P. Eng., MBA, SRK Principal Consultant (Mining)

Daniel H. Sepulveda, BSc, SME-RM, SRK Associate Consultant (Metallurgy)

Jarek Jakubec, C. Eng. FIMMM, SRK Practice Leader/Principal Consultant (Mining, Geotechnical)

 

Prepared by

 

 

SRK Consulting (Canada) Inc.

2US043.005

October 2020

 

 

 

 

 

Preliminary Economic Assessment, Bolivar Mine, Mexico

 

 

 

 

 

 

 

 

 

 

October 2020

 

 

 

 

 

 

 

 Prepared forPrepared by
 

 

Sierra Metals Inc.

Av. Pedro de Osma
No. 450, Barranco,
Lima 04, Peru

 

 

SRK Consulting (Canada) Inc.

2200–1066 West Hastings Street

Vancouver, B.C., V6E 3X2

Canada

 

Tel:       +51 1 630 3100

Web:    https://www.sierrametals.com

Tel:      +1 604 681 4196

Web:   www.srk.com

 

 

 

 

 

Project No:        2US043.005

 

File Name:         Bolivar_TR_PEA_2US043.005_Final_Draft_20201030.docx

 

 

Copyright © SRK Consulting (Canada) Inc., 2020

 

 

 

 

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page ii

 

Important Notice

 

This PEA report was prepared as a National Instrument 43-101 Technical Report for Sierra Metals Inc. (“Sierra Metals”) by SRK Consulting (Canada) Inc. (“SRK”). The quality of information, conclusions, and estimates contained herein is consistent with the level of effort involved in SRK’s services, based on: i) information available at the time of preparation, ii) data supplied by outside sources, and iii) the assumptions, conditions, and qualifications set forth in this report. This report is intended for use by Sierra Metals subject to the terms and conditions of its contract with SRK and relevant securities legislation. The contract permits Sierra Metals to file this report as a Technical Report with Canadian securities regulatory authorities pursuant to National Instrument 43-101, Standards of Disclosure for Mineral Projects. Except for the purposes legislated under provincial securities law, any other uses of this report by any third party is at that party’s sole risk. The responsibility for this disclosure remains with Sierra Metals. The user of this document should ensure that this is the most recent Technical Report for the property as it is not valid if a new Technical Report has been issued.

 

Copyright

 

This report is protected by copyright vested in SRK Consulting (Canada) Inc. It may not be reproduced or transmitted in any form or by any means whatsoever to any person without the written permission of the copyright holder, other than in accordance with stock exchange and other regulatory authority requirements.

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page iii

 

1Executive Summary

 

Sierra Metals Inc. (Sierra Metals) own and operate the Bolivar Mine and Piedras Verdes processing plant (combined to form the Property) located in the Piedras Verdes District of Chihuahua State, Mexico, approximately 250 km southwest of the city of Chihuahua. The Property consists of 14 mineral concessions totalling 6,800 ha.

 

Sierra Metals engaged various specialist groups to evaluate how, on a conceptual level, mining, mineral processing, and tailings management could be adapted at the Property to achieve a sustainable and staged increase in mine production and mill throughput.

 

This Preliminary Economic Assessment (PEA) report was prepared in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and Reserves: Definitions and Guidelines, May 10, 2014 (CIM, 2014).

 

The reader is reminded that PEA studies are indicative and not definitive and that the resources used in the proposed mine plan include Inferred Resources that are too speculative to be used in an economic analysis, except as allowed for by the Canadian Securities Administrators (CSA) National Instrument 43-101 (NI 43-101) in PEA studies. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. There is no certainty that Inferred Resources can be converted to Indicated or Measured Resources or Mineral Reserves, and as such, there is no certainty that the results of this PEA will be realized.

 

This PEA report is not a wholly independent report as some sections have been prepared and signed off by qualified persons (QPs) from Sierra Metals, the project owner and producing issuer. The terms ‘QP’ and ‘producing issuer’ used here are as defined under NI43-101 Standards of Disclosure for Mineral Projects. The QPs responsible for this report are listed in Sections 2.1 and 2.2.

 

1.1Property Description and Ownership

 

The Bolivar Property is owned by Sierra Metals. The Property consists of 14 mineral concessions (approximately 6,800 ha) in the northern Mexican state of Chihuahua. The Property is in the Piedras Verdes mining district, 400 km south by road from the city of Chihuahua (population 4.8 million as of 2010) and roughly 10 km southwest of the town of Urique (population 1,102 as of 2010). The Property includes the Bolivar Mine, an historic Cu-Zn skarn deposit that has been actively mined by Sierra Metals since November 2011, as well as the Piedras Verdes processing plant, which is situated approximately 5 km by road from the mine.

 

1.2Geology and Mineralization

 

The Bolivar deposit is a Cu-Zn skarn and is one of many precious and base metal deposits of the Sierra Madre belt, which trends north-northwest across the states of Chihuahua, Durango and Sonora in northwestern Mexico (Meinert, 2007). The deposit is located within the Guerrero composite terrane, which makes up the bulk of western Mexico and is one of the largest accreted terranes in the North American Cordillera. The Guerrero terrane, proposed to have accreted to the margin of nuclear Mexico in the Late Cretaceous, consists of submarine and lesser subaerial volcanic and sedimentary sequences ranging from Upper Jurassic to middle Upper Cretaceous in age. These sequences rest unconformably on deformed and partially metamorphosed early Mesozoic oceanic sequences.

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page iv

 

The Piedras Verdes district is made up of Cretaceous andesitic to basaltic flows and tuffs intercalated with greywacke, limestone, and shale beds. Cu-Zn skarn mineralization is in carbonate rocks adjacent to the Piedras Verde granodiorite. Mineralization exhibits strong stratigraphic control and two stratigraphic horizons host the bulk of the mineralization: an upper calcic horizon, which predominantly hosts Zn-rich mineralization, and a lower dolomitic horizon, which predominantly hosts Cu-rich mineralization. In both cases, the highest grades are developed where structures and associated breccia zones cross these favorable horizons near skarn-marble contacts.

 

1.3Status of Exploration, Development and Operations

 

The Bolivar Mine is currently an operational project. During 2019, the Piedras Verdes processing plant consistently produced copper concentrate of commercial quality with copper grade ranging between 21.7% Cu to 28% Cu, silver content in concentrate ranging from 392 g/t to 677 g/t, and gold content in concentrate ranging from 3.2 g/t to 7.9 g/t. Metal recovery for copper, silver, and gold averaged monthly 82.9%, 78.3% and 62.3%, respectively. The mined material is transported 5 km to the Piedras Verdes mill which currently operates at 3,500 tonnes of mineralized material per day (tpd).

 

1.4Mineral Processing and Metallurgical Testing

 

Various development and test mining have occurred at the Bolivar Mine under Sierra Metal’s ownership since 2005. Prior to late 2011, no processing facilities were available on site, and the mineralized material was trucked to the Cusi Mine’s Malpaso mill located 270 km by road. Bolivar’s Piedras Verdes processing facilities started operating in November 2011 at 1,000 tpd of nominal throughput. The mineralized material processing capacity was expanded to 2,000 tpd in mid-2013. The mill has been upgraded since and the current nominal throughput capacity is 3,500 tpd although the mine has exceeded this throughput on many occasions and in 2020 has achieved 5,000 tpd.

 

1.5Mineral Resource Estimate

 

CIM Definition Standards for Mineral Resources and Mineral Reserves (May 2014) defines a Mineral Resource as follows:

 

“A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling”.

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page v

 

The “reasonable prospects for economic extraction” requirement generally implies that the quantity and grade estimates meet certain economic thresholds and that the Mineral Resources are reported at an appropriate cut-off grade (CoG) taking into account extraction scenarios and processing recoveries. To assess this at Bolivar, SRK has calculated an economic value for each block in terms of US dollars based on the grade of contained metal in the block, multiplied by the assumed recovery for each metal, multiplied by pricing established by Sierra Metals for each commodity. Costs for mining and processing are taken from data provided by Sierra Metals for their current underground mining operation.

 

The December 31, 2019, consolidated Mineral Resource statement for the Bolivar Mine is presented in Table 1-1.

 

Table 1-1: Consolidated Bolivar Mine Mineral Resource Statement as of December 31, 2019 – SRK Consulting (Canada), Inc. (1)(2)(3)

 

Category  Tonnes
(Mt)
  Ag (g/t)  Au (g/t)  Cu (%)  Ag (M oz)  Au (k oz)  Cu (t) 
Indicated  19.4  15.1  0.21  0.77  9.4  127.8  149,116 
Inferred  21.4  14.2  0.21  0.78  9.8  145.6  167,077 

 

Source: SRK, 2020

 

(1)Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
(2)All figures are rounded to reflect the relative accuracy of the estimates.
(3)Mineral Resources are reported at a value per tonne cut-off of US$24.25/t using the following metal prices and recoveries; Cu at US$3.08/t and 88% recovery; Ag at US$17.82/oz and 78.6% recovery, Au at US$1,354/oz and 62.9% recovery.

 

1.6Mineral Reserve Estimate

 

A Mineral Reserve is the economically mineable part of a Measured and/or Indicated Resource. It includes diluting material and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-feasibility or Feasibility level as appropriate that include the application of Modifying Factors.

 

A Mineral Reserve has not been estimated for the project as part of this PEA.

 

The PEA includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves.

 

1.7Mining Methods

 

Bolivar Mine is a producing operation. The primary mining method is underground room and pillar mining. Previous mining at Bolivar has sometimes used lower cost and more productive longhole stope mining in areas where the mineralized zones have a steeper dip angle, and the mine plans to undertake a geotechnical assessment program in 2020/2021 to expand the use of longhole stope mining.

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page vi

 

Current mineralized material production is from the El Gallo Inferior, Chimenea 1 and 2, and the Bolivar West mineralized zones.

 

The PEA evaluated seven different possible production rates for the Bolivar Mine:

 

·5,000 tpd (base case)

 

·7,000 tpd in 2024

 

·10,000 tpd in 2024

 

·10,000 tpd in 2026

 

·12,000 tpd in 2024

 

·12,000 tpd in 2026

 

·15,000 tpd in 2024

 

An economic analysis of these production rates is provided in Section 22.

 

Development waste rock is primarily stored underground in historic mine openings. Mineralized material is hauled to the surface using one of several adits or declines accessing the mineralized material, and then dumped onto small surface storage pads outside the portals. The mineralized material is then loaded into rigid-frame, over-the-road trucks and hauled on a gravel road approximately 5 km south to the Piedras Verdes mill. As explained in more detail in Section 18, the mine is constructing an underground tunnel that will enable mineralized material to be delivered via underground truck transport to a portal adjacent to the mill. This development will eliminate the impact of bad weather on the current surface truck haulage system and will provide a lower cost and more reliable method of delivering mineralized material to the plant.

 

Mine production at Bolivar in 2019 averaged approximately 3,500 tpd, but frequently surpassed 4,000 tpd and achieved rates of 5,000 tpd in early 2020. Due to efficiency improvements through better planning and improved equipment utilization, the mine is currently operating with a production rate of 5,000 tpd.

 

1.8Recovery Methods

 

Sierra Metals operates a conventional concentration plant consisting of crushing, grinding, flotation, thickening, and filtration of the final concentrate. Flotation tails are disposed of in a conventional tailings facility and future tailings (mid-2020) will be deposited as dry-stack tailings. Run of mine mineralized material feed in 2019 totaled 1,269,697 t, equivalent to an average of 105,000 tonnes per month (t/m), or 3,500 tpd. The plant has repeatedly demonstrated that it can process 5,000 tpd and is doing so in 2020.

 

During 2019, production of copper concentrate consistently ranged between approximately 2,370 t/m and 3,850 t/m, equivalent to roughly a 2.9% mass pull. The monthly average concentrate consistently reached commercial quality with copper grade averaging 24.1% Cu and credit metals content in concentrate averaging 531.6 g/t silver and 5.57 g/t gold. Average monthly metal recovery for copper, silver, and gold was 82.9%, 78.3% and 62.3%, respectively.

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page vii

 

1.9Project Infrastructure

 

The project has fully developed infrastructure including access roads, a man-camp capable of supporting 329 persons that includes a cafeteria, laundry facilities, maintenance facilities for the underground and surface mobile equipment, electrical shop, guard house, fuel storage, laboratories, warehousing, storage yards, administrative offices, plant offices, truck scales, explosives storage, processing plant and associated facilities, tailings storage facility (TSF), and water storage reservoir and water tanks.

 

The site has fully developed and functioning electric power from the Mexican power grid, backup diesel generators and heating from site propane tanks.

 

The project has developed waste handling and storage facilities. The site has minimal waste rock requirements but does have a small permitted area to dispose of waste rock. The tailings management plan at the Bolivar Mine includes placement of tails in several locations in and around the TSF that has been in operation since late 2011. The existing TSF has five locations to store tailings (TSF1 through TSF5).

 

A new dry-stack TSF (herein referred to as “New TSF”) is to be located just to the west of the existing facility and has an expected life through 2025. The site is also installing an additional thickener and filter presses to allow additional water recovery. Thickened tails (60% solids) are being placed currently. After the filter presses are constructed, dry-stack tailings will be placed in the TSF starting in the latter part of 2020.

 

This PEA considers the use of tailings as backfill and has included the capital and operating costs for a backfill plant. Storing some of the tailings underground would increase the life of the TSF, and also potentially permit the removal of mineralized material pillars that are currently unrecoverable.

 

The overall Project infrastructure exists already and is functioning and adequate for the purpose of the supporting the mine and mill.

 

1.10Environmental Studies and Permitting

 

Sierra Metals intends to build additional tailings capacity concurrent with mine operations, and the permitting associated with the TSF expansion has been completed.

 

Geochemical characterization results for 2014 and 2015, provided to SRK, indicate low metals leaching potential and either uncertain or non-acid generating potential. The 2016 ABA results (NP = 52.5 kg CaCO3/ton; AP = 141 kg CaCO3/ton), however, suggest that some of the more recent material may be potentially acid generating: NP/AP = 0.372. Additional investigation of the current materials being deposited into the tailings impoundment may be warranted; however, given the dryness of the Chihuahuan Desert, this may not necessarily be a material issue for the project.

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page viii

 

The required permits for continued operation at the Bolivar Mine, including exploration of the site, have been obtained. SRK has not conducted an investigation as to the current status of all the required permits. At this time, SRK is not aware of any outstanding permits or any non-compliance at the project or nearby exploration sites.

 

In February 2017, Treviño Asociados Consultores presented to Sierra Metals a work breakdown of the anticipated tasks for closure and reclamation of the Bolivar Mine. The closure costs were estimated to be MX$9,259,318 (~US$475,324 based on the exchange rate at February 2020). SRK’s scope of work did not include an assessment of the veracity of this closure cost estimate, but, based on projects of similar nature and size within Mexico, the estimate appears low in comparison.

 

1.11Capital and Operating Costs

 

Based on a planned production rate of 10,000 tpd (2024), the yearly capital expenditure by area is summarized in Table 1-2.

 

Table 1-2: Capital Cost Summary

 

DescriptionTotal [US$]
Development sustaining capital89,939,728
Ventilation sustaining capital4,588,394
Development expansion capital5,852,300
Equipment sustaining capital41,200,000
Exploration sustaining capital18,800,000
Exploration capital35,897,000
Backfill plant capital24,883,721
Plant sustaining capital13,940,000
Plant expansion capital67,500,000
Tailings storage facility capital5,369,000
Tailings storage facility sustaining capital1,380,000
Additional studies capital2,274,000
Closure capital5,000,000
Total Capital316,624,142

 

Source: Sierra Metals, 2020

 

The operating cost estimate is based on site specific data and has been factored to account for an expansion to 10,000 tpd. Table 1-3 provides a summary of total operating costs and unit operating costs.

 

Table 1-3: Operating Cost Summary

 

Description Life of Mine
(US$000’s)
  Life of Mine
(US$/t mineralized material)
  Life of Mine
(US$/Cu equivalent lb)
 
Underground Mining 433,099  10.36  0.61 
Process 225,578  5.40  0.32 
G&A 55,409  1.33  0.08 
Backfill plant 112,383  2.69  0.16 
Total Operating 826,469  19.77  1.16 

 

Source: Sierra Metals, 2020

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page ix

 

1.12Economic Analysis

 

The economic analysis for this PEA was prepared by Sierra Metals and reviewed by SRK. The analysis is based on Mineral Resources only and includes Inferred Mineral Resources. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability and must be supported at least by a pre-feasibility study. This PEA is preliminary in nature and there is no certainty that the results of the PEA will be realized. The commodity prices, and their sources, used in the economic analysis are described in Section 19 and include the following:

 

Table 1-4: Commodity Price Forecast by Year

 

Metal  Unit  2020  2021  2022  2023  Long Term (LT) 
Au  $/oz  1,755  1,907  1,782  1,737  1,541 
Ag  $/oz  19.83  24.12  22.22  22.47  20.0 
Cu  $/lb  2.65  2.86  2.89  2.93  3.05 
Pb  $/lb  0.82  0.87  0.89  0.90  0.91 
Zn  $/lb  0.94  0.99  1.04  1.04  1.07 

 

Source: Sierra Metals, 2020

 

In addition to the prices listed above in Table 1-4, the NSR factors in Table 1-5 and the economic factors in Table 1-6 were also used in the economic analysis.

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page x

 

Table 1-5: NSR Factors

 

Process Recoveries*
Cu %  88 
Ag %  78.7 
Au %  62.43 
Concentrate Grades
Cu %  25 
Ag g/t  570 
Au g/t  6.8 
Moisture content %  8 
Freight, Insurance and Marketing
Transport losses %  0.5 
Transportation US$/wmt  42 
Port US$/wmt  9 
Load US$/wmt  40 
Marketing US$/dmt  10 
Insurances US$/wmt  10 
Total US$/dmt  102.92 
Smelter Terms
Cu payable %  96 
Ag payable %  90 
Au payable %  92 
Cu minimum deduction %  1 
Ag minimum deduction oz/t  0 
Au minimum deduction oz/t  0 
Treatment Charges/Refining Charges (TC/RC)
Cu Concentrate TC US$/dmt  69.00 
Cu Refining charge US$/lb Cu  0.069 
Cu Refining cost US$/t Cu  152.12 
Cu Price Participation US$/dmt  0 
Average Penalties US$/dmt  10 
Ag Refining charge US$/oz  0.35 
Au Refining charge US$/oz  6 
Total treatment cost US$/t Cu  727.68 
Total cost of sales US$/t Cu  879.80 
Net Smelter Return Factors
Cu US$/t/%  48.8171 
Ag US$/t/g/t  0.4444 
Au US$/t/g/t  28.1940 

 

Source: Sierra Metals, 2020

* NI 43-101 Technical Report (SRK Consulting (Canada) Inc. May 8, 2020)

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page xi

 

Other economic factors and assumptions used in the economic analysis include:

 

Table 1-6: Economic Factors

 

MeasureUnitValue
Discount Rate%8
LOM Average grade - Aug/t0.19
LOM Average grade – Agg/t13.56
LOM Average grade - Cu%0.72
Ordinary Mining Entitled RoyaltyUS$/year220,000
Extraordinary Mining Entitled Royalty (applied to precious metals)%0.5
Variable Special Mining RoyaltyUS$/yearDepends on operating margin
Tax Rate%30

 

Source: Sierra Metals, 2020

Numbers are presented on a 100% ownership basis and do not include financing costs.

 

The economic analysis is based on mine schedule, CAPEX and OPEX estimation, and price assumptions detailed above. Table 1-7 shows the results of the economic evaluations for the production rates evaluated in this PEA using the metal prices in Table 1-4. The production rate option of 15,000 tpd (2024) has the highest post tax NPV with respect to the other options and both the 10,000 tpd (2024) and 12,000 tpd (2024) options have better returns than their 2026 counterparts.

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page xii

 

Table 1-7: Summary Economic Evaluation

 

Summary Economic Evaluation
Description5 KTPD7 KTPD
(2024)
10 KTPD
(2024)
10 KTPD
(2026)
12 KTPD
(2024)
12 KTPD
(2026)
15 KTPD
(2024)
Unit
Life of mine24181415131311years
Market Prices (Long Term)        
Gold1,5411,5411,5411,5411,5411,5411,541$/oz
Silver20.0020.0020.0020.0020.0020.0020.00$/oz
Copper3.053.053.053.053.053.053.05$/lb
Net Sales        
Gold233,617233,617233,617233,617233,617233,617233,617k$
Silver265,316265,316265,316265,316265,316265,316265,316k$
Copper1,680,2971,680,2971,680,2971,680,2971,680,2971,680,2971,680,297k$
Gross Revenue2,179,2302,179,2302,179,2302,179,2302,179,2302,179,2302,179,230k$
Charges for treatment, refining, impurities172,461172,461172,461172,461172,461172,461172,461k$
Gross Revenue After Selling and Treatment Costs2,006,7692,006,7692,006,7692,006,7692,006,7692,006,7692,006,769k$
Royalties and Mining Permits83,53988,23394,09793,33596,93795,50999,936k$
Gross Revenue After All Costs1,923,2301,918,5361,912,6721,913,4351,909,8321,911,2601,906,833k$
Operating Costs        
Mine512,790472,036433,099438,771414,747423,093393,612k$
Plant259,792242,443225,578228,035217,521221,151208,147k$
G&A78,00973,39755,40958,03048,41452,05341,419k$
Back Fill145,984128,510112,383114,732104,987108,41396,638k$
Total Operating Costs996,574916,385826,469839,567785,669804,711739,815k$
EBITDA926,6561,002,1511,086,2031,073,8671,124,1631,106,5501,167,018k$
LoM Capital + Sustaining Capital244,825268,624316,624319,854355,105357,639408,345k$
Working Capital18,84918,27618,14618,69618,95017,56618,146k$
Income Taxes(209,021)(220,058)(230,874)(230,410)(242,044)(224,673)(230,807)k$
Cash flow before Taxes662,982715,251751,433735,317750,108731,344740,527k$
Cash flow after Taxes453,961495,193520,559504,908508,064506,671509,720k$
Post Tax NPV @ 5%282,882320,898350,787334,178349,978336,798354,455k$
Post Tax NPV @ 8%225,191256,236282,546267,228284,080268,832288,105k$
Post Tax NPV @ 10%197,271223,529246,605232,484248,693233,214252,002k$

 

Source: Sierra Metals, 2020

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page xiii

 

A sensitivity analysis of the Post Tax NPV vs Tonnes Per Day throughput is shown in Figure 1-1.

 

 

 

Source: Sierra Metals, 2020

Note: 5,000 tpd (base case), 7,000 tpd, 10,000 tpd (2024), 12,000 tpd (2024), 15,000 tpd are shown

 

Figure 1-1: Sensitivity Analysis – NPV vs TPD

 

Table 1-8: Incremental Post Tax NPV and Post Tax IRR

 

Production RatesPost Tax NPV US$Post Tax IRR %
7ktpd - 5ktpd31,044,11929.21%
10ktpd (2024) - 5ktpd57,354,81827.87%
10ktpd (2024) - 7ktpd26,310,69926.83%
12ktpd (2024) - 5ktpd58,888,18826.63%
12ktpd (2024) - 7ktpd27,844,06925.20%
12ktpd (2024) - 10ktpd (2024)1,533,3705.75%
15ktpd - 5ktpd62,914,03724.84%
15ktpd - 7ktpd31,869,91723.03%
15ktpd - 10ktpd (2024)5,559,21918.31%
15ktpd - 12ktpd (2024)4,025,84816.84%

 

Source: Sierra Metals, 2020

 

As seen in Table 1-8, the incremental benefit generated by increasing the production rate from 5,000 tpd to 10,000 tpd is very significant with an incremental post tax NPV of US$ 57.4 M and an incremental post tax IRR of 28%. However, the incremental benefit generated by increasing the production rate to 12,000 tpd or 15,000 tpd is far less significant and given that trebling the production rate can potentially present significant operational challenges, Sierra Metals has therefore selected the 10,000 tpd (2024) production rate as the preferred option.

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page xiv

 

The 10,000 tpd (2024) proposed mine plan requires a capital requirement (initial and sustaining) of US$ 317 M over the life of mine; efficiencies associated with higher throughputs are expected to drive a reduction in operating costs on a per tonne basis. This PEA indicates a post tax NPV (8%) at 10,000 tpd (in 2024) of US$ 283 M. Total operating cost for the life of mine is US$ 827 M, equating to a total operating cost of US$ 19.77 per tonne milled and US$ 1.16 per pound copper equivalent.

 

Not included in the economic analysis is the potential sale of magnetite. Sierra Metals is currently studying this potential development and believes that doing so could result in the following outcomes:

 

1.Reduction of overall tailings management costs (less tailings to be handled and stored, reduced tailings storage development capital);

 

2.Impact on future closure costs (reduced closure costs); and

 

3.Impact on revenue (increased sales revenue).

 

The proposed mine plan is conceptual in nature and would benefit from further, more definitive, investigation. The Piedras Verdes processing plant can be adapted to process 10,000 tpd and would require:

 

·Temporary shutdown to overhaul equipment;

 

·Purchase of mobile jaw and cone crushers; and

 

·Overhaul and reintroduction of idle equipment.

 

The availability of tailings storage capacity is a risk to the proposed mine plan, but it is noted that there is ample underground storage that could be utilized for the storage of tailings and the financial analysis has allowed for capital and operating costs for the operation of a tailings backfill plant.

 

1.13Conclusions and Recommendations

 

1.13.1Geology and Mineral Resources

 

SRK is of the opinion that the MRE has been conducted in a manner consistent with industry standards and that the data and information supporting the stated Mineral Resources are sufficient for declaration of Indicated and Inferred classifications of resources. SRK has not classified any of the resources in the Measured category due to some uncertainties regarding the data supporting the MRE.

 

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SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page xv

 

General deficiencies related to the Geology and Mineral Resources of Bolivar include:

 

·No QA/QC program was conducted prior to 2016. This has been addressed by a limited resampling campaign of historical drill core and a more recent QA/QC program that was implemented in 2016. Continuation of the current QA/QC program will be required in order to achieve Measured Resources which generally are supported by high resolution drilling and sampling data that feature consistently implemented and monitored QA/QC.

 

·There is limited to no downhole deviation survey data for the historic drilling. The survey data obtained to date show significant deviations from planned orientations as well as local downhole deviations that influence the exact position of mineralized intervals.

 

·There is currently insufficient density sampling and analysis to adequately define this characteristic for the different lithological units and mineralization types in the various areas of the project. Correlation of density to mineralization characteristics is important for this type of deposit and therefore additional density sampling and analysis will be required for all future drilling.

 

·There is inadequate detailed structural geology data collection from drill core to support interpretation of local mineralization controls and geotechnical characteristics.

 

·A significant portion of the current sample database is missing gold analysis and therefore the current Mineral Resources may not accurately reflect the true value of Bolivar mineralization locally.

 

·Bolivar currently does not have an adequate production reconciliation system to allow for robust comparison of mill production to mine forecasts.

 

SRK recommends the following action items for Bolivar:

 

·Complete downhole surveys for all future exploration and delineation drill holes using a non-magnetic downhole survey instrument.

 

·Continue to improve upon the current sample assay QA/QC program and monitor progress of the program over time to identify trends in the preparation and analytical phases of sample analysis.

 

·Complement the QA/QC protocol using additional controls including coarse blanks, twin samples, fine and coarse duplicates, and a second lab control using a certified laboratory to control the different phases of the preparation and chemical analysis process.

 

·Document the failures in the quality control protocol and the correction measurements taken.

 

·Implement a consistent density testing program including the representative selection of drill core from the different lithological units and mineralization types for the various areas of Bolivar and La Sidra. Multiple density samples should be collected from every drill hole so that local density fluctuations can be assessed.

 

·Density samples should be submitted for geochemical analysis to allow for correlation of density to mineralization type and extent.

 

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SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page xvi

 

·Density check samples (approximately 5 to 10% of total) should be submitted to a third-party independent laboratory such as ALS Minerals for testing using ASTM standards as part of the QA/QC program. These samples should also be analyzed using the current methods employed by Sierra and reviewed to ensure that the mine site analytical performance is reasonable.

 

·Drill core samples previously not analyzed for gold content should be re-analyzed for gold content. Current Mineral Resources may not reflect the true value of the mineralization and metal content due to missing gold analysis. All future drill core samples should be summitted for the full suite of geochemical analyses.

 

·Delineation and infill drilling are recommended in areas of Inferred Mineral Resources to facilitate upgrading to higher confidence resource categories (i.e. Indicated or Measured Mineral Resource) to support life of mine planning activities. A drill hole spacing study should be completed to provide guidance on drill hole density requirements.

 

·Detailed structural geology data collection (i.e. oriented drill core) should be implemented for all future drill holes to allow for more detailed analysis of mineralization controls and geotechnical assessments to support mine design.

 

·Continue to develop a site wide litho-structural model to support exploration, Mineral Resource delineation and mine design activities.

 

·Implement a production reconciliation system to allow for proper reconciliation of mill production to mine forecasts. This should include the development of a dynamic grade control model to support short- and long-term mine planning activities.

 

·Undertake a backfill study to determine the suitability of using tailings as backfill in stopes.

 

1.13.2Recovery Methods

 

There is a high level of month-to-month variability for both tonnes and head grade input to processing. Better integration between geology, mine planning and processing can significantly reduce this variability. Additional work is also needed in the processing facilities to stabilize the operation. Improvements include the implementation of a preventive maintenance program and training programs to improve operators’ skill, with the ultimate objective of improving metal recovery and lowering operating cost, while maintaining or improving concentrate quality.

 

1.13.3Tailings Management

 

As part of the overall tailings management plan, Bolivar is moving to filtered tailings (also known as dry-stack tailings). Expansion in the immediate area of the currently operating facility will occur as the site was first moved to thickened tailings in mid-2017 and will move to filtered tailings in mid-2020. An analysis of utilizing tailings as backfill in the mine should be carried out, and a trade-off study should be completed to determine if the size of the New TSF can be reduced.

 

Based on the 2016 geochemical characterization data, a more robust and comprehensive closure program for the tailings should be undertaken with an emphasis on closure of the existing facilities in such a manner as to not pose a risk to local groundwater resources.

 

CK/JJ October 2020

 

 

 

SRK Consulting
2US043.005 Sierra Metals Inc.
Bolivar_Technical_Report_PEA            Page xvii

 

1.13.4Environmental, Permitting, and Social

 

It does not appear that there are currently any known environmental issues that could materially impact the extraction and beneficiation of Mineral Resources at Bolivar Mine.

 

Ongoing management of dust on surface roadways between the mine and the plant location should be actively performed to protect Sierra Metals’s social license and avoid regulatory compliance violations.

 

More recent geochemical characterization data suggest that some of the material from the underground mine may be potentially acid generating. Additional investigation of the current materials being deposited into the tailings impoundment may be warranted; however, given the dryness of the Chihuahuan Desert, this may not necessarily be a material issue for the project.

 

The required permits for continued operation at the Bolivar Mine, including exploration of the site, have been obtained based on information provided by Sierra Metals. Currently, SRK is not aware of any outstanding permits or any non-compliance at the project or nearby exploration sites.

 

SRK’s scope of work did not include an assessment of the veracity of the closure cost estimate completed in 2017 by Treviño Asociados Consultores, but, based on projects of similar nature and size within Mexico, the estimate appears low in comparison.

 

SRK has the following recommendations regarding environment, permitting, and social or community impact at Bolivar:

 

·The issue of surface road fugitive dust emissions should be addressed as soon as possible to avoid jeopardizing the mine’s social license and incurring compliance violation from the regulatory authorities.

 

·SRK recommends that Sierra Metals contract an independent, outside review of the closure cost estimate, with an emphasis on benchmarking against other projects in northern Mexico. This may require a site investigation and the preparation of a more comprehensive and detailed closure and reclamation plan before a closure specialist evaluates the overall closure approach and costs.

 

In 2017, FLOPAC Ingenieria signed a contract to conduct geophysics, geotechnical and hydrological studies. Based on the results of these studies, a new tailings dam was designed.


CK/JJ October 2020

 

 

 

SRK Consulting  
2US043.005 Sierra Metals Inc.  
Bolivar_Technical_Report_PEA  Page xviii

 

Table of Contents

 

1Executive Summaryiii
    
 1.1Property Description and Ownershipiii
   
 1.2Geology and Mineralizationiii
    
 1.3Status of Exploration, Development and Operationsiv
    
 1.4Mineral Processing and Metallurgical Testingiv
    
 1.5Mineral Resource Estimateiv
    
 1.6Mineral Reserve Estimatev
    
 1.7Mining Methodsv
    
 1.8Recovery Methodsvi
    
 1.9Project Infrastructurevii
    
 1.10Environmental Studies and Permittingvii
    
 1.11Capital and Operating Costsviii
    
 1.12Economic Analysisix
    
 1.13Conclusions and Recommendationsxiv
    
 1.13.1Geology and Mineral Resourcesxiv
    
 1.13.2Recovery Methodsxvi
    
 1.13.3Tailings Managementxvi
    
 1.13.4Environmental, Permitting, and Socialxvii
    
2Introduction1
    
 2.1Qualifications of Consultants (SRK)1
    
 2.2Qualifications of Consultants (Sierra Metals)2
    
 2.3Details of Site Visit Inspection2
    
 2.4Sources of Information3
    
 2.5Effective Date3
    
 2.6Units of Measure3
    
3Reliance on Other Experts4
    
4Property Description and Location5
    
 4.1Property Location5
    
 4.2Mineral Titles6
    
 4.2.1Nature and Extent of Issuer’s Interest8
    
 4.3Royalties, Agreements and Encumbrances8
    
 4.3.1Purchase Agreements8
    
 4.3.2Legal Contingencies9

 

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 4.4Environmental Liabilities and Permitting10
    
 4.4.1Environmental Liabilities10
    
 4.4.2 Required Permits and Status10
    
 4.5Other Significant Factors and Risks10
    
5Accessibility, Climate, Local Resources, Infrastructure and Physiography11
    
 5.1Topography, Elevation and Vegetation11
    
 5.2Accessibility and Transportation to the Property11
    
 5.3Climate and Length of Operating Season11
    
 5.4Infrastructure Availability and Sources11
    
 5.4.1Power11
    
 5.4.2Water11
    
 5.4.3Mining Personnel11
    
 5.4.4 Potential Tailings Storage Areas12
    
 5.4.5Potential Waste Rock Disposal Areas12
    
 5.4.6Potential Processing Plant Sites12
    
6History13
    
 6.1Exploration and Development Results of Previous Owners13
    
 6.2Historic Mineral Resource and Reserve Estimates14
    
 6.3Historic Production14
    
7Geological Setting and Mineralization16
    
 7.1Regional Geology16
    
 7.2Local Geology16
    
 7.3Property Geology18
    
 7.3.1Skarn-hosting Sedimentary Rocks18
    
 7.3.2Intrusive Rocks18
    
 7.4Significant Mineralized Zones21
    
8Deposit Types22
    
 8.1Mineral Deposit22
    
 8.2Geological Model22
    
9Exploration23
    
 9.1Relevant Exploration Work23
    
 9.2Sampling Methods and Sample Quality24
    
 9.3Significant Results and Interpretation25
    
10Drilling25
    
 10.1Type and Extent25
    
 10.2Procedures26
    
 10.3Interpretation and Relevant Results27

 

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Bolivar_Technical_Report_PEA  Page xx

 

11Sample Preparation, Analyses, and Security28
    
 11.1Security Measures28
    
 11.2Sample Preparation for Analysis28
    
 11.3Sample Analysis28
    
 11.4Quality Assurance/Quality Control Procedures29
    
 11.4.1Certified Reference Materials29
    
 11.4.2Blanks34
    
 11.4.3Duplicates34
    
 11.4.4Results36
    
 11.4.5Actions36
    
 11.5Opinion on Adequacy37
    
12Data Verification38
    
 12.1Procedures38
    
 12.2Limitations38
    
 12.3Opinion on Data Adequacy38
    
13Mineral Processing and Metallurgical Testing39
    
 13.1Testing and Procedures41
    
 13.2Recovery Estimate Assumptions41
    
14Mineral Resource Estimates43
    
 14.1Drill hole and Channel Sample Database43
    
 14.1.1Drilling Database43
    
 14.1.2Downhole Deviation44
    
 14.1.3Missing and Unsampled Intervals45
    
 14.2Geological Model45
    
 14.2.1Bolivar Area Mineralization46
    
 14.3Assay Sample Summary50
    
 14.3.1Assay Sample Length50
    
 14.3.2Assay Grade Summary50
    
 14.3.3Compositing53
    
 14.3.4Outlier Analysis and Grade Capping56
    
 14.4Density60
    
 14.5Variography62
    
 14.6Block Model Configuration64
    
 14.7Estimation Parameters65
    
 14.8Model Validation67
    
 14.9Mineral Resource Classification71
    
 14.10Depletion for Mining73
    
 14.11Mineral Resource Statement75
    
 14.12Mineral Resource Sensitivity75
    
 14.13Previous Resource Estimates76
    
 14.14Relevant Factors77

 

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2US043.005 Sierra Metals Inc.  
Bolivar_Technical_Report_PEA  Page xxi

 

15Mineral Reserve Estimates78
    
16Mining Methods79
    
 16.1Introduction79
    
 16.2Current Mining Methods80
    
 16.2.1 Sub-Level Stoping - Bolivar West83
    
 16.2.2Sub-Level Stoping - El Gallo Inferior83
    
 16.2.3Drilling, Blasting, Loading and Hauling84
    
 16.2.4 Mineralized Material and Waste Handling87
    
 16.3Geomechanical Parameters88
    
 16.3.1 Stability Design Criteria88
    
 16.3.2 Excavation Design for El Gallo Inferior93
    
 16.3.3Geomechanical Characterization of Bolivar West99
    
 16.3.4Excavation Design for Bolivar West101
    
 16.3.5 Pillar Recovery Potential and Mining Method Alternatives106
    
 16.3.6Hydrological109
    
 16.4Proposed Mine Plan109
    
 16.4.1 Proposed Mine Plan109
    
 16.4.2 Dilution and Recovery Factor111
    
 16.5Mineable Inventory115
    
 16.6Mine Design117
    
 16.7Mine Production Schedule (Base Case)119
    
 16.8Waste Storage127
    
 16.9Major Mining Equipment127
    
 16.10Ventilation130
    
17Recovery Methods140
    
 17.1Process Description140
    
 17.1.1 Crushing Stage140
    
 17.1.2 Grinding Circuit141
    
 17.1.3Flotation Circuit141
    
 17.1.4Thickening and Filtration141
    
 17.2Piedras Verdes Concentrator Performance141
    
 17.2.1 Operational Performance141
    
 17.2.2Process Plant, Operating Costs and Consumables145
    
 17.3Plant Design and Equipment Characteristics147

 

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 17.4Processing Plant Capex148
    
 17.5Conclusion and Recommendations149
    
18Project Infrastructure150
    
 18.1Access and Local Communities151
    
 18.2Service Roads153
    
 18.3Mine Operations and Support Facilities154
    
 18.4New Mineralized Material Delivery Tunnel154
    
 18.5Process Support Facilities156
    
 18.6Energy158
    
 18.6.1 Propane158
    
 18.6.2Power Supply and Distribution158
    
 18.6.3Fuel Storage159
    
 18.7Water Supply160
    
 18.7.1Potable Water160
    
 18.7.2Water Rights160
    
 18.7.3 Process Water160
    
 18.8Site Communications161
    
 18.9Site Security162
    
 18.10Logistics162
    
 18.11Waste Handling and Management163
    
 18.11.1 Waste Management163
    
 18.11.2 Waste Rock Storage163
    
 18.12Tailings Management163
    
 18.12.1 Existing Tailings Storage Facility163
    
 18.12.2Tailings Facility Expansion165
    
19Market Studies and Contracts169
    
 19.1Metal Price Forecast Sources169
    
20Environmental Studies, Permitting, and Social or Community Impact172
    
 20.1Environmental Studies and Liabilities172
    
 20.2Environmental Management172
    
 20.2.1Tailings Disposal172
    
 20.3Geochemistry173
    
 20.3.1Emission and Waste Management173
    
 20.4Mexican Environmental Regulatory Framework174
    
 20.4.1 Mining Law and Regulations174
    
 20.4.2General Environmental Laws and Regulations174
    
 20.4.3Other Laws and Regulations177

 

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 20.4.4Expropriations179
    
 20.4.5NAFTA179
    
 20.4.6International Policy and Guidelines179
    
 20.4.7The Permitting Process179
    
 20.4.8Required Permits and Status181
    
 20.4.9MIA and CUS Authorizations182
    
 20.5Social Management Planning and Community Relations183
    
 20.6Closure and Reclamation Plan183
    
21Capital and Operating Costs185
    
 21.1Capital Cost (Capex)185
    
 21.2Operating cost (Opex)185
    
22Economic Analysis194
    
 22.1Risk Assessment207
    
23Adjacent Properties210
    
24Other Relevant Data and Information211
    
25Interpretation and Conclusions212
    
 25.1Geology and Mineral Resources212
    
 25.2Mineral Reserve Estimate212
    
 25.3Metallurgy and Processing212
    
 25.4Environmental, Permitting and Social213
    
 25.5Economic Analysis214
    
26Recommendations216
    
 26.1Recommended Work Programs and Costs216
    
 26.1.1Geology and Mineral Resources216
    
 26.1.2Mining and Geotechnical217
    
 26.1.3Tailings Management217
    
 26.1.4Environmental, Permitting and Social or Community Impact218
    
 26.1.5Costs218
    
27References219
    
28Glossary221
    
 28.1Mineral Resources221
    
 28.2Mineral Reserves221
    
 28.3Abbreviations223

 

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2US043.005 Sierra Metals Inc.  
Bolivar_Technical_Report_PEA  Page xxiv

 

List of Tables 
  
Table 1-1: Consolidated Bolivar Mine Mineral Resource Statement as of December 31, 2019 – SRK Consulting (Canada), Inc. (1)(2)(3)     v
  
Table 1-2: Capital Cost Summary     viii
  
Table 1-3: Operating Cost Summary     viii
  
Table 1-4: Commodity Price Forecast by Year     ix
  
Table 1-5: NSR Factors     x
  
Table 1-6: Economic Factors     xi
  
Table 1-7: Summary Economic Evaluation     xii
  
Table 2-1: Site Visit Participants     2
  
Table 4-1: Concessions for the Bolivar Mine     6
  
Table 6-1: Ownership History and Acquisition Dates for Claims at the Bolivar Property     13
  
Table 6-2: 2011 to 2019 Bolivar Production     15
  
Table 10-1: Summary of Drilling by Sierra Metals on the Bolivar Property, 2003 to 2019     25
  
Table 11-1: 2015 to 2017 CRM Expected Means and Tolerances     30
  
Table 11-2: 2018-2019 CRM Expected Means and Tolerances     30
  
Table 14-1: Bolivar Drilling History     43
  
Table 14-2: Drilling Types     44
  
Table 14-3: Sample Assay Descriptive Statistics – All Drilling (length weighted)     44
  
Table 14-4: Drill Hole Downhole Survey Details     45
  
Table 14-5: Bolivar Mineralization Domains and Codes     48
  
Table 14-6: Summary Assay Statistics for Cu (%)     51
  
Table 14-7: Summary Assay Statistics for Ag (g/t)     52
  
Table 14-8: Summary Assay Statistics for Au (g/t)     53
  
Table 14-9: Composited Assay Summary Statistics for Cu (%)     54
  
Table 14-10: Composited Assay Summary Statistics for Ag (g/t)     55
  
Table 14-11: Composited Assay Summary Statistics for Au (g/t)     56
  
Table 14-12: Capped Composite Summary Statistics for Cu (%)     57
  
Table 14-13: Capped Composite Summary Statistics for Ag (g/t)     58
  
Table 14-14: Capped Composite Summary Statistics for Au (g/t)     59
  
Table 14-15:  Assigned Average Density Values for Mineralized Domains     61
  
Table 14-16: Variogram Parameters for Copper     63

 

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Table 14-17: Variogram Parameters for Silver     63
  
Table 14-18: Variogram Parameters for Gold     63
  
Table 14-19: Block Model Configuration Parameters     64
  
Table 14-20: Search Ellipse Orientation Parameters     66
  
Table 14-21: Summary of Estimation Parameters     66
  
Table 14-22: Consolidated Bolivar Mine Mineral Resource Statement as of December 31, 2019(1)(2)(3)     75
  
Table 14-23: Consolidated Bolivar Mine Mineral Resource Statement as of October 31, 2017–SRK Consulting (U.S.), Inc.     76
 
Table 16-1: Rock Mass Characteristics of El Gallo Inferior, Chimenea 1 and Chimenea 2 and Bolivar West          82
  
Table 16-2: Determination of Stope Stability – El Gallo Inferior     94
  
Table 16-3: Factor B and Factor C – El Gallo Inferior     94
  
Table 16-4: Estimation of Induced Stresses (Part 1) – El Gallo Inferior     95
  
Table 16-5: Estimation of Induced Stresses (Part 2) – El Gallo Inferior     95
  
Table 16-6: Stability Number – El Gallo Inferior     96
  
Table 16-7: Geomechanical Calculation Results     98
  
Table 16-8: Determination of Stope Stability – Bolivar West     102
  
Table 16-9: Factor B and Factor C – Bolivar West     102
  
Table 16-10: Estimation of Induced Stresses (Part 1) – Bolivar West     102
  
Table 16-11: Estimation of Induced Stresses (Part 2) – Bolivar West     103
  
Table 16-12: Stability Number – Bolivar West     103
  
Table 16-13: Geomechanical Calculation Results     105
  
Table 16-14: Unit Value Metal Price Assumptions     113
  
Table 16-15: Metallurgical Recoveries     113
  
Table 16-16: NSR Calculation Parameters     114
  
Table 16-17: NSR Calculation Parameters – Site Operating Costs Per Tonne     115
  
Table 16-18: Parameters for Sub-Level Stoping Mining Method     115
  
Table 16-19: Resource Report     116
  
Table 16-20: Mineable Inventory     117
  
Table 16-21: Bolivar Mine – Development Meters in the LOM Plan     118
  
Table 16-22: LOM Production Rates     119
  
Table 16-23: LOM Production Schedule for 5,000 Tonnes/Day     120

 

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Table 16-24: LOM Development Schedule for 5,000 Tonnes/Day     120
  
Table 16-25: LOM Production Schedule for 7,000 Tonnes/Day (7,000 tpd in 2024)     121
  
Table 16-26: LOM Development Schedule for 7,000 Tonnes/Day (7,000 tpd in 2024)     121
  
Table 16-27: LOM Production Schedule for 10,000 Tonnes/Day (10,000 tpd in 2024)     122
  
Table 16-28: LOM Development Schedule for 10,000 Tonnes/Day (10,000 tpd in 2024)     122
  
Table 16-29: LOM Production Schedule for 10,000 Tonnes/Day (10,000 tpd in 2026)     123
  
Table 16-30: LOM Development Schedule for 10,000 Tonnes/Day (10,000 tpd in 2026)     123
  
Table 16-31: LOM Production Schedule for 12,000 Tonnes/Day (12,000 tpd in 2024)     124
  
Table 16-32: LOM Development Schedule for 12,000 Tonnes/Day (12,000 tpd in 2024)     124
  
Table 16-33: LOM Production Schedule for 12,000 Tonnes/Day (12,000 tpd in 2026)     125
  
Table 16-34: LOM Development Schedule for 12,000 Tonnes/Day (12,000 tpd in 2026)     125
  
Table 16-35: LOM Production Schedule for 15,000 Tonnes/Day (15,000 tpd in 2024)     126
  
Table 16-36: LOM Development Schedule for 15,000 Tonnes/Day (15,000 tpd in 2024)     126
  
Table 16-37: Current List of Major Underground Mining Equipment at Bolivar     127
  
Table 16-38: Main Planned Underground Mining Equipment (5,000 tpd)     128
  
Table 16-39: Main Planned Underground Mining Equipment (7,000 tpd - 2024)     128
  
Table 16-40: Main Planned Underground Mining Equipment (10,000 tpd - 2024)     128
  
Table 16-41: Main Planned Underground Mining Equipment (10,000 tpd - 2026)     128
  
Table 16-42: Main Planned Underground Mining Equipment (12,000 tpd - 2024)     129
  
Table 16-43: Main Planned Underground Mining Equipment (12,000 tpd - 2026)     129
  
Table 16-44: Main Planned Underground Mining Equipment (15,000 tpd - 2024)     129
  
Table 16-45: Auxiliary Mining Equipment     130
  
Table 16-46: Ventilation Requirements for Equipment and Personnel (5,000 tpd)     131
  
Table 16-47: Ventilation Requirements by Year (5,000 tpd)     132
  
Table 16-48: Ventilation Requirements by Year (7,000 tpd – 2024)     133
  
Table 16-49: Ventilation Requirements by Year (10,000 tpd – 2024)     134
  
Table 16-50: Ventilation Requirements by Year (10,000 tpd – 2026)     135
  
Table 16-51: Ventilation Requirements by Year (12,000 tpd – 2024)     136
  
Table 16-52: Ventilation Requirements by Year (12,000 tpd – 2026)     137
  
Table 16-53: Ventilation Requirements by Year (15,000 tpd - 2024)     138
  
Table 17-1: Piedras Verdes Performance - 18-month Period July 2018 to December 2019     142
  
Table 17-2: Piedras Verdes’ Performance Comparison – Q4 2018 and Q4 2019     143

 

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Table 17-3: Piedras Verdes Mill’s Major Process Equipment     148
  
Table 18-1: Tunnel Dimensions and Lengths     156
  
Table 18-2: Propane Tank Location and Capacities     158
  
Table 18-3: Fuel Tank Storage and Capacity Summary     159
  
Table 18-4: Site Water Use (January to December 2018)     161
  
Table 18-5: Site Water Use (January to December 2019)     161
  
Table 19-1: Metal Prices     169
  
Table 19-2: CIBC Global Mining Group’s Consensus Forecast Summary - September 30, 2020     170
  
Table 19-3: LT Silver Price Forecast – September 30, 2020     171
  
Table 20-1: Permit and Authorization Requirements for the Bolivar Mine     181
  
Table 20-2: Bolivar Project Concessions     182
  
Table 20-3: Bolivar Mine - Estimated Cost of Reclamation and Closure of the Mine     183
  
Table 21-1: Opex Estimate at 5,000 Tonnes/Day (US$)     187
  
Table 21-2: Capex Estimate at 5,000 Tonnes/Day (US$)     187
  
Table 21-3: Opex Estimate at 7,000 Tonnes/Day (US$) (7,000 tpd in 2024)     188
  
Table 21-4: Capex Estimate at 7,000 Tonnes/Day (US$) (7,000 tpd in 2024)     188
  
Table 21-5: Opex Estimate at 10,000 Tonnes/Day (US$) (10,000 tpd in 2024)     189
  
Table 21-6: Capex Estimate at 10,000 Tonnes/Day (US$) (10,000 tpd in 2024)     189
  
Table 21-7: Opex Estimate at 10,000 Tonnes/Day (US$) (10,000 tpd in 2026)     190
  
Table 21-8: Capex Estimate at 10,000 Tonnes/Day (US$) (10,000 tpd in 2026)     190
  
Table 21-9: Opex Estimate at 12,000 Tonnes/Day (US$) (12,000 tpd in 2024)     191
  
Table 21-10: Capex Estimate at 12,000 Tonnes/Day (US$) (12,000 tpd in 2024)     191
  
Table 21-11: Opex Estimate at 12,000 Tonnes/Day (US$) (12,000 tpd in 2026)     192
  
Table 21-12: Capex Estimate at 12,000 Tonnes/Day (US$) (12,000 tpd in 2026)     192
  
Table 21-13: Opex Estimate at 15,000 Tonnes/Day (US$) (15,000 tpd in 2024)     193
  
Table 21-14: Capex Estimate at 15,000 Tonnes/Day (US$) (15,000 tpd in 2024)     193
  
Table 22-1: Commodity Price Forecast by Year     194
  
Table 22-2: NSR Factors     195
  
Table 22-3: Economic Factors     196
  
Table 22-4: Summary Economic Evaluation     197
  
Table 22-5: Incremental Post Tax NPV and IRR     198
  
Table 22-6: Sensitivity Analysis NPV – 5,000 Tonnes/Day (US$)     200

 

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Table 22-7: Sensitivity Analysis NPV – 7,000 Tonnes/Day (US$)     201
  
Table 22-8: Sensitivity Analysis NPV – 10,000 Tonnes/Day (US$) (10,000 tpd in 2024)     202
  
Table 22-9: Sensitivity Analysis NPV – 10,000 Tonnes/Day (US$) (10,000 tpd in 2026)     203
  
Table 22-10: Sensitivity Analysis NPV - 12,000 Tonnes/Day (US$) (12,000 tpd in 2024)     204
  
Table 22-11: Sensitivity Analysis NPV - 12,000 Tonnes/Day (US$) (12,000 tpd in 2026)     205
  
Table 22-12: Sensitivity Analysis NPV - 15,000 Tonnes/Day (US$) (15,000 tpd in 2024)     206
  
Table 22-13: Bolivar Mine – Risk Assessment     207
  
Table 26-1: Summary of Costs for Recommended Work     218
  
Table 28-1: Definition of Terms     222
  
Table 28-2: Abbreviations     223

 

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List of Figures 
  
Figure 1-1: Sensitivity Analysis – NPV vs TPD     xiii
  
Figure 4-1: Map Showing the Location of the Bolivar Property in Chihuahua, Mexico     5
  
Figure 4-2: Land Tenure Map showing Bolivar Concessions     7
  
Figure 4-3: Map of the Bolivar Property     8
  
Figure 7-1: Regional Geology Map showing the Locations of Various Mines in the Sierra Madre Occidental Precious Metals Belt     16
  
Figure 7-2: Local Geology Map Showing the Location of the Bolivar Property     17
  
Figure 7-3: Stratigraphic Column of the Bolivar Property     19
  
Figure 7-4: Geologic Map of the Bolivar Property     20
  
Figure 7-5: Mineralized Andradite Garnet Skarn – El Gallo Area Core Sample     21
  
Figure 10-1: Location Map of Drill Hole Collars (green) and Traces (grey)     26
  
Figure 11-1: CRM Performance for MCL-01, MCL-02 and PLSUL-03 for Cu     31
  
Figure 11-2: CRM Performance for SKRN-05, OXHYO-03 and STRT-01 for Cu     32
  
Figure 11-3: CRM Performance for MCL-03, PLSUL-08 and PLSUL-11 for Cu     33
  
Figure 11-4: Fine Blank Performance – Cu     34
  
Figure 11-5: Duplicate Sample Analysis for Cu (2018 and 2019 campaigns)     35
  
Figure 11-6: Duplicate Sample Analysis for Ag (2018 and 2019 campaigns)     35
  
Figure 11-7: Duplicate Sample Analysis for Au (2018 and 2019 campaigns)     36
  
Figure 13-1: The Piedras Verdes Processing Plant’s Flotation Area     39
  
Figure 13-2: Piedras Verdes Flowsheet     40
  
Figure 13-3: Piedras Verdes Monthly Average Performance in 2019     42
  
Figure 13-4: Monthly Cu Head Grade vs. Cu Recovery - 2019     42
  
Figure 14-1: December 2019 Mineralization Model for Bolivar     47
  
Figure 14-2: 3D View of Piedras Verde Granodiorite Relative to Mineralization Zones     49
  
Figure 14-3: Assay Sample Interval Summary Statistics     50
  
Figure 14-4: Scatter Plots of Density (t/m3) Relative to Cu (%), Fe (%) and Combined Cu + Fe + Zn (%) Mineralization     62
  
Figure 14-5: 2020 Bolivar MRE Block Models     64
  
Figure 14-6: Swath Plot of Cu (%) Grade for the EGI Domain     68
  
Figure 14-7: Swath Plot of Ag (g/t) Grade for the EGI Domain     69

 

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Figure 14-8: Comparison of Average Cu (%) Grade Between Block Model Estimate and Declustered Nearest Neighbour Model For Each Mineralized Domain (Note: Grey Bars Represent Volume of Individual Domains)          70
  
Figure 14-9: Comparison of Average Ag (g/t) Grade Between Block Model Estimate and Declustered Nearest Neighbour Model For Each Mineralized Domain (Note: Grey Bars Represent Volume of Individual Domains)          70
  
Figure 14-10: EGI Domain Cross-section Comparison of Estimated Block Cu (%) Grades Relative to Drill Hole Assay Composites     71
  
Figure 14-11: BNW4 Domain Cross-section Comparison of Estimated Block Cu (%) Grades Relative to Drill Hole Assay Composites     71
  
Figure 14-12: Areas of Mine Production as of December 31, 2019     74
  
Figure 14-13: Grade-Tonnage Curve for Indicated and Inferred Mineral Resources     76
  
Figure 16-1: Overview of Bolivar Mine Design – Plan View     79
  
Figure 16-2: Bolivar Overview – Plan View     80
  
Figure 16-3: Plan View of Bolivar Mineralized Zone Location and Mined Out Areas     81
  
Figure 16-4: Isometric View of El Gallo Inferior, Chimenea 1 and Chimenea 2     81
  
Figure 16-5: Isometric View of Bolivar W, Bolivar NW and Mined Out Areas     82
  
Figure 16-6: Typical Section Showing Sub-Level Stoping     83
  
Figure 16-7: Typical Section Showing Sub-Level Stoping     84
  
Figure 16-8: Typical 4 m x 4 m Development Blast Pattern 1     85
  
Figure 16-9: Typical 4 m x 4 m Development Blast Pattern 2     85
  
Figure 16-10: Blasting Design for Longholes in Bolivar West     86
  
Figure 16-11: Blasting Design for Longholes in El Gallo Inferior     86
  
Figure 16-12: Drill Jumbo Drilling a Blast Pattern in an El Gallo Inferior Production Stope     87
  
Figure 16-13: Stress Factor in Rock A, for Different Values of σc / σ1     89
  
Figure 16-14: Orientation of the Critical Joint with Respect to the Excavation Surface (Potvin, 1988)     90
  
Figure 16-15: Adjustment Factor B (Potvin, 1988)     90
  
Figure 16-16: Gravity Adjustment Factor C, for Gravity Falls and Slumps (Potvin, 1988)     91
  
Figure 16-17: Gravity Adjustment Factor C, for Slip Failure Modes (Potvin, 1988)     92
  
Figure 16-18: Stope Stability Graph for Large Excavations (Potvin, 1988)     92
  
Figure 16-19: El Gallo Inferior Cross-section     93
  
Figure 16-20: Hydraulic Radii – El Gallo Inferior     96
  
Figure 16-21: Maximum Spans - El Gallo Inferior     97

 

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Figure 16-22: Stability Factor of Excavations in El Gallo Inferior with Maximum Openings of 40 m (Stable, lower dilution) and 65 m (Unstable, higher dilution).     97
  
Figure 16-23: Column Stability     98
  
Figure 16-24: El Gallo Inferior – Plan Section     99
  
Figure 16-25: Geomechanical Zoning of Bolivar West     99
  
Figure 16-26: Drilling Logging - Bolivar West     100
  
Figure 16-27: Drilling Logging – Bolivar West     100
  
Figure 16-28: Geomechanical Model of Bolivar West Along the Mineralized Structure (RMR 20 - 40, poor quality)   101
  
Figure 16-29: Hydraulic Radii – Bolivar West     103
  
Figure 16-30: Stability and Failure Probabilities – Bolivar West     104
  
Figure 16-31: Maximum Spans – Bolivar West     104
  
Figure 16-32: Stability Factor of the Excavations in Bolivar West with maximum openings of 9.0 m (stable and less dilution) and vertical pillars of 7.0 x7.0 m for heights of 12 m     105
  
Figure 16-33: Example of Slender Pillar     106
  
Figure 16-34: Proposed Pillar Recovery Program Scheme     109
  
Figure 16-35: Typical Section Bolivar NW     110
  
Figure 16-36: Typical Room and Pillar Section Bolivar West (Lower Area)     110
  
Figure 16-37: Mine Design and Mineralized Areas     118
  
Figure 16-38: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year     120
  
Figure 16-39: LOM Production – Tonnes per Year and Tonnes Per Day     120
  
Figure 16-40: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year     121
  
Figure 16-41: LOM Production – Tonnes per Year and Tonnes Per Day     121
  
Figure 16-42: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year     122
  
Figure 16-43: LOM Production – Tonnes per Year and Tonnes Per Day     122
  
Figure 16-44: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year     123
  
Figure 16-45: LOM Production – Tonnes per Year and Tonnes Per Day     123
  
Figure 16-46: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year     124
  
Figure 16-47: LOM Production – Tonnes per Year and Tonnes Per Day     124
  
Figure 16-48: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year     125
  
Figure 16-49: LOM Production – Tonnes per Year and Tonnes Per Day     125
  
Figure 16-50: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year     126
  
Figure 16-51: LOM Production – Tonnes per Year and Tonnes Per Day     126

 

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Figure 16-52: Sierra Metals Ventilation Model for Existing Workings     130
  
Figure 16-53: Bolivar W/Bolivar NW/El Gallo Inferior Key Ventilation Development Layout 2020-2023 Mine Production 12,000 tpd     139
  
Figure 16-54: Bolivar W/Bolivar NW/El Gallo Inferior Key Ventilation Development Layout 2024-2032 Mine Production 12,000 tpd     139
  
Figure 17-1: Piedras Verdes Mill – Block Flow Diagram     140
  
Figure 17-2: Piedras Verdes – Mineralized Material Throughout (Tonnes) and Copper Head Grade %     144
  
Figure 17-3: Piedras Verdes – Mill Feed Head Grade (Cu %, Ag g/t, Au x 10 g/t)     144
  
Figure 17-4: Piedras Verdes – Copper Concentrate and Metal Recoveries     145
  
Figure 17-5: Piedras Verdes – Copper Concentrate Operating Cost     146
  
Figure 17-6: Piedras Verdes – Operating Cost Breakdown Q3 2019     147
  
Figure 18-1: Bolivar General Facilities Location     150
  
Figure 18-2: Bolivar Camp – Accommodation Units     152
  
Figure 18-3: Bolivar Camp - Plan Layout     153
  
Figure 18-4: Bolivar Maintenance Shop     154
  
Figure 18-5– Isometric View of New Mineralized Material Delivery Tunnel     155
  
Figure 18-6: Aerial View of the Piedras Verdes Processing Plant     156
  
Figure 18-7: Inside the Piedras Verdes Processing Plant     157
  
Figure 18-8: Piedras Verdes Tailings Storage Facility - Looking South     157
  
Figure 18-9: Monthly Power Consumption     159
  
Figure 18-10: Piedras Verdes Water Reservoir     160
  
Figure 18-11: Concentrate Trucking Route     162
  
Figure 18-12: Active Tailings Area Location     163
  
Figure 18-13: TSF Operational Area     164
  
Figure 18-14: Active Tailings Area     165
  
Figure 18-15: Current TSF - Isometric View of Flopac Ingenieria Study Area     166
  
Figure 18-16: Isometric View of the New TSF     167
  
Figure 18-17: Plan View of the Current TSF and New TSF Locations     168
  
Figure 20-1: Construction and Start-up Authorization for Industrial Facilities     180
  
Figure 22-1: Sensitivity Analysis – Post Tax NPV vs TPD     198
  
Figure 22-2: Sensitivity Analysis – 5,000 tpd     200
  
Figure 22-3: Sensitivity NPV Vs Discount Rate – 5,000 tpd     200

 

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Figure 22-4: Sensitivity Analysis – 7,000 tpd     201
  
Figure 22-5: Sensitivity NPV Vs Discount Rate – 7,000 tpd     201
  
Figure 22-6: Sensitivity Analysis – 10,000 tpd in 2024     202
  
Figure 22-7: Sensitivity NPV Vs Discount Rate – 10,000 tpd in 2024     202
  
Figure 22-8: Sensitivity Analysis – 10,000 tpd in 2026     203
  
Figure 22-9: Sensitivity NPV Vs Discount Rate – 10,000 tpd in 2026     203
  
Figure 22-10: Sensitivity Analysis – 12,000 tpd in 2024     204
  
Figure 22-11: Sensitivity NPV Vs Discount Rate – 12,000 tpd in 2024     204
  
Figure 22-12: Sensitivity Analysis – 12,000 tpd in 2026     205
  
Figure 22-13: Sensitivity NPV Vs Discount Rate – 12,000 tpd in 2026     205
  
Figure 22-14: Sensitivity Analysis – 15,000 tpd in 2024     206
  
Figure 22-15: Sensitivity NPV Vs Discount Rate – 15,000 tpd in 2024     206

 

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2Introduction

 

This Preliminary Economic Assessment (PEA) report is not a wholly independent Technical Report as some sections have been prepared and signed off by qualified persons (QPs) from Sierra Metals, the project owner and producing issuer, with the terms ‘QP’ and ‘producing issuer’ used here as defined under the Canadian Securities Administrators (CSA) National Instrument 43-101 (NI 43-101) Standards of Disclosure for Mineral Projects. The QPs responsible for this report are listed in Sections 2.1 and 2.2.

 

Sierra Metals has engaged various specialist groups to evaluate how, on a conceptual level, mining, mineral processing, and tailings management could be adapted at the Bolivar Mine and Piedras Verdes processing plant (combined to form the Property) to achieve a sustainable and staged increase in mine production and mill throughput.

 

This PEA is designed to give an indication of the economic viability of operating the Property at increased production rates, from 5,000 tpd to 15,000 tpd.

 

This PEA is based on Indicated and Inferred Mineral Resources reported on May 8, 2020 by SRK and effective as of December 31, 2019. The mine plan presented in this PEA considers the resource depleted to December 31, 2019.

 

The reader is reminded that PEA studies are indicative and not definitive, and that the resources used in the proposed mine plan include Inferred Resources that are too speculative to be used in an economic analysis except as allowed for by NI 43-101 in PEA studies.

 

Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. There is no certainty that Inferred Resources can be converted to Indicated or Measured Resources or Mineral Reserves, and as such, there is no certainty that the results of this PEA will be realized.

 

2.1Qualifications of Consultants (SRK)

 

The consultants preparing this Technical Report are specialists in the fields of geology, exploration, Mineral Resource estimation and classification, underground mining, geotechnical, environmental, permitting, metallurgical testing, mineral processing, processing design, capital and operating cost estimation, and mineral economics.

 

None of the SRK consultants and associate consultants employed in the preparation of this report has any beneficial interest in Sierra Metals or its subsidiaries. The consultants are not insiders, associates, or affiliates of Sierra Metals or its subsidiaries. The results of this Technical Report are not dependent upon any prior agreements concerning the conclusions to be reached, nor are there any undisclosed understandings concerning any future business dealings between Sierra Metals and the consultants. The consultants are being paid a fee for their work in accordance with normal professional consulting practice.

 

The following individuals, by virtue of their education, experience and professional association, are considered Qualified Persons (QPs) as defined in the NI 43-101 standard, for this report, and are members in good standing of appropriate professional institutions. QP certificates of authors are provided in Appendix A. The QPs are responsible for specific sections as follows:

 

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·Cliff Revering, P. Eng., SRK Principal Consultant (Resource Geology), is the QP responsible for Sections 7 through 12, Section 14, and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report.

 

·Carl Kottmeier, B.A.Sc., P. Eng., MBA, SRK Principal Consultant (Mining), is the QP responsible for Sections 2 through 6, 27, 28 and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report.

 

·Daniel H. Sepulveda, BSc, SRK Associate Consultant (Metallurgy), is the QP responsible for Sections 13 and 17 (mineral processing, metallurgical testing and recovery methods), and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report.

 

·Jarek Jakubec, C. Eng. FIMMM, SRK Practice Leader/Principal Consultant (Mining, Geotechnical), is the QP responsible for portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report.

 

2.2Qualifications of Consultants (Sierra Metals)

 

The following individuals from Sierra Metals, by virtue of their education, experience and professional association, are considered Qualified Persons (QPs) as defined in the NI 43-101 standard, for this report, and are members in good standing of appropriate professional institutions. QP certificates of authors are provided in Appendix A. The QPs are responsible for specific sections as follows:

 

·Américo Zuzunaga, Vice President Corporate Planning, is the QP responsible for Sections 15, 16, 18, 19, 20, 21, 22, 23 and 24, and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report.

 

2.3Details of Site Visit Inspection

 

Table 2-1: Site Visit Participants

 

PersonnelCompanyExpertiseDates of VisitDetails of Inspection
Andre DeissSRKResource Geology, Mineral ResourcesApril 7 & 8, 2019Reviewed geology, resource estimation methodology, sampling and drilling practices, and examined drill core.
Carl KottmeierSRKMining, Infrastructure, EconomicsApril 7 & 8, 2019Reviewed mining methods, UG and surface infrastructure.
Daniel SepulvedaSRKMetallurgy and ProcessApril 7 & 8, 2019Reviewed metallurgical test work, tailings storage, and process plant.

Source: SRK, 2020

 

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2.4Sources of Information

 

The sources of information used in the preparation of this report include data and reports supplied by Sierra Metals personnel, and the previous NI 43-101 Technical Report prepared by SRK. Documents cited throughout the report are referenced in Section 27.

 

2.5Effective Date

 

The effective date of this report is December 31, 2019.

 

2.6Units of Measure

 

The metric system has been used throughout this report. Tonnes (t) are metric of 1,000 kilograms (kg), or 2,204.6 pounds (lb). All currency is in U.S. dollars (US$) unless otherwise stated.

 

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3Reliance on Other Experts

 

This PEA report is not a wholly independent report as some sections have been prepared and signed off by QPs from Sierra Metals, the project owner, with the term QP used here as it is defined under NI 43-101 standards. Section 2 explains which report sections were prepared by SRK and which were prepared by Sierra Metals.

 

The consultants’ opinions contained herein are based on information provided to the consultants by Sierra Metals throughout the course of the investigations. SRK has relied upon the work of other consultants in some areas in support of this Technical Report.

 

The consultants used their experience to determine if the information from previous reports was suitable for inclusion in this Technical Report and adjusted information that required amending. This report includes technical information that required subsequent calculations to derive subtotals, totals and weighted averages. Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, the consultants do not consider them to be material.

 

SRK received statements of validity for mineral titles, surface ownership and permitting for various areas and aspects of the Bolivar Mine and reproduced them for this report. These items have not been independently reviewed by SRK and SRK did not seek an independent legal opinion of these items.

 

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4Property Description and Location

 

4.1Property Location

 

The Bolivar Property is located in the state of Chihuahua, Mexico (Figure 4-1), in the municipality of Urique. The Property is situated in the rugged, mountainous terrain of the Sierra Madre Occidental, approximately 400 km by road southwest of the city of Chihuahua and approximately 1,250 km northwest of Mexico City. The geographic center of the Property is 27°05’N Latitude and 107°59’W Longitude. It is roughly bounded to the northeast by the Copper Canyon mine (50 km from the Bolivar Mine), to the south by the El Fuerte river (18 km), to the north by the village of Piedras Verdes (5 km), and to the northwest by the town of Cieneguita (12.5 km).

 

 

Source: Sierra Metals, 2020

 

Figure 4-1: Map Showing the Location of the Bolivar Property in Chihuahua, Mexico

 

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4.2Mineral Titles

 

Sierra Metals wholly holds mineral concession titles allowing exploration and mining within 14 concessions (6,799.69 ha) that make up the project area. Locations of the concessions are shown in cyan in Figure 4-2. Other area concessions are shown in gray. The concessions list is provided in Table 4-1. Production from the Bolivar Mine is not subject to any royalties; however, the concessions are subject to a federal tax that varies by concession.

 

Table 4-1: Concessions for the Bolivar Mine

 

Claim NameSurface Area (ha)File NumberTitle NumberExpiration Date
La Cascada1,944.33016/32259222720August 26, 2054
Bolivar III48.00321.1/1-64180659July 13, 2037
Bolivar IV50.00321.1/1-118195920September 22, 2042
Piedras Verdes92.47016/31958220925October 27, 2054
Mezquital2,475.41016/32157223019October 4, 2054
Mezquital Fracc. 14.73016/32157223020October 4, 2054
Mezquital Fracc. 22.43016/32157223021October 4, 2054
Mezquital Fracc. 3974.57016/32157223022October 4, 2054
El Gallo251.80016/32514224112April 04, 2055
Bolivar63.56321.1/1-100192324December 18, 2041
La Chaparrita10.001/1.3/00882217751August 12, 2052
La Mesa718.95016/32556223506January 11, 2055
Moctezuma67.431/1/01432226218December 01, 2055
San Guillermo96.00099/02161196862August 12, 2043
Total6,799.69   

Source: Sierra Metals, 2020

 

 

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Source: SNL FINANCIAL LC, 2020

 

Figure 4-2: Land Tenure Map showing Bolivar Concessions

 

Figure 4-3 shows the concessions in the immediate Bolivar Mine area with the Bolivar West, Bolivar Northwest and La Sidra zones identified.

 

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Source: SNL FINANCIAL LC, 2020

 

Figure 4-3: Map of the Bolivar Property

 

4.2.1Nature and Extent of Issuer’s Interest

 

Sierra Metals holds an agreement for surface rights (exploration and mining) with Piedras Verdes Ejido, the village roughly 12 km from the property. Production from the Bolivar Mine is not subject to any royalties; however, the concessions are subject to a federal tax that varies by concession.

 

4.3Royalties, Agreements and Encumbrances

 

4.3.1Purchase Agreements

 

The concessions listed in Table 4-1 are described in more detail as follows:

 

·La Cascada: In August 2004, Sierra Metals entered into an Option to Purchase Agreement with Polo y Ron Minerales, S.A. de C.V. to acquire the La Cascada claim for US$10,000;

 

·Bolivar III and Bolivar IV: In 2004, Sierra Metals purchased 50% of all the rights of Bolívar III and IV from Minera Senda de Plata, SA de CV. On October 2, 2007 the remaining 50% was purchased from Mr. Javier Octavio Bencomo Munoz and his wife Carmen Beatriz Chavez Marquez;

 

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·Piedras Verdes: In December 2007, Sierra Metals entered into an Option to Purchase Agreement with Mr. Raul Tarín Melendez and Mrs. María Francisca Carrasco Valdez to purchase the Piedras Verdes concession for US$10,000;

 

·Mezquital, Mezquital Fracción 1 through 3, and El Gallo: On November 2005, Sierra Metals entered into an Option to Purchase Agreement with Polo y Ron Minerales, S.A. de C.V. to acquire the Mezquital, Mezquital Fracción 1, Mezquital Fracción 2, Mezquital Fracción 3, and El Gallo concessions for US$5,000;

 

·Bolivar: In January 2008, Sierra Metals entered into a purchase agreement with Marina Fernandez regarding the Bolívar property for US$85,000 paid between 2008 and 2009;

 

·La Chaparrita: In January 29, 2008, Sierra Metals entered into an Option to Purchase Agreement with Mr. Jesús Fernández Loya on behalf of Minera Senda de Plata S.A. de C.V. to purchase the La Chaparrita concession for US$85,000;

 

·La Mesa: In January 2005, Sierra Metals staked the La Mesa claim, at Dirección General de Minas, México;

 

·Moctezuma: In November 2010, Sierra Metals entered into an Option to Purchase Agreement with Mr. Juan Orduño García, Mr. Jesús Manuel Chávez González, and Mr. Armando Solano Montes purchase the Moctezuma concession. The terms of the agreement included a total cash payment of MX$3,500,000 (Mexican Pesos); and

 

·San Guillermo: In October 2011, Sierra Metals entered into a purchase agreement with Minera Potosi Silver, a sister company of Minera Piedras Verdes del Norte, S.A. de C.V., for the San Guillermo concession for MX$464,000.

 

4.3.2Legal Contingencies

 

In 2009, a personal action was filed in Mexico against DBM by an individual, Ambrosio Bencomo Muñoz, as administrator of the intestate succession of Ambrosio Bencomo Casavantes y Jesus Jose Bencomo Muñoz, claiming the annulment and revocation of the purchase agreement of two mining concessions, Bolívar III and IV between Minera Senda de Plata S.A. de C.V. and Ambrosio Bencomo Casavantes, and with this, the nullity of purchase agreement between DBM and Minera Senda de Plata S.A. de C.V. In June 2011, the Sixth Civil Court of Chihuahua, Mexico, ruled that the claim was unfounded and dismissed the case, the plaintiff appealed to the State Court. On November 3, 2014, the Sixth Civil Court of Chihuahua ruled against the plaintiff, noting that the legal route by which the plaintiff presented his claim was not admissible. On February 17, 2017 the State Court issued a ruling dismissing the arguments of the plaintiff. Sierra Metals is attentive to any legal action that is generated in relation to this process.

 

Carlos Emilio Seijas Bencomo, a relative of Ambrosio Bencomo Casavantes and Ambrosio Bencomo Muñoz, following the steps of the Ambrosio lawsuit, filed a similar personal action to claim annulment and revocation of the purchase of the two mining concessions. In May 31, 2019, the Second Federal Civil Court issued a resolution ordering: a) the annulment and revocation of the purchase agreement of the two mining concessions, Bolívar III and IV between Minera Senda de Plata S.A. de C.V. and Ambrosio Bencomo Casavantes, and with this, the nullity of purchase agreement between DBM and Minera Senda de Plata S.A. de C.V., and b) the payment of a sum of money pending to be defined by concept of restitution of the benefits of those two mining concessions. In June 2019, a Federal Court Chihuahua granted Sierra Metals a suspension of this adverse resolution issued. At this time, the appeal (writ of amparo) presented by the Company is pending to be resolved by the Third Federal Collegiate Court of Civil and Labor Matters of the Seventeenth circuit in Chihuahua. Sierra Metals will continue to vigorously defend this action and is confident that the claim is of no merit.

 

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4.4Environmental Liabilities and Permitting

 

4.4.1Environmental Liabilities

 

Based on communications with representatives from Sierra Metals, and a reconnaissance of the Property in January 2018, it does not appear that there are currently any known environmental issues that could materially impact the extraction and beneficiation of Mineral Resources or Reserves. From previous assessments (Gustavson, 2013), lesser known environmental liabilities include unreclaimed exploration disturbances (i.e., roads, drill pads, etc.) and small residual waste rock piles from historical mining operations. As observed by SRK personnel during previous site visits, dust emissions generated as a result of ore haulage traffic from the mine to mill could become an issue in the future but has not yet become an issue for SEMARNAT.

 

4.4.2Required Permits and Status

 

Required permits and the status of permits are discussed in Section 20.

 

4.5Other Significant Factors and Risks

 

There are no other factors or risks that affect access, title or right or ability to perform work on the Property other than those stated in the above sections which SRK would expect to have a material impact on the Mineral Resource statement.

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5Accessibility, Climate, Local Resources, Infrastructure and Physiography

 

5.1Topography, Elevation and Vegetation

 

The Bolivar Property is located in the rugged topography of the Sierra Madre Occidental mountain range. Elevation varies from 600 to 2,100 m above sea level.

 

Vegetative cover in the region consists of oak and eucalyptus trees at low elevations and pine trees at higher elevations. The land surrounding the mine is used to raise cattle. Wildlife in the area includes various species of insects, lizards, snakes, birds, and small mammals.

 

5.2Accessibility and Transportation to the Property

 

From the city of Chihuahua, the Bolivar Property can be accessed via travel along paved (325 km) and unpaved (70 to 80 km) roads to the Piedras Verdes or Cieneguita villages, located 5 km and 12.5 km north of the Bolivar Mine, respectively.

 

Transportation from the villages to the mineral concessions is via private and company vehicles.

 

5.3Climate and Length of Operating Season

 

Climate in the project area is semi-arid, with a mean annual temperature of 25°C and 758 mm of annual precipitation on average. The region experiences a rainy season from June to October, when monthly precipitation ranges from 83 to 188 mm; the rest of the year is relatively dry (approximately 26 mm of monthly precipitation). In the past, the Bolivar Mine has operated year-round and operations were not limited by climatic variations.

 

5.4Infrastructure Availability and Sources

 

5.4.1Power

 

Electricity is currently sourced from Mexico’s main grid system. Backup generators are also located at the Bolivar Mine site.

 

5.4.2Water

 

Industrial water is sourced from the Piedras Verdes dam, a reservoir that is owned and operated by Sierra Metals. The reservoir drains to the El Fuerte River, 18 km south of the Bolivar Mine. Water from the dam is sufficient to meet mine and mill operations and exploration needs. Potable water is available from local sources.

 

5.4.3Mining Personnel

 

Two villages, Piedras Verdes and Cieneguita, are located within 10 km of the mineral concessions. The combined population of these two villages is approximately 1,500 people and many of the mine employees live in these villages.

 

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5.4.4Potential Tailings Storage Areas

 

The site has an existing TSF. The tailings management plan at the Bolivar Mine includes placement of tailings in a number of locations. The site will be installing infrastructure to recover additional process water and reduce the water content of the final tailings. An additional thickener and filter presses will be installed by 2021.

 

5.4.5Potential Waste Rock Disposal Areas

 

The site has existing permitted waste rock disposal areas.

 

5.4.6Potential Processing Plant Sites

 

The site has an existing processing plant that has been in use since its commissioning in 2011.

 

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6History

 

Ownership history of the mineral concessions at Bolivar is shown in Table 6-1, modified from a 2013 technical report completed by Gustavson Associates in Lakewood, Colorado, USA. No earlier records of ownership are known to exist.

 

Table 6-1: Ownership History and Acquisition Dates for Claims at the Bolivar Property

 

Claim Name Previous Owner Date Acquired
La Cascada Polo y Ron Minerales, S.A. de C.V. August 10, 2004
Bolivar III Javier Bencomo Munoz y Minera Senda de Plata, S.A. de C.V. September 14, 2004
Bolivar IV Javier Bencomo Munoz y Minera Senda de Plata, S.A. de C.V. September 14, 2004
Piedras Verdes Raul Tarin Melendez December 11, 2007
Mezquital Polo y Ron Minerales, S.A. de C.V. November 11, 2005
Mezquital Fracc. 1 Polo y Ron Minerales, S.A. de C.V. November 11, 2005
Mezquital Fracc. 2 Polo y Ron Minerales, S.A. de C.V. November 11, 2005
Mezquital Fracc. 3 Polo y Ron Minerales, S.A. de C.V. November 11, 2005
El Gallo Polo y Ron Minerales, S.A. de C.V. November 11, 2005
Bolivar Minera Senda de Plata, S.A. de C.V. January 29, 2008
La Chaparrita Minera Senda de Plata, S.A. de C.V. January 29, 2008
La Mesa Direccion General de Minas January 12, 2005
Moctezuma Juan Orduno Garcia/Jesus Chavez Gonzalez/Armando Solano Montes November 5, 2010
San Guillermo Minera Potosi, S, de R.L. de CV. October 6, 2011

 

Source: Gustavson, 2013

 

6.1Exploration and Development Results of Previous Owners

 

Historic mining, prospecting and exploration for polymetallic Cu-Zn-Pb-Ag-Au deposits in the Sierra Madre precious metals belt of Northwestern Mexico have been carried out since the Spanish colonial period. Small scale mining was realized by small miners from Spanish colonial days, without historical record for the Piedras Verdes District. Between 1968 and 1970, Minera Frisco was exploring for porphyry copper deposits at the Piedras Verdes District, including mapping, sampling and drilling, however the reports are not available.

 

From 1980 to 2000, some 300,000 tonnes of mineralized material were mined while the Bolivar Mine was under the control of the Bencomo Family; detailed production records for this period are not available (De la Fuente, et. al., 1992)

 

Information provided by Sierra Metals’ exploration department, September 30, 2019, suggests that from December 2003 to the present, Sierra Metals carried out an exploration program of regional geological mapping at the Bolívar Property covering 15,217 ha. The work included detailed mapping, geochemistry sampling, geophysics, topographic surveying and diamond drilling, with 274,321 m drilled in 1,414 diamond drill holes.

 

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6.2Historic Mineral Resource and Reserve Estimates

 

A QP has not done sufficient work to classify the historical estimate as a current Mineral Resource estimate or Mineral Reserve estimate and the issuer is not treating the historical estimate as a current resource estimate.

 

6.3Historic Production

 

Historic mining and exploration for polymetallic deposits in the Sierra Madres has been carried out sporadically since the Spanish colonial period. In 1632, a native silver vein was discovered at La Nevada near Batopilas. Thereafter, sporadic mining of silver deposits continued for almost one hundred years. A second phase of mining started with the Carmen Mine near the end of 18th Century but was halted due to the Mexican War of Independence from 1810 to 1821. A third phase of mining in the region occurred from 1862 to 1914 but was again halted due to the Mexican Revolution in 1910.

 

The Urique District is characterized by gold-rich fissure veins hosted by andesitic rocks. Since 1915, there have been sporadic attempts to develop mineral deposits in the area. Small scale mining of polymetallic deposits in this district started before 1910 by gambusinos (artisanal miners). Production records from 1929 are reported as 2,891 t of ore containing 2,686 kg of copper (Cu), 7,990 kg of lead (Pb), 1,061 kg of silver (Ag) and 44 kg of gold (Au), indicating an average grade of 0.09% Cu, 0.28% Pb, 367 g/t Ag and 15.22 g/t Au. Since 1915, some 300 M oz of silver are reported to have been produced from the Batopilas District.

 

Other mining activities in the area include the Cieneguita de los Trejo gold deposit located at the outskirts of the village of Cieneguita, which is situated about 1.5 km northwest of the northwestern corner of the El Cumbre Mineral License. In the 1990s, Glamis Gold Ltd. (Glamis) developed an open pit mine and produced gold by heap leaching method. The old leach pads are visible from the Bolivar property.

 

From 1980 to 2000, some 300,000 t of mineralized material were mined while the Bolivar Mine was under the control of the Bencomo Family. This mineralized material included:

 

·195,000 t from the Fernandez trend;

 

·90,000 t from the Rosario Trend; and

 

·15,000 t from the Pozo del Agua Area.

 

Detailed production records for this period are not available but are reported to be in the order of 50 tpd, and the average grade of the mineralized material is reported to be in the range of 5% to 6% Cu and 25% to 30% Zn. Production records from 2000 to 2007 were not available to SRK.

 

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According to Sierra Metals, production from 2008 to 2010 was as follows:

 

·2008: 126,500 t processed at 1.65% copper grade and 8.00% zinc grade;

 

·2009: 89,600 t processed at 1.81% copper grade, 10.06% zinc grade, and 49.5 g/t silver;

 

·2010: 104,800 t processed at 1.45% copper grade, 8.59% zinc grade, and 31.6 g/t silver.

 

Commercial production was declared in November 2011. Table 6-2 lists the 2011 to 2019 production as reported by Sierra Metals.

 

Table 6-2: 2011 to 2019 Bolivar Production

 

Year  Plant 

Tonnes Processed
(dry)

  

Au
(g/t)

  

Ag
(g/t)

  

Cu
(%)

 
2011  Mal Paso (1)       88,247       46.62   1.32 
2012  Piedras Verdes     312,952       24.58   1.17 
2013  Piedras Verdes     507,865   0.05   21.16   1.25 
2014  Piedras Verdes     666,414   0.29   22.23   1.20 
2015  Piedras Verdes     830,447   0.25   20.57   1.15 
2016  Piedras Verdes     950,398   0.19   16.72   1.00 
2017  Piedras Verdes     887,236   0.17   14.93   0.96 
2018  Piedras Verdes    1031,750   0.17   17.69   0.95 
2019  Piedras Verdes  1,269,697   0.27   19.81   0.85 

 

Source: Sierra Metals, 2020

(1)Bolivar material was processed at the Mal Paso mill in 2011 until the Piedras Verdes mill was commissioned in November 2011.

 

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7Geological Setting and Mineralization

 

7.1Regional Geology

 

The Bolivar Property is located within the Guerrero composite terrane which makes up the bulk of western Mexico and is one of the largest accreted terranes in the North American Cordillera. The terrane is proposed to have accreted to the margin of Mexico in the Late Cretaceous and consists of submarine and lesser subaerial volcanic and sedimentary sequences ranging from Upper Jurassic to middle Upper Cretaceous in age. These sequences rest unconformably on deformed and partially metamorphosed early Mesozoic oceanic sequences.

 

The Bolivar deposit is one of many precious and base metal occurrences in the Sierra Madre precious metals belt, which trends north-northwest across the states of Chihuahua, Durango, and Sonora (Figure 7-1).

 

Mexico - Mineralized belts.jpg

 

Source: Sierra Metals, 2020

 

Figure 7-1: Regional Geology Map showing the Locations of Various Mines in the Sierra Madre Occidental Precious Metals Belt

 

7.2Local Geology

 

The Piedras Verdes District shown in Figure 7-2 consists of Cretaceous andesitic to basaltic flows and tuffs intercalated with greywacke, limestone, and shale beds commonly referred to as the Lower Volcanic Series (LVS). This volcanic-sedimentary package has been intruded by several Upper Cretaceous to Lower Cenozoic age intermediate to felsic composition plutonic bodies that range from 85 to 28.3 Ma. The LVS and intermediate to felsic intrusive bodies have in turn been overlain by a widespread cap of rhyolitic and dacitic ignimbrites and tuffs referred to as the Upper Volcanic Series (UVS) that were deposited between 30 to 26 Ma. The UVS is one of the largest continuous ignimbrite provinces in the world. All known mineralization in this region formed during the time interval between the deposition of the LVS and the deposition of the UVS (Meinert, 2007).

 

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At the Bolivar Property, the volcanic rocks strike northwest and dip gently to moderately to the northeast. Assuming these volcanics are younger than the granodiorite, the stock must also be tilted to the northeast (Meinert, 2007). Several outcrops exhibit tight, northeast trending folds. Three major sets of faults have been recognized at the local scale: a north-northwest trending set which dip steeply northeast or southwest, an east-southeast trending set, and a north-trending set. None of the faults on the property is described as having offsets greater than 200 m (Meinert, 2007).

 

The structural setting and stratigraphy control the mineralization at Bolivar.

 

 

Source: Sierra Metals, 2020

 

Figure 7-2: Local Geology Map Showing the Location of the Bolivar Property

 

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7.3Property Geology

 

7.3.1Skarn-hosting Sedimentary Rocks

 

Skarn alteration and mineralization at the Bolivar Property is hosted primarily in a package of sedimentary rocks that occur as a layer or lens within the LVS (Reynolds, 2008). All sedimentary units have undergone low grade metamorphism. The lowermost sedimentary horizon observed is a dolostone which ranges from 24 m to 40 m in thickness. The lower part of the dolostone horizon is interlayered with siltstone. To the south, progressively less of the sedimentary sequence is cut out by granodioritic intrusive rocks and the dolostone is observed to be underlain by a siltstone horizon.

 

The lower siltstone unconformably overlies the LVS. The dolostone is overlain by a discrete layer of siltstone. The average thickness of this siltstone unit is 12 to 30 m. Horizons of argillaceous dolostone (50 m thick) and argillaceous limestone (9 m thick) are above the siltstone marker layer. The uppermost sedimentary horizon is a limestone with local chert and argillaceous laminations. The vertical thickness of this horizon varies considerably in cross-section (108 to 173 m) and this variation is attributed to paleo-topographic relief. The upper contact of the limestone is an unconformity with the LVS. Figure 7-3 presents the stratigraphy of the property and Figure 7-4 is the geologic map.

 

7.3.2Intrusive Rocks

 

The most important igneous rocks on the property are the Piedras Verde granodiorite and related andesite dikes and sills. All are slightly porphyritic, but none are a true porphyry. The Piedras Verde granodiorite exhibits a range of textural variations and compositions. The average composition is very similar to plutons related to Cu skarns (Meinert, 2007). There is no indication of a gold association.

 

The dikes locally cut the granodiorite, have planar, chilled contacts, and are generally finely crystalline. Both their texture and crosscutting relations suggest that the dikes are younger and shallower than the granodiorite. Both granodiorite and andesite dikes have alteration and locally skarn along their contacts. In addition, endoskarns, which are skarns of igneous origin that form within the granite mass itself, affect both the granodiorite and in rare cases, the andesite dikes. Thus, these rocks are older than or at best coeval with alteration/mineralization. The presence of skarn veins cutting an andesite dike is clear evidence that at least some skarn is later than at least some of the andesite dikes. A closer association of granodiorite with skarn alteration and mineralization is suggested by local K-silicate veining of the granodiorite and the zonation of skarn relative to this contact.

 

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Source: Sierra Metals, 2020

 

Figure 7-3: Stratigraphic Column of the Bolivar Property

 

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Source: Sierra Metals, 2020

 

Figure 7-4: Geologic Map of the Bolivar Property

 

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7.4Significant Mineralized Zones

 

Mineralization at the Bolivar Property is hosted by skarn alteration in carbonate rocks adjacent to the Piedras Verde granodiorite (Meinert, 2007). Orientations of the skarn vary dramatically, although the majority are gently-dipping. Thicknesses vary from 2 m to over 20 m. Skarn mineralization is strongly zoned, with proximal Cu-rich garnet skarn in the South Bolivar area, close to igneous contacts, and more distal Zn-rich garnet+pyroxene skarn in the northern Bolivar and southern skarn zones near El Val. The presence of chalcopyrite+bornite dominant skarn (lacking sphalerite) in the South Bolivar area, along with K-silicate veins in the adjacent granodiorite suggests that this zone is close to a center of hydrothermal fluid activity. In contrast, the main Bolivar Mine is characterized by Zn>Cu and more distal skarn mineralogy such as pyroxene>garnet and pale green and brown garnets. Alteration is zoned relative to fluid flow channels. From proximal to distal, the observed sequence is red-brown garnet to brown garnet with chalcopyrite ± bornite ± magnetite to green garnet ± pyroxene with chalcopyrite + sphalerite to massive sulfide (sphalerite ± chalcopyrite ± galena) to marble with stylolites and other fluid escape structures.

 

Mineralization exhibits strong stratigraphic control and two stratigraphic horizons host the majority: an upper calcic horizon, which predominantly hosts Zn-rich mineralization, and a lower dolomitic horizon, which predominantly hosts Cu-rich mineralization. Figure 7-5 presents an example of a mineralized skarn with propylitic alteration in a core sample of El Gallo area. In both cases, the highest grades are developed where fault or vein structures and associated breccia zones cross these favorable horizons near skarn-marble contacts. Meinert (2007) suggested that hydrothermal fluids moved up along the Piedras Verde granodiorite contact, forming skarn and periodically undergoing phase separation that caused brecciation. Zones of breccia follow faults like the Rosario, Fernandez, and Breccia Linda trends as well as nearly vertical breccia pipes such as La Increible.

 

 

 

Figure 7-5: Mineralized Andradite Garnet Skarn – El Gallo Area Core Sample

 

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8Deposit Types

 

8.1Mineral Deposit

 

The Bolivar deposit is classified as a high-grade Cu-Zn skarn and exhibits many characteristics common to this type of deposit (Meinert, 2007). The term ‘skarn’ refers to coarse-grained calcium or magnesian silicate alteration formed at relatively high temperatures by the replacement of the original rock, which is often carbonate-rich.

 

The majority of the world’s economic skarn deposits formed by infiltration of magmatic-hydrothermal fluids, resulting in alteration that overprints the genetically related intrusion as well as the adjacent sedimentary country rocks (Ray and Webster, 1991). While alteration commonly develops close to the related intrusion, fluids may also migrate considerable distances along structures, lithologic contacts, or bedding planes.

 

Based on the alteration assemblages present, skarn deposits are generally described as either calcic (garnet, clinopyroxene, and wollastonite) or magnesian (olivine, phlogopite, serpentine, spinel, magnesium-rich clinopyroxene). Both the alteration and the mineralization in skarn deposits are considered to be magmatic-hydrothermal in origin.

 

8.2Geological Model

 

The geological model of the Bolivar deposit is well-understood and has been verified through multiple expert opinions as well as a history of mining. SRK is of the opinion that the model is appropriate and will serve Sierra Metals going forward.

 

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9Exploration

 

9.1Relevant Exploration Work

 

The following information has been modified and updated from a 2009 Technical Report prepared by SGS Geostat.

 

Exploration conducted by Sierra Metals, 2003-2012:

 

·2003 to 2005. During this period, Sierra Metals carried out an exploration program of geological mapping, outcrop sampling, topographic survey, at 1:250 and 1:500 scale, including detailed 2 m x 2 m panel sampling perpendicular to the mineralized structures. Sierra Metals completed semi-regional prospecting, reconnaissance and representative sampling of the Bolivar District at the La Montura and La Narizona prospects. Pilot mining started at the Bolivar Mine. Development drifting conducted led to the Brecha Linda orebody discovery.

 

·2006. Sierra Metals performed detailed 1:500 scale geologic mapping in the Bolivar and Bolivar South areas, including 2 m x 2 m panel sampling. Sierra Metals did some prospecting in other mineralized areas to the south, including El Gallo. This work was accompanied by a rock panel geochemical survey. The results of the El Gallo prospecting supported the drilling program.

 

·2007. Detailed underground, 1:250 scale geological mapping was completed on the El Gallo and La Narizona areas, including detailed 2 m x 2 m panel sampling. This exploration work identified two mineralized stratiform horizons in the El Gallo area, El Gallo Superior (EGS) and El Gallo Inferior (EGI), similar to the stratiform orebody at La Narizona. Preliminary geologic mapping to support the drilling was completed on three other mineralized areas to the south, La Montura, La Pequeña and El Val.

 

·2008. Detailed 1:500 scale surface geology mapping was done at the Bolivar North zone, including representative chips sampling, yielding a geochemical anomaly consistent with the NW structural trend. Mining was mainly concentrated in the Titanic, Selena and San Francisco areas on and under level 6 (Rosario), Guadalupe, Rebeca and San Angel, which were high grade, individual orebodies, geologically related to the calcareous upper stratigraphic favorable horizon.

 

·2009. Detailed 1:250 scale geologic mapping was done at San Francisco and Los Americanos North, including detailed 2 m x 2 m panel sampling. Regional 1:25,000 scale geology and detailed stream sediment sampling was done over the entire Bolivar Property, yielding the new targets of Los Americanos – Lilly Skarn (Cu-Zn), La Cascada - Sidra (Au) and El Mezquite (Au). Underground 1:250 scale detailed mapping was done at San Francisco and La Increible Mines, including detailed 2 m x 2 m panel sampling. Mining was mainly concentrated at the Bolivar Mine in the high-grade orebodies (Rosario, La Foto, Fernandez, Rosario Magnetita, and San Angel areas). Sierra Metals announced the construction of the new Piedras Verdes Mill with capacity of 1,000 tpd.

 

·2010. 1:1000 scale geologic mapping was done at La Cascada – La Sidra areas, including chips channel sampling, and a TITAN IP geophysical survey was conducted by QUANTEC Geoscience. A drilling program was completed, indicating low grade gold. Regional 1:25,000

 

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scale geologic mapping was completed over the entire Bolivar Property, including lithology units, regional faulting and dikes, and alteration, confirming the previous geochemical anomalies on Los Americanos – Lilly Skarn (Cu-Zn), La Cascada - La Sidra (Au) and El Mezquite (Au) targets. Underground 1:250 scale detailed mapping, including detailed 2 m x 2 m panel sampling was done at El Gallo, La Increible and La Narizona Mines. Mining during this time was mainly concentrated at La Narizona, El Gallo, and Rosario areas, while Sierra Metals continued with the construction of the new Piedras Verdes Mill.

 

·2011. New geological interpretations indicated the continuity of El Gallo trends to the southeast toward La Montura, and northeast toward La Increible, discovering the El Salto and El Gallo step out areas respectively. Underground development and production drifting allowed detailed 1:250 scale mapping at Bolivar, El Gallo, and La Narizona Mines. Mining of 360 tpd was terminated during late October and the new Piedras Verdes Mill started with commercial production of 1,000 tpd operation, mainly from El Gallo Mine.

 

·2012. Underground development and production drifting and detailed 1:250 scale mapping was done at Bolivar, El Gallo, and La Narizona Mines. Production of 1,000 tpd processing at Piedras Verdes Mill began by receiving ore principally from the upper stratigraphic horizon from El Gallo Mine. Exploration drilling on the El Gallo step out and El Salto areas continued. Preliminary drilling started at La Montura and La Pequeña areas, located in between El Gallo and La Narizona Mines.

 

·2013 to 2016. New geological interpretations were completed at Bolivar for the Bolivar W and Bolivar NW areas. Underground production and development in El Gallo Superior (EGS) and El Gallo Inferior (EGI) were ongoing during this time period, along with new development of the Chimeneas areas. Interpretation and drilling of the La Sidra vein to the west of the main Bolivar Mine area yielded exploration drilling results which included mineralized intervals ranging from 0.3 to 2.1 m, with grades ranging from 0.01 to 9.1 g/t Au and 0.01 to 1,850 g/t Ag.

 

·2017. Additional drilling was focused in the Bolivar W and Bolivar NW areas. Three drill holes were completed in the El Gallo area. A TITAN IP geophysical survey was conducted by QUANTEC Geoscience in order to determine the possible extensions of known zones of mineralization.

 

·2018. Additional drilling and new geological interpretations were completed based on the 2017 geophysical survey, resulting in a considerable increase in Mineral Resources in the Bolivar W and Bolivar NW areas.

 

·2019. Drilling of geophysical anomalies continued, resulting in identification of mineralization west of Bolivar W.

 

9.2Sampling Methods and Sample Quality

 

Sampling supporting Mineral Resource estimation consists of drill core and underground channel types. SRK reviewed in general the methods and the quality assurance protocol carried out by trained geologists or geologic technicians. SRK is of the opinion that the methodology and QA/QC protocol used during drilling campaigns since 2016 follows industry standard practices, although some improvements can be implemented.

 

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9.3Significant Results and Interpretation

 

The exploration results at Bolivar, and in the nearby area, are used to develop detailed exploration plans and to support Mineral Resource estimation.

 

10Drilling

 

10.1Type and Extent

 

Between 1968 and 1970, Minera Frisco drilled short diamond drill holes, but existing records do not provide a reliable register of the number of holes, meters drilled, or the results of the drilling.

 

Between 2003 and 2019, Sierra Metals drilled 994 drill holes totaling to 259,748 meters as listed in Table 10-1 and shown in Figure 10-1. The objective of drilling completed during this period was to explore for mapped and projected polymetallic sulfide mineralization in calc-silicate rocks with moderate east-northeast dips. These efforts identified Cu-rich skarn mineralization within the Bolivar III, Bolivar IV, Piedras Verdes, and El Gallo concessions.

 

Table 10-1: Summary of Drilling by Sierra Metals on the Bolivar Property, 2003 to 2019

 

YearCountMeters% of Total Meters
200312020.1%
20049315,7706.1%
20057012,3604.8%
2006619,9593.8%
20079621,8418.4%
20089520,8268.0%
2009435,6432.2%
2010283,7361.4%
2011266,5742.5%
20124013,0325.0%
20132711,4024.4%
2014305,8302.2%
20157518,3427.1%
20165116,5856.4%
201710240,24415.5%
20187028,02210.8%
20198629,38211.3%
Total994259,748100.0%

Source: SRK, 2020 

Note: Totals may not match due to rounding.

 

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Figure 10-1: Location Map of Drill Hole Collars (green) and Traces (grey)

 

10.2Procedures

 

The Bolivar Mine uses a local coordinate grid which is based on meters from a central control point. Nearby exploration is registered in a standard UTM coordinate grid, and thus it is necessary to consider the exploration data separately from the mine data.

 

The primary drilling method at Bolivar has been diamond drill core. To date, 994 drill holes have been completed with an average length of approximately 260 m. The drill holes have been drilled predominantly from surface, and to a lesser degree from underground, in a wide variety of orientations. Near the mining operations, the average drill hole spacing ranges between 25 and 50 m. In the deeper or less explored areas, the average drill hole spacing ranges between 75 and 150 m. Overall, the majority of the drilling completed by Sierra Metals has been relatively closely spaced and appears to have been directed at Mineral Resource delineation. Approximately 30% of the drill holes have had downhole deviation surveys completed. A significant number of the drill holes are relatively long, and their precise location is considered uncertain due to the lack of downhole surveys. Since 2015, approximately 75% of drill holes have been downhole surveyed using the Deviflex survey tool (non-magnetic electronic multi-shot). Prior to 2015, the practice of surveying exploration drilling was not carried out, which poses a significant risk as to the confidence regarding the location of the results and interpretation of exploration efforts. The drilling also intersects the mineralization at a wide range of orientations and therefore drill intercept lengths do not necessarily reflect the true thickness of mineralization.

 

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The drilling has been conducted with Sierra Metals-owned drills and outside contractors. All drill core has been logged by Sierra Metals geologists. Sample intervals are determined by the geologist and the core is then cut in half (hydraulic splitter) and bagged by Sierra Metals technicians. SRK is of the opinion that the core processing area and logging facilities are all appropriately organized and consistent with industry standard practices.

 

10.3Interpretation and Relevant Results

 

The drilling results are used to guide ongoing exploration efforts and to support Mineral Resource estimation. Most of the individual deposits have been drilled as perpendicular to the deposit as possible, but some areas feature drilling that is nearly parallel to the trend of mineralization. This has been accounted for in the Mineral Resource classification, and SRK strongly recommends drilling these areas from different positions to improve the angle of intersection between the drilling and true thickness of mineralization.

 

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11Sample Preparation, Analyses, and Security

 

11.1Security Measures

 

After logging and splitting, all exploration drilling samples are laid out in order and recorded into a digital database prior to shipping. Samples are placed into larger plastic bags, and these bags are marked with the hole ID and sample numbers, then sealed with a security seal. All samples are kept behind gated access-controlled areas on the Bolivar Mine site, then transported by Sierra Metals personnel to a shipping facilitator. Hard copies and electronic forms are kept for all sample transactions, detailing shipping, receipt, and types of analyses to be conducted.

 

11.2Sample Preparation for Analysis

 

Historically, samples have been crushed at Sierra Metals facilities at either the Malpaso Mill or the Piedras Verdes Mill. The Sierra Metals labs carry out a chemical analysis to define the mineralized intercepts. Once the mineralized intercepts are defined, the remaining crushed material of the samples is sent to ALS Chemex (ALS), an ISO-certified independent commercial laboratory. The rest of the sample preparation procedure is completed at the ALS Chemex Hermosillo, Mexico facility, and final analysis is conducted at the ALS Chemex primary laboratory in North Vancouver, BC, Canada. The crushing and splitting procedures in Sierra Metals labs should be appropriately controlled to avoid contamination of samples.

 

11.3Sample Analysis

 

The analytical history of Bolivar sampling is complex and includes various sources of analyses from the nearby Malpaso Mill Lab or Piedras Verdes Mill Lab and ALS. Previous reports have noted inconsistencies between the internal and external laboratories in terms of analytical precision and accuracy, with the Malpaso Mill historically featuring relatively poor results from submitted QA/QC samples. A significant effort has been made over the past several years to improve the equipment and methodology for the Sierra Metals internal laboratory. Results of the current QA/QC program indicate that performance has drastically improved and is consistent with industry standards. The QA/QC program includes check samples between the Piedras Verdes (PV) Lab and ALS which show reasonable duplicate performance.

 

Currently, all samples are initially analyzed internally at the PV Lab, and selected intervals with identified mineralization are re-submitted to ALS. This step ensures that only intervals identified to have significant mineralization by the PV Lab are sent for analysis to ALS, thereby reducing analytical costs. The duplicates are selected from coarse rejects from the initial preparation. The ALS results are incorporated into the database as the final analytical result for the duplicated intervals. This is a reasonable practice, but a study should be conducted to formally document and establish the validity of the internal assays. Results from 2016 the QA/QC program suggest that the Piedras Verdes Mill may now be suitable as a primary lab, if monitoring of the performance continues.

 

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11.4Quality Assurance/Quality Control Procedures

 

Samples supporting the Mineral Resource estimate have been analyzed almost exclusively by ALS in Vancouver. However, the preparation of samples has been completed at other facilities and historically conducted by the nearby PV Lab, with crushing rejects or pulps provided to ALS for analysis. Inconsistencies in the preparation methodology and the size-fraction of the received pulp have been noted over the history of the project, but the results of recent duplicate comparisons show reasonable agreement between samples prepared entirely by ALS and those prepared by the PV Lab.

 

One purpose of a QA/QC program is to submit samples with known or expected values, in the sequence of normal analyses, to “test” the internal or third-party laboratory’s accuracy. These samples with known values are blind to the laboratory, so analyses that are not within expected tolerances represent failure criteria which are flagged upon receipt and action is taken to rectify with the lab the potential source of the failure and take corrective action.

 

Prior to 2013, the drill sampling QA/QC program only featured duplicate sampling which evaluates analytical precision. This program was not consistent with industry best practices and was modified to align with current industry standards. From 2013 to late 2015, a very basic QA/QC program included continued submission of duplicate samples to ALS, as well as insertion of Certified Reference Material (CRM). However, this program was not properly monitored, and the results were not tracked in detail. The current QA/QC procedures (established late 2015) include: insertion of CRMs, blanks, and duplicates, at rates consistent with industry best practices. The results are monitored and tracked by Sierra Metals personnel. The results of the QA/QC show reasonable performance for the laboratory and SRK is of the opinion that the current analytical methods and QA/QC procedures are consistent with industry standards.

 

In order to provide additional support to the data used for the MRE, Sierra Metals conducted a thorough review of the historic sample data in the unmined areas which were analyzed without modern QA/QC. They selected 315 (~307 m) samples from several areas and submitted these intervals for reanalysis with appropriate QA/QC measures to ALS. This process served to validate some historic drilling (dating back to 2012), specifically in areas that are critical to the MRE, as well as test the historic performance of the PV Lab against the new ALS results.

 

11.4.1Certified Reference Materials

 

Sierra Metals currently inserts CRMs into the sample stream at a rate of about 1:20 samples, although the insertion rate is adjusted locally to account for particular observations in the core. Initially starting in 2015, three CRMs were procured and certified via round robin analysis for the exploration programs. These CRMs were homogenized and packaged by Target Rocks Peru (S.A.) and the round robin was conducted by Smee & Associates Consulting Ltd., a consultancy specializing in provision of CRMs to clients in the mining industry.

 

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Each CRM underwent a rigorous process of homogenization and analysis using aqua regia digestion and AA or ICP finish, from a random selection of 10 packets of blended pulverized material. None of these CRMs were certified for Au, a lesser contributor to the Mineral Resources at Bolivar. The six laboratories which participated in the round robin for the initial three Target Rocks CRM are:

 

·ALS Minerals, Lima;

 

·Inspectorate, Lima;

 

·Acme, Santiago;

 

·Certimin, Lima;

 

·SGS, Lima; and

 

·LAS, Peru.

 

The mean values and between-lab standard deviations (SD) were calculated from the received results of the round robin analyses, and the certified means and tolerances were provided in certificates from Smee & Associates. The certified means and expected tolerances for the initial three CRMs used from 2015 to 2017 are shown in Table 11-1.

 

Table 11-1: 2015 to 2017 CRM Expected Means and Tolerances

 

CRM IdentifierCertified MeanTwo Standard Deviations (between labs)
Ag (g/t)Pb %Cu%Zn%Ag (g/t)Pb %Cu%Zn%
MCL-0126.40.3260.8960.9881.900.030.050.07
MCL-0240.80.6531.5812.493.40.050.0840.09
Mat. PLSUL N° 03192.03.0941.0333.154.00.0840.0360.13

Source: Sierra Metals, 2017

 

In 2018, six new CRMs were introduced into the QA/QC program and have been primarily used throughout the 2018 and 2019 drilling campaigns. Three of the new CRMs are certified for Au. The certified means and expected tolerances of these new CRMs are provided in Table 11-2.

 

Table 11-2: 2018-2019 CRM Expected Means and Tolerances

 

CRM IdentifierCertified MeanTwo Standard Deviations (between labs)
Au (g/t)Ag (g/t)Cu%Zn%Au (g/t)Ag (g/t)Cu%Zn%
MCL-03 19.80.7945.22 2.400.0420.25
SKRN-050.4354.401.783 0.0340.300.058 
PLSUL-08 248.00.98312.54 14.00.0420.55
OXHYO-03 92.31.0250.426 6.90.0460.018
PLSUL-110.234113.01.0510.780.0148.00.070.54
STRT-010.32811.00.8490.1460.0100.80.0240.0091

Source: Sierra Metals, 2020

 

The QA/QC data provided to SRK included a total of 377 CRM analysis from the 2016 to 2019 drilling campaigns. The performance of CRMs is evaluated over time using a simple plot of the expected mean vs the reported analysis, and a ±3 standard deviation failure criteria. This is consistent with industry standard practices. SRK has noted some failures of CRMs submitted throughout the drilling campaigns. Examples of CRM analysis plots for Cu are provided in Figure 11-1 through Figure 11-3 .

 

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Source: Sierra Metals, 2020

 

Figure 11-1: CRM Performance for MCL-01, MCL-02 and PLSUL-03 for Cu

 

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Source: Sierra Metals, 2020

 

Figure 11-2: CRM Performance for SKRN-05, OXHYO-03 and STRT-01 for Cu

 

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Source: Sierra Metals, 2020

 

Figure 11-3: CRM Performance for MCL-03, PLSUL-08 and PLSUL-11 for Cu

 

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11.4.2Blanks

 

Pulverized blank material is used in the QA/QC program to monitor for potential contamination in the pulverizing process of ALS and consists of barren limestone selected by Bolivar geologists prepared and certified by Target Rocks. Results submitted to SRK included 309 samples which were inserted into the sample stream for drill holes drilled between 2016 and 2019. The failure criteria for blanks is five (5) times the detection limit of the ALS lab. SRK reviewed the performance of the blank samples submitted and noted some failures for the blanks, occurring in seven (7) of the 309 samples, for Cu. An example of the blank performance chart is shown in Figure 11-4. The failures indicate contamination in the pulverizing and splitting process in the lab.

 

 

 

Source: Sierra Metals, 2020

 

Figure 11-4: Fine Blank Performance – Cu

 

Coarse blanks are not being used and the contamination in the crushing and splitting process is not being controlled.

 

11.4.3Duplicates

 

Prior to 2013, the drill sampling QA/QC featured duplicate sampling only. The 2005 report by Roscoe Postle Associates (RPA) noted that Sierra Metals geologists collected field duplicate samples from split drill core after every tenth sample and submitted the samples to ALS, in lieu of a standard QA/QC program.

 

Currently, all duplicate samples are initially analyzed by the PV Lab, and selected mineralized intervals are then re-submitted to ALS; duplicates are selected from coarse rejects from the internal laboratory preparation.

 

The performance of duplicate splits show good correlation for Cu analysis as shown in Figure 11-5, as well as for Ag as shown in Figure 11-6. However, more variability for Au duplicate analysis is observed as shown in Figure 11-7.

 

It is recommended that Sierra Metals start the use of field duplicates, fine duplicates and coarse duplicates to evaluate the error in the core crushing and pulverizing sampling processes. Although the second lab used is PV Lab, SRK recommends using a certified laboratory as a second lab control to evaluate the analytical error.

 

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Source: Sierra Metals, 2020

 

Figure 11-5: Duplicate Sample Analysis for Cu (2018 and 2019 campaigns)

 

 

 

Source: Sierra Metals, 2020

 

Figure 11-6: Duplicate Sample Analysis for Ag (2018 and 2019 campaigns)

 

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Source: Sierra Metals, 2020

 

Figure 11-7: Duplicate Sample Analysis for Au (2018 and 2019 campaigns)

 

11.4.4Results

 

SRK is of the opinion that the results from the duplicate analyses suggest the PV Lab and ALS results show excellent overall comparisons and, despite a relatively high percent difference on a sample by sample basis, any bias between the two labs is negligible in terms of Mineral Resource estimation.

 

11.4.5Actions

 

Although some failures of blanks and CRMs were found, no actions have been taken. The procedures and processes for definition of actions upon detection of failures have been improved but there is no well-documented information about the actions taken when failures in blanks and CRMs are found. The general procedure is described as follows:

 

·Upon receipt of laboratory analytical reports, QA/QC samples are copied and merged into a master spreadsheet which displays them on a graph, as well as designating whether they are a failure per the above criteria.

 

·In the event of a failure, the database technicians communicate internally with geologists to ensure that the correct sample was submitted.

 

·If this is the case, the laboratory is notified, and the batch is re-analyzed and re-reported. If no failures are noted, these analyses are transferred into the QA/QC sheets and the final drilling database is updated with the non-QA/QC samples.

 

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11.5Opinion on Adequacy

 

Sierra Metals completed a very limited QA/QC program consisting of field duplicate sampling during the first few years of its exploration drilling programs. Previous Technical Reports deemed the level of QA/QC consistent with industry best practices, but SRK cautions, based on its extensive experience, that this is not the case.

 

SRK is of the opinion, given the recent QA/QC results and comparison to the PV Lab, as well as the fact that Bolivar is a producing mine with a robust production history, that the quality of the analytical data is sufficient to report Mineral Resources in the Indicated and Inferred categories.

 

SRK strongly advises Sierra Metals to continue supporting ongoing QA/QC monitoring and to implement the use of additional controls including coarse blanks, twin samples, fine and coarse duplicates, and a second lab control using a certified laboratory. It is necessary to clearly document the procedures and methods for actions taken in the event of failures.

 

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12Data Verification

 

12.1Procedures

 

SRK was provided with analytical certificates from ALS to facilitate validation of the assay database used for this MRE. SRK reviewed and cross-checked a subset of the total number of certificates (approximately 15%) and found no inconsistencies with the database. SRK has conducted similar validation exercises for previous MRE updates conducted since 2017.

 

In addition, SRK, Gustavson and RPA have conducted other means of data validation in previous reports and found the data to be sufficient in terms of accuracy for use at those times.

 

12.2Limitations

 

SRK did not review 100% of the analyses from the analytical certificates during data validation for the MRE used in this report. In addition, SRK reviewed analyses from certificates that may have been previously vetted as part of past audits.

 

12.3Opinion on Data Adequacy

 

SRK is of the opinion that the data provided are adequate for estimation of Mineral Resources.

 

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13Mineral Processing and Metallurgical Testing

 

Bolivar’s Piedras Verdes processing plant has been in operation since late 2011. Prior to late 2011, no processing facilities were available on site, and the ore was trucked to the Cusi Mine’s Malpaso Mill located 270 km by road.

 

Bolivar’s Piedras Verdes processing facilities started operating in October 2011 at 1,000 tpd of nominal throughput. The ore processing capacity was expanded to 2,000 tpd in mid-2013. The mill has been upgraded since and the current actual throughput is approaching 3,800 tpd.

 

Piedras Verdes operates a conventional concentration plant consisting of crushing, grinding, flotation, thickening of concentrates, filtration of concentrates, and tailings disposal. The plant’s flotation area can be seen in Figure 13-1 and the current process flowsheet is shown in Figure 13-2.

 

Piedras Verdes is consistently producing copper concentrate of commercial quality. The copper concentrate’s average assays for 2019 Q4 were 25% Cu, 570 g/t Ag, and 6.8 g/t Au.

 

 

 

Source: SRK, 2020

 

Figure 13-1: The Piedras Verdes Processing Plant’s Flotation Area

 

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Source: Sierra Metals, 2020

 

Figure 13-2: Piedras Verdes Flowsheet

 

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13.1Testing and Procedures

 

The Bolivar Mine’s facilities include a metallurgical laboratory at site. Sampling and testing of samples are executed on an as-needed basis considering current and future mining areas as follows:

 

·El Gallo Inferior;

 

·Chimeneas-Brechas;

 

·El Salto (continuation of El Gallo Inferior);

 

·Bolivar West; and

 

·Tajo 6900 and Tajo Mogote.

 

Additional testing has been performed to assess the commercial viability of producing iron ore concentrates. The available results show iron concentrate assaying approximately 61% Fe which is in the lower end of industry’s typical commercial iron ore assays.

 

13.2Recovery Estimate Assumptions

 

Metal recovery for copper and silver showed a consistent improvement in the period July 2018 to December 2019 (18-months). Over the same period, gold recovery showed a minor downward trend.

 

Recovery of solids into a concentrate (mass-pull) appears fairly consistent ranging between 2.5% and 3.6%.

 

A comparison of the plant’s performance shows that between 2018 Q4 and 2019 Q4:

 

·Copper recovery increased by 7%;

 

·Silver recovery increased by 2%;

 

·Gold recovery decreased by 3%; and

 

·Concentrate mass-pull increased by 3%.

 

During 2019, Piedras Verdes consistently produced copper concentrate of commercial quality with copper grade ranging between 21.7% Cu to 28% Cu, silver content in concentrate ranging from 392 g/t Ag to 677 g/t Ag, and gold content in concentrate ranging from 3.2 g/t Au to 7.9 g/t Au. Average monthly metal recovery for copper, silver, and gold was 82.9%, 78.3% and 62.3%, respectively.

 

An additional correlation analysis between the key metallurgical variables suggests that recovery of copper correlates positively with ore throughput, and recovery of silver correlates positively with that of copper. All other correlations analysis between head grades, recoveries, and mass-pull showed no relationship among the parameters.

 

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Monthly production data for the Piedras Verdes processing plant in 2019 is shown in Figure 13-3.

 

 

Source: SRK, 2020

 

Figure 13-3: Piedras Verdes Monthly Average Performance in 2019

 

These findings suggest potential substandard operational practices in the concentrator in the beginning of the period in question. Based on the more positive outcome towards the end of 2019, SRK is of the opinion that the Piedras Verdes processing plant has made major improvements that are reflected in the improved metallurgical performance shown in Figure 13-4.

 

 

Source: SRK, 2020

 

Figure 13-4: Monthly Cu Head Grade vs. Cu Recovery - 2019

 

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14Mineral Resource Estimates

 

Cliff Revering, PEng, of SRK (Canada) has conducted the Mineral Resource Estimate (MRE) as described herein, and Glen Cole, PGeo, of SRK (Canada) has reviewed the Mineral Resource estimation process. Findlay Craig and Ron Uken of SRK (Canada) developed the geological and mineralization domain interpretation used within this MRE. SRK has relied on the general geological knowledge and interpretation of the Bolivar area provided by Sierra Metals to guide the model development for this MRE.

 

14.1Drill hole and Channel Sample Database

 

Information supporting the MRE is derived from data obtained from exploration drilling and underground mine production supplied by Sierra Metals.

 

14.1.1Drilling Database

 

The resource database is comprised of 994 diamond holes, totaling 259,748 m of drilling. The drilling data consist of approximately 25,920 copper, silver, gold, zinc and lead assays. Decisions as to whether an interval is sampled are made by site geological staff during logging of the drill core. Drilling history for the project has been documented since 2003. Drilling information from some older holes has either been lost or the type of drilling is not known. These holes have been removed from the database.

 

The database is maintained in Microsoft® Access and was provided as Microsoft® Excel files with collar information, hole orientation, geology logging, sample assay data and geotechnical data. A summary of drill holes completed by year is provided in Table 14-1 and drill hole size is provided in Table 14-2. Descriptive statistics for all drill hole sample assays are presented in Table 14-3.

 

Table 14-1: Bolivar Drilling History

 

YearCountMeters% of Total Meters
200312020.1%
20049315,7706.1%
20057012,3604.8%
2006619,9593.8%
20079621,8418.4%
20089520,8268.0%
2009435,6432.2%
2010283,7361.4%
2011266,5742.5%
20124013,0325.0%
20132711,4024.4%
2014305,8302.2%
20157518,3427.1%
20165116,5856.4%
201710240,24415.5%
20187028,02210.8%
20198629,38211.3%
Total994259,748100.0%

Source: SRK, 2020

Note: Totals may not match due to rounding.

 

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Table 14-2: Drilling Types

 

Hole TypeCountMeters
Unknown427,489
NQ13327,148
BTW231,818
HQ_NQ423152,696
HQ5527,768
BQ31842,830
Total994259,748

Source: SRK 2020

Note: Totals may not match due to rounding.

 

Table 14-3: Sample Assay Descriptive Statistics – All Drilling (length weighted)

 

ColumnCountMinMaxMeanVarianceSt. Dev.Coefficient of
Variation
Au22,4350.002524.900.120.27.524.33
Ag25,9200.00004,720.0012.443323.3457.654.63
Cu25,9200.000042.070.472.041.423.01
Pb25,8030.00018.050.020.010.116.72
Zn25,9200.000152.090.9518.444.294.53

Source: SRK, 2020

 

14.1.2Downhole Deviation

 

Of the 994 drill holes in the database, 295 have downhole deviation measurements. Almost all drill holes drilled since 2017 have been surveyed with downhole instruments including Deviflex and Reflex tools. Table 14-4 provides details on drill holes with downhole surveys per drilling campaign.

 

The deviation surveys show that the initial angle of the drill setup is frequently five or more degrees off the intended azimuth for holes drilled before 2016, and that subsequent surveys taken downhole vary significantly from the first, indicating substantial deviation. The survey deviations are not consistent within the measurement data and the results indicate that un-surveyed drill holes could be materially off the planned azimuth which is recorded into the database.

 

As previously observed by SRK, the average azimuth downhole deviation for these surveyed holes is highly variable, with some holes exhibiting very little deviation and others more than 15° over the course of the hole. Thus, SRK is of the opinion that downhole surveys should continue to be collected with the Deviflex equipment on a regular basis and used as a matter of course during all drilling campaigns.

 

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Table 14-4: Drill Hole Downhole Survey Details

 

Drilling Campaign YearNumber of Holes DrilledNumber of Holes Surveyed
200310
2004930
2005700
2006610
2007960
2008950
2009430
2010280
2011260
2012400
2013278
2014300
20157520
20165130
201710291
20187066
20198680
Total994295

Source: SRK, 2020

 

14.1.3Missing and Unsampled Intervals

 

The handling of missing and unsampled intervals for the Bolivar data is critical for Mineral Resource estimation. There are many cases where samples are not present in the database for significant drill lengths, or for the entire drill hole. In most cases this is because the geologist logging the drill hole did not note mineralization or material of interest, and therefore did not sample the interval. However, there were other factors that may have contributed to intervals not having assay results. Some assays have been lost or deemed of too low confidence by Sierra Metals to include in the MRE; others are partial analyses, meaning that Cu was analyzed but not Au. For example, there are approximately 3,500 less Au analyses compared to Cu analyses, which is a function of the analytical capability of the PV Lab prior to installation of a fire assay circuit. SRK is of the opinion that for areas where Au was not analyzed or data are missing, there may be additional upside potential within the Mineral Resource.

 

In a select few obvious cases, SRK advised Sierra Metals (prior to this work) to sample those intervals that clearly should cross the mineralized body based on other nearby drilling or sampling. Sierra Metals did this and submitted modern QA/QC along with the selection of samples to effectively “infill” most of these areas.

 

In general, due to uncertainties associated with missing or unsampled intervals, SRK has assigned a value of “0” to all missing or unsampled intervals.

 

14.2Geological Model

 

Geological and mineralization models were constructed in 3D to serve as limits and guides for interpolation of grades for the MRE.

 

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14.2.1Bolivar Area Mineralization

 

An initial mineralization model for the Bolivar deposit was provided by Sierra Metals in September 2019. This was subsequently revised by SRK to incorporate additional exploration drilling conducted in Q4 2019, as well as to incorporate revisions to the geological model and the cut-off grade used to define the extents of mineralization.

 

The revised mineralization model developed to support the 2019 year-end MRE is comprised of four main areas of mineralization and thirty distinct zones (domains) of mineralization as depicted in Figure 14-1 and summarized in Table 14-5. Volumetrically, the EGI area is the most significant and has been the main source of mine production since 2007. All volumes reported in Table 14-5 reflect the total volume of the interpreted models and have not been adjusted for mine depletion.

 

As discussed in Section 7.0, the dominant lithological contact controlling mineralization at Bolivar is the Piedras Verde granodiorite with the majority of mineralization located in close proximity to this lithological unit (Figure 14-2). A cut-off grade of approximately 0.42% equivalent copper (Cu-Eq) has been used to define the mineralized zones at Bolivar, based on a metal value cut-off of US$24.25/t. Further details of cut-off criteria used for Mineral Resource estimation are provided in Section 14.10.

 

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Source: SRK, 2020

 

Figure 14-1: December 2019 Mineralization Model for Bolivar

 

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Table 14-5: Bolivar Mineralization Domains and Codes

 

DomainDomain CodeVolume (m3)
EGI1108,207,490
EGI_212031,315
EGI_3130577,516
EGI_414035,349
EGI_5150119,861
EGI_616095,453
CHIMINEA_1210326,742
CHIMINEA_2220856,948
BNW_1310398,728
BNW_2320275,464
BNW_333013,815
BNW_43402,492,726
BNW_535067,961
BNW_636078,155
BNW_7370480,318
BNW_838012,238
BNW_93901,061,601
SKARN_1410185,808
SKARN_242094,434
SKARN_3430187,316
SKARN_4440448,826
B_W_A510246,577
B_W_B520164,667
B_W_C530862,355
B_W_D540458,584
B_W_E550308,282
BWW161040,330
BWW2620115,476
BWW3630138,045
BWW4640140,641

Source: SRK, 2020

Note: volumes are not adjusted for mine depletion.

 

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Source: SRK, 2020

Figure 14-2: 3D View of Piedras Verde Granodiorite Relative to Mineralization Zones

 

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14.3Assay Sample Summary

 

14.3.1Assay Sample Length

 

A total of 10,052 assay samples are located within the interpreted mineralized domains at Bolivar. Sample interval lengths are variable but predominately 1.0 m to 1.5 m. Further details are provided in Figure 14-3.

 

 

Source: SRK, 2020

 

Figure 14-3: Assay Sample Interval Summary Statistics

 

14.3.2Assay Grade Summary

 

Sample analysis has typically consisted of assaying for Cu, Ag, Au, Zn, Pb, and Fe, however inclusion of Au, Fe and Pb was more inconsistent during historical drilling campaigns. The primary metals of interest currently incorporated into the MRE are Cu, Ag and Au. Summary assay statistics for the three primary metals, segregated by mineralized domain, are provided in Table 14-6 to Table 14-8.

 

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Table 14-6: Summary Assay Statistics for Cu (%)

 

DomainDomain
 Code
# of
Samples
Avg.
Sample
Length (m)
Cu_pct
(Mean)
Cu_pct
(StDev)
Cu_pct
(Min)
Cu_pct
(Max)
Cu_pct
(CV)
EGI11026561.130.73568.010.008.79778
EGI_2120531.121.43596.420.063.78417
EGI_31304861.171.17845.380.0012.70724
EGI_4140660.980.58347.120.017.20601
EGI_51501251.051.811067.960.008.01592
EGI_6160661.061.01882.050.007.13876
CHIMINEA_12106781.161.682042.930.0027.501,217
CHIMINEA_22208021.200.67885.270.0019.901,316
BNW_13101401.171.16986.900.004.24853
BNW_23201211.210.90666.250.0012.15742
BNW_3330121.220.55200.620.003.27365
BNW_43405461.190.57421.720.005.78737
BNW_5350171.011.31525.680.142.85401
BNW_6360211.160.84638.520.003.35758
BNW_73701161.140.60348.080.003.55584
BNW_838051.420.57152.220.350.77267
BNW_93901131.311.06511.630.005.56483
SKARN_14103691.040.61482.780.006.65785
SKARN_24203661.270.652459.900.009.293,788
SKARN_34305331.171.201947.640.0019.501,626
SKARN_444019221.161.141465.530.0028.301,289
B_W_A5101071.361.05484.720.007.60460
B_W_B520971.300.65365.170.006.75561
B_W_C5303741.301.371692.300.008.931,236
B_W_D540951.290.69261.470.005.55378
B_W_E550501.330.70260.750.005.39372
BWW1610121.420.83149.610.341.34181
BWW2620261.360.70256.000.072.40364
BWW3630351.421.36492.370.364.35361
BWW4640431.450.67190.810.091.66285

Source: SRK, 2020

 

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Table 14-7: Summary Assay Statistics for Ag (g/t)

 

DomainDomain
 Code
# of
Samples
Avg.
Sample
Length (m)
Ag_g/t
(Mean)
Ag_g/t
(StDev)
Ag_g/t
(Min)
Ag_g/t
(Max)
Ag_g/t
(CV)
EGI11026561.1312.7012093.930.00355.00952
EGI_2120531.1224.7810883.030.5088.00439
EGI_31304861.1731.7035295.250.001850.001,113
EGI_4140660.988.343620.420.1044.40434
EGI_51501251.0532.1919352.230.10184.00601
EGI_6160661.0625.8424325.380.10158.00941
CHIMINEA_12106781.1637.2344419.300.00582.001,193
CHIMINEA_22208021.2025.95129896.420.304720.005,006
BNW_13101401.1766.7969283.860.00388.001,037
BNW_23201211.2133.0722682.780.00285.00686
BNW_3330121.2220.249501.510.0059.70469
BNW_43405461.195.016321.400.0090.001,261
BNW_5350171.0131.5213615.321.0077.00432
BNW_6360211.1618.6813225.660.5082.00708
BNW_73701161.149.215902.400.1054.00641
BNW_838051.428.894545.701.6015.90511
BNW_93901131.3114.857473.170.50116.00503
SKARN_14103691.0423.8517531.300.00420.00735
SKARN_24203661.2740.11248259.390.00578.006,190
SKARN_34305331.1718.5622888.270.10270.001,233
SKARN_444019221.1621.7326516.550.001050.001,220
B_W_A5101071.368.914597.730.00166.00516
B_W_B520971.3015.3010250.710.00226.00670
B_W_C5303741.3044.5472269.990.00669.001,623
B_W_D540951.299.784112.190.5081.00420
B_W_E550501.3313.287212.010.00272.00543
BWW1610121.4214.568836.721.0047.00607
BWW2620261.369.934409.941.0027.00444
BWW3630351.4227.2826013.892.00291.00954
BWW4640431.456.244682.540.5039.00750

Source: SRK, 2020

 

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Table 14-8: Summary Assay Statistics for Au (g/t)

 

DomainDomain
 Code
# of
Samples
Avg.
Sample
Length (m)
Au_g/t
(Mean)
Au_g/t
(StDev)
Au_g/t
(Min)
Au_g/t
(Max)
Au_g/t
(CV)
EGI11026561.130.203356.0050.00011.8501,756
EGI_2120531.120.408366.7830.0002.660899
EGI_31304861.170.193561.4290.00010.3502,909
EGI_4140660.980.03832.9320.0030.588868
EGI_51501251.050.199330.9800.0033.5201,663
EGI_6160661.060.247336.5950.0032.0601,364
CHIMINEA_12106781.160.02164.8210.0004.3103,138
CHIMINEA_22208021.200.02384.8960.0002.2703,759
BNW_13101401.179.08412821.5450.00024.9001,412
BNW_23201211.210.8321035.3070.0009.3001,244
BNW_3330121.220.691215.3800.0001.225312
BNW_43405461.190.352676.2370.00010.0001,921
BNW_5350171.010.303194.5140.0191.275642
BNW_6360211.160.089108.4300.0000.5111,212
BNW_73701161.140.364379.9170.0004.7101,045
BNW_838051.420.19483.8600.0000.343433
BNW_93901131.310.00941.3640.0001.6254,671
SKARN_14103691.040.198172.3670.0005.870871
SKARN_24203661.270.5934171.0190.0009.6107,038
SKARN_34305331.170.06190.3120.0000.9891,470
SKARN_444019221.160.110235.9700.0008.7002,152
B_W_A5101071.360.0000.4220.0000.0253,226
B_W_B520971.300.0025.3270.0000.2102,461
B_W_C5303741.300.00028.9250.0001.81070,026
B_W_D540951.290.104128.7740.0005.1301,235
B_W_E550501.330.01641.0110.0001.7402,635
BWW1610121.420.12763.9900.0000.349504
BWW2620261.360.313252.6550.0001.660807
BWW3630351.420.670631.8920.0005.140942
BWW4640431.450.263154.9360.0051.660590

Source: SRK, 2020

 

14.3.3Compositing

 

Assay sample intervals are composited to provide common support for statistical and geostatistical analysis, and for estimation of Mineral Resources. Sample intervals of 1.5 m and 2.0 m represent 90% and 98% of all sample lengths (Figure 14-3), therefore a composite length of 2.0 m was selected as an optimal compositing interval. Although longer compositing intervals may reduce the variability of the composited dataset, a shorter composite length may allow finer definition of the bedding-parallel mineralization.

 

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Compositing was conducted within each domain independently. Composite intervals located along the margins of the mineralized domains less than 1.0 m in length were incorporated into the adjacent composite intervals to remove any small residuals from the final composite dataset. A summary of composite sample assay statistics is provided in Table 14-9 to Table 14-11.

 

Table 14-9: Composited Assay Summary Statistics for Cu (%)

 

DomainDomain
Code
# of CompsCu_pct
(Mean)
Cu_pct
(StDev)
Cu_pct
(Min)
Cu_pct
(Max)
Cu_pct
(CV)
EGI11017360.650.720.005.901.11
EGI_2120371.220.830.003.780.68
EGI_31303111.071.280.007.401.20
EGI_4140360.480.380.001.750.81
EGI_5150661.561.170.005.400.75
EGI_6160390.751.050.005.911.41
CHIMINEA_12104591.282.660.0023.202.08
CHIMINEA_22205060.540.690.005.031.28
BNW_1310900.810.660.003.410.82
BNW_2320910.761.080.007.681.43
BNW_3330110.550.510.001.740.93
BNW_43403180.630.530.002.750.84
BNW_5350150.690.620.001.750.89
BNW_6360130.710.720.002.591.02
BNW_7370690.610.510.012.230.84
BNW_838050.600.160.400.770.27
BNW_9390741.020.940.004.630.92
SKARN_14102070.490.630.003.881.29
SKARN_24202080.620.870.006.251.40
SKARN_34303630.891.520.0011.881.72
SKARN_444012300.861.670.0024.281.93
B_W_A510680.650.740.002.971.13
B_W_B520630.680.870.003.761.28
B_W_C5302411.111.010.005.900.91
B_W_D540750.810.890.003.771.10
B_W_E550320.790.830.002.751.05
BWW161090.850.270.391.330.32
BWW2620170.720.410.241.700.57
BWW3630251.370.730.463.330.54
BWW4640300.670.310.131.510.46

Source: SRK, 2020

 

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Table 14-10: Composited Assay Summary Statistics for Ag (g/t)

 

DomainDomain
Code
# of CompsAg_g/t
(Mean)
Ag_g/t
(StDev)
Ag_g/t
(Min)
Ag_g/t
(Max)
Ag_g/t
(CV)
EGI110173611.5216.460.00266.751.43
EGI_21203719.8212.430.0051.900.63
EGI_313031128.8069.460.001089.002.41
EGI_4140367.675.230.0019.740.68
EGI_51506629.5119.600.2392.410.66
EGI_61603919.0426.740.00103.341.40
CHIMINEA_121045928.6457.000.00512.051.99
CHIMINEA_222050620.41139.240.002960.996.82
BNW_13109035.2648.770.00311.281.38
BNW_23209127.5737.150.00183.471.35
BNW_33301118.2218.590.0059.701.02
BNW_43403187.529.350.0050.151.24
BNW_53501515.7815.880.0048.261.01
BNW_63601314.8412.190.0041.980.82
BNW_7370697.498.120.4039.651.09
BNW_8380510.374.884.5515.900.47
BNW_93907416.1915.790.0077.860.98
SKARN_141020719.1828.590.00210.101.49
SKARN_242020821.0437.160.00380.071.77
SKARN_343036315.1619.940.00206.551.32
SKARN_4440123018.2433.330.00610.581.83
B_W_A5106810.3214.110.0084.461.37
B_W_B5206319.0127.180.00113.891.43
B_W_C53024134.9352.210.00425.641.49
B_W_D5407510.5812.280.0052.101.16
B_W_E5503215.8919.340.0075.881.22
BWW1610916.9619.052.6546.991.12
BWW26201710.117.321.2726.590.72
BWW36302526.5937.802.25156.971.42
BWW4640305.806.880.5025.191.19

Source: SRK, 2020

 

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Table 14-11: Composited Assay Summary Statistics for Au (g/t)

 

DomainDomain
Code
# of CompsAu_g/t
(Mean)
Au_g/t
(StDev)
Au_g/t
(Min)
Au_g/t
(Max)
Au_g/t
(CV)
EGI11017360.1690.3850.0006.0052.28
EGI_2120370.3270.4320.0001.6471.32
EGI_31303110.1780.8100.00010.3004.56
EGI_4140360.0370.0600.0000.3081.63
EGI_5150660.1630.3110.0031.9291.90
EGI_6160390.1670.3160.0001.2311.89
CHIMINEA_12104590.0240.1200.0002.2104.99
CHIMINEA_22205060.0220.1060.0001.6674.86
BNW_1310900.6381.2880.0008.9772.02
BNW_2320910.4851.1160.0007.1142.30
BNW_3330110.4790.5130.0001.2251.07
BNW_43403180.4600.6350.0004.8941.38
BNW_5350150.1660.2070.0000.8141.25
BNW_6360130.0900.1780.0000.5111.98
BNW_7370690.3490.6270.0004.2301.80
BNW_838050.1510.1410.0000.3430.94
BNW_9390740.0670.2120.0001.1023.18
SKARN_14102070.1940.3570.0002.9761.84
SKARN_24202080.2400.5730.0006.2032.39
SKARN_34303630.0510.0780.0000.5521.51
SKARN_444012300.1040.3250.0008.7003.12
B_W_A510680.0010.0030.0000.0254.94
B_W_B520630.0140.0300.0000.1762.23
B_W_C5302410.0420.1620.0001.1313.81
B_W_D540750.3720.6730.0003.9451.81
B_W_E550320.0150.0790.0000.4485.19
BWW161090.1160.1160.0000.3361.00
BWW2620170.3380.5020.0001.4151.48
BWW3630250.6691.0870.0003.5251.62
BWW4640300.2770.2460.0061.1640.89

Source: SRK, 2020

 

14.3.4Outlier Analysis and Grade Capping

 

Grade capping is a technique used to mitigate the effect that a small population of high-grade sample outliers can have during grade estimation. These high-grade samples are considered to not be representative of the general sample population and are therefore “capped” to a level that is more representative of the general data population. Although subjective, grade capping is a common industry practice when performing grade estimation for deposits that have significant grade variability.

 

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Outlier analysis for Bolivar was conducted on the 2 m composited dataset and assessed separately for each individual domain. Histograms and normal quantile plots were generated for each mineralized domain, and appropriate capping levels were selected where required. Composites were capped prior to grade estimation. A summary of grade capping levels is provided in Table 14-12 to Table 14-14.

 

Table 14-12: Capped Composite Summary Statistics for Cu (%)

 

DomainDomain
Code
# of
Comps
Cu_pct
(Cap Value)
Cu_pct
(#'s capped)
Cu_pct
(Mean)
Cu_pct
(StDev)
Cu_pct
(CV)
EGI11017364.530.650.711.1
EGI_2120372.231.160.690.6
EGI_31303114.861.051.211.2
EGI_4140360.9540.440.310.7
EGI_5150662.861.440.880.6
EGI_6160391.540.570.490.9
CHIMINEA_12104591171.182.141.8
CHIMINEA_22205062.2100.510.571.1
BNW_1310901.950.780.570.7
BNW_2320912.830.680.731.1
BNW_333011N/AN/A0.550.510.9
BNW_43403182.270.630.510.8
BNW_535015N/AN/A0.690.620.9
BNW_636013N/AN/A0.710.721.0
BNW_7370691.170.540.340.6
BNW_83805N/AN/A0.600.160.3
BNW_9390742.840.990.840.8
SKARN_14102071.970.460.521.1
SKARN_24202081.890.520.511.0
SKARN_3430363670.841.271.5
SKARN_444012307.3150.811.301.6
B_W_A510681.380.530.460.9
B_W_B520631.860.570.561.0
B_W_C5302413.851.090.930.9
B_W_D540752.820.790.831.1
B_W_E55032230.760.771.0
BWW16109N/AN/A0.850.270.3
BWW262017N/AN/A0.720.410.6
BWW363025231.260.520.4
BWW4640301.120.650.260.4

Source: SRK, 2020

 

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Table 14-13: Capped Composite Summary Statistics for Ag (g/t)

 

DomainDomain
Code
# of
Comps
Ag_g/t
(Cap Value)
Ag_g/t
(#'s capped)
Ag_g/t
(Mean)
Ag_g/t
(StDev)
Ag_g/t
(CV)
EGI1101736115511.3314.691.3
EGI_21203730518.169.360.5
EGI_3130311120424.3726.181.1
EGI_4140361537.374.630.6
EGI_51506655627.7315.460.6
EGI_61603935613.2012.150.9
CHIMINEA_1210459300128.1853.811.9
CHIMINEA_2220506300314.0036.112.6
BNW_131090135332.1136.281.1
BNW_23209170822.5523.221.0
BNW_333011N/AN/A18.2218.591.0
BNW_43403183857.398.871.2
BNW_535015N/AN/A15.7815.881.0
BNW_636013N/AN/A14.8412.190.8
BNW_7370692737.247.331.0
BNW_83805N/AN/A10.374.880.5
BNW_93907435614.4311.220.8
SKARN_1410207115318.4324.741.3
SKARN_2420208155119.9629.041.5
SKARN_343036370614.4616.131.1
SKARN_44401230180317.6827.231.5
B_W_A510682858.768.921.0
B_W_B5206350815.2417.921.2
B_W_C530241205432.8641.071.3
B_W_D540752979.479.511.0
B_W_E5503253215.1617.341.1
BWW16109N/AN/A16.9719.051.1
BWW262017N/AN/A10.117.320.7
BWW36302560220.2419.881.0
BWW4640301054.273.570.8

Source: SRK, 2020

 

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Table 14-14: Capped Composite Summary Statistics for Au (g/t)

 

DomainDomain
Code
# of
Comps
Au_g/t
(Cap Value)
Au_g/t
(#'s capped)
Au_g/t
(Mean)
Au_g/t
(StDev)
Au_g/t
(CV)
EGI11017362.370.1620.3252.0
EGI_2120370.9530.2860.3291.1
EGI_31303111.2570.1130.2352.1
EGI_4140360.0830.0260.0220.8
EGI_5150660.540.1240.1451.2
EGI_616039N/AN/A0.1670.3161.9
CHIMINEA_12104590.2150.0170.0332.0
CHIMINEA_22205060.1980.0140.0342.4
BNW_1310901.750.4500.5161.1
BNW_2320911.950.3290.4971.5
BNW_333011N/AN/A0.4790.5131.1
BNW_43403182.25100.4340.5201.2
BNW_535015N/AN/A0.1660.2071.2
BNW_636013N/AN/A0.0900.1782.0
BNW_7370691.620.3010.3981.3
BNW_83805N/AN/A0.1510.1410.9
BNW_939074N/AN/A0.0670.2123.2
SKARN_14102071.1440.1720.2421.4
SKARN_24202081.640.2100.3631.7
SKARN_34303630.390.0490.0641.3
SKARN_444012301.740.0970.2072.1
B_W_A51068N/AN/A0.0010.0034.9
B_W_B520630.0630.0100.0181.7
B_W_C5302410.0830.0080.0232.9
B_W_D540751.6630.3180.4641.5
B_W_E550320.0310.0020.0073.3
BWW16109N/AN/A0.1160.1161.0
BWW262017N/AN/A0.3380.5021.5
BWW3630250.6550.2740.2811.0
BWW4640300.3660.2140.1180.6

Source: SRK, 2020

 

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14.4Density

 

Density measurements have been taken at Bolivar from both drill core and hand samples from the underground workings.

 

For both sample types, density has been assessed via the standard immersion method, measuring the mass of the sample in air and then water, and taking the difference between the two. In addition, Bolivar has data from ongoing production which provide an average density of material through the plant that generally fluctuates around 3.7 t/m3.

 

A total of 559 density samples have been collected from drill core within the various mineralized domains at Bolivar. However, as noted in Table 14-15, many of the interpreted mineralized domains contain few density measurements. Insufficient density measurements are available to estimate density locally and therefore an average density has been assigned to the various mineralized domains.

 

As noted in Section 7.4, mineralization at Bolivar is locally associated with magnetite, depending on proximity to fluid flow channels. Analysis of the density measurements for Bolivar, relative to sulphide (i.e. Cu and Zn) and magnetite (i.e. Fe) mineralization suggests that density is affected by both the extent of sulphide and magnetite mineralization present. Figure 14-4 provides plots of density relative to Cu, Fe and combined Cu, Fe and Zn content.

 

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Table 14-15: Assigned Average Density Values for Mineralized Domains

 

DomainDomain CodeDomain Group# of Density SamplesAverage Assigned
Density (t/m3)
EGI1101001753.6
EGI_2120100113.6
EGI_3130100303.6
EGI_4140100143.6
EGI_515010003.6
EGI_616010043.6
CHIMINEA_121020073.2
CHIMINEA_222020073.2
BNW_131030053.45
BNW_232030053.45
BNW_333030003.45
BNW_434030093.45
BNW_535030003.45
BNW_636030033.45
BNW_737030023.45
BNW_838030013.45
BNW_939030033.45
SKARN_141040093.6
SKARN_242040063.6
SKARN_3430400633.6
SKARN_4440400793.6
B_W_A51050083.45
B_W_B52050073.45
B_W_C530500433.45
B_W_D540500313.45
B_W_E55050053.45
BWW161060013.2
BWW262060093.2
BWW3630600123.2
BWW4640600103.2

Source: SRK, 2020

 

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Source: SRK, 2020

 

Figure 14-4: Scatter Plots of Density (t/m3) Relative to Cu (%), Fe (%) and Combined Cu + Fe + Zn (%) Mineralization

 

It is recommended to implement a systematic density measurement program of different rock types and mineralization styles within Bolivar. Drill core samples collected for density measurement should also be submitted for geochemical analysis to allow for correlation of density to sulphide and magnetite content within the various mineralization domains.

 

14.5Variography

 

Due to limited composites within most individual mineralized domains, variogram analysis was conducted only on the larger domains (i.e. EGI, Chiminea_1, Chiminea_2, BNW_4 and B_W_C) Directional variograms for copper, silver and gold were produced for each of these domains, with the exception of B_W_C where no variogram was produced for gold. Variogram parameters are provided in Table 14-16 to Table 14-18.

 

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Table 14-16: Variogram Parameters for Copper

 

   Struct1Struct2   
DomainDomain CodeNuggetSillMajorSemi MajorMinorSillMajorSemi MajorMinorBearingPlungeDip
EGI1100.250.6402580.15140651598-822
CHIMINEA_12100.050.5815680.3755161011511-60
CHIMINEA_22200.250.35788200.415060551105-62
BNW_43400.20.568537100.2415570151441232
B_W_C5300.20.536660.27707014-1510-10

Source: SRK, 2020

 

Table 14-17: Variogram Parameters for Silver

   Struct1Struct2   
DomainDomain CodeNuggetSillMajorSemi MajorMinorSillMajorSemi MajorMinorBearingPlungeDip
EGI1100.250.6402580.15140651598-822
CHIMINEA_12100.050.4615880.4960201211511-60
CHIMINEA_22200.150.5528860.311740201105-62
BNW_43400.150.625545100.23200100201441232
B_W_C5300.20.646660.16707014-1510-10

Source: SRK, 2020

 

Table 14-18: Variogram Parameters for Gold

 

   Struct1Struct2   
DomainDomain
Code
NuggetSillMajorSemi
Major
MinorSillMajorSemi
Major
MinorBearingPlungeDip
EGI1100.30.53503640.17112781292-822
CHIMINEA_12100.050.78980.253827178249-66
CHIMINEA_22200.150.641717200.215555359030-56
BNW_43400.150.59703860.2619560131441232

Source: SRK, 2020

 

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14.6Block Model Configuration

 

Two block models were constructed in MAPTEK® Vulcan software for the 2020 Bolivar MRE, with details provided in Table 14-19 and shown in Figure 14-5.

 

Table 14-19: Block Model Configuration Parameters

 

OriginBolivar EastBolivar West
X Coordinate10,9008,600
Y Coordinate8,2509,100
Z Coordinate13001100
 Rotation 
Bearing50°90°
 Block Size 
X5m5m
Y5m5m
Z5m5m
 Sub-Block Size 
X1m1m
Y1m1m
Z1m1m
 Distance offsets 
X1,4001100
Y3,000900
Z700600

Source: SRK, 2020

 

 

Source: SRK, 2020

 

Figure 14-5: 2020 Bolivar MRE Block Models

 

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14.7Estimation Parameters

 

Block estimation of copper, silver and gold was conducted using both Ordinary Kriging and Inverse Distance (ID2). Ordinary Kriging was used for domains which contained sufficient sample density to develop variogram models. All other domain block grades were estimated using ID2. Estimation was conducted using multiple passes, using the following generalized approach:

 

·Pass 1 search ellipse range used 60% of the variogram range

 

·Pass 2 search ellipse range used 100% of the variogram range

 

·Pass 3 search ellipse used approximately 150% of the variogram range

 

·Pass 4 search ellipse used approximately 200% of the variogram range.

 

Generally, the majority of blocks within each domain were estimated within the first two estimation passes, with passes 3 and 4 used to estimate blocks along the peripheries of the mineralized domains. Search ellipse and estimation parameters are summarized in Table 14-20 and Table 14-21.

 

For mineralized domains with significant undulating geometry, the technique of locally varying anisotropy (LVA) was used to locally adjust search orientations to better align with the geometry of the mineralized zone contacts. The LVA option in MAPTEK® Vulcan uses HW and FW surfaces to determine block scale orientation parameters to use during grade estimation. Domains where LVA was used are indicated in Table 14-20.

 

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Table 14-20: Search Ellipse Orientation Parameters

 

DomainDomain
Code
Estimation
Technique
BearingPlungeDipLVA
EGI110OKVariogram  Y
EGI_2120ID2112-936 
EGI_3130ID245-3027 
EGI_4140ID251-2715Y
EGI_5150ID250-3110 
EGI_6160ID223-20-15 
CHIMINEA_1210OKVariogram 
CHIMINEA_2220OKVariogram 
BNW_1310ID255100Y
BNW_2320ID21175515 
BNW_3330ID2122-220 
BNW_4340OKVariogramY
BNW_5350ID230-200 
BNW_6360ID26-100 
BNW_7370ID212-280 
BNW_8380ID2124-120 
BNW_9390ID2130023Y
SKARN_1410ID2Omni-directional 
SKARN_2420ID214000 
SKARN_3430ID22130-85 
SKARN_4440ID2440-85 
B_W_A510ID29050 
B_W_B520ID22000Y
B_W_C530OKVariogramY
B_W_D540ID2303820 
B_W_E550ID2090 
BWW1610ID2128-10-11 

Source: SRK, 2020

 

Table 14-21: Summary of Estimation Parameters

 

EstimationMin # ofMax # ofMax CompsRange
PassCompositesCompositesper DDHMajorSemi-MajorMinor
Pass 15103505010
Pass 25103757515
Pass 3510310010020
Pass 4110315015030

Source: SRK, 2020

Note: Search ellipse range parameters used for ID2 estimation.

 

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14.8Model Validation

 

Block model validation was conducted using multiple techniques including:

 

1.Swath plot analysis of grade profiles between the block model, a nearest neighbour (declustered) block model and assay composites.

 

2.Comparison of block model mean grades to a nearest neighbour (declustered) model produced on a 1m by 1m by 1m grid.

 

3.Visual inspection of estimated block grades relative to assay composites.

 

Examples for each of the model validation techniques are provided in Figure 14-6 to Figure 14-11. In general, there is good correlation between the drill hole composite data, nearest neighbor (declustered) model and estimated block grades.

 

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Source: SRK, 2020

 

Figure 14-6: Swath Plot of Cu (%) Grade for the EGI Domain

 

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Source: SRK, 2020

 

Figure 14-7: Swath Plot of Ag (g/t) Grade for the EGI Domain

 

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Source: SRK, 2020

 

Figure 14-8: Comparison of Average Cu (%) Grade Between Block Model Estimate and Declustered Nearest Neighbour Model For Each Mineralized Domain (Note: Grey Bars Represent Volume of Individual Domains)

 

 

 

Source: SRK, 2020

 

Figure 14-9: Comparison of Average Ag (g/t) Grade Between Block Model Estimate and Declustered Nearest Neighbour Model For Each Mineralized Domain (Note: Grey Bars Represent Volume of Individual Domains)

 

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Source: SRK, 2020

 

Figure 14-10: EGI Domain Cross-section Comparison of Estimated Block Cu (%) Grades Relative to Drill Hole Assay Composites

 

 

 

Source: SRK, 2020

 

Figure 14-11: BNW4 Domain Cross-section Comparison of Estimated Block Cu (%) Grades Relative to Drill Hole Assay Composites

 

14.9Mineral Resource Classification

 

Mineral Resource classification is a subjective concept and industry best practices suggest it should consider both the confidence in the geological continuity of the mineralized structures, the quality and quantity of exploration data supporting the estimates, and the geostatistical confidence in the tonnage and grade estimates. Appropriate classification criteria should aim at integrating all of these concepts to delineate regular areas of similar resource classification.

 

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The Bolivar Mineral Resources have been classified as either Indicated or Inferred Mineral rRsources. No Measured Mineral Resource has been defined for this deposit. CIM Definition Standards for Mineral Resources and Mineral Reserves (CIM, 2014) define Indicated and Inferred Mineral Resources as follows:

 

Indicated Mineral Resource

 

An Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation.

 

Inferred Mineral Resource

 

An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

 

Significant factors affecting the classification at Bolivar include:

 

·Lack of historic and consistent QA/QC program;

 

·Lack of downhole surveys for most pre-2017 drill holes and measured deviations from planned and actual azimuths;

 

·Lack of density tests of the different mineralization and rock types for all the areas;

 

·Geological understanding of mineralization controls;

 

·Spacing of drilling compared to observed geological continuity;

 

·Geostatistical factors suggesting ranges of reasonable influence between sampling; and

 

·Bolivar is a producing mine with a successful operating history of more than 10 years.

 

The classification is generally based on the confidence in geological interpretation of the mineralization controls and block estimation passes, which are then used to guide a manually digitized polygon to assign the final classification. Generally, blocks estimated within the first two estimation passes with sufficient confidence in the drill hole data and geological model were classified as Indicated.

 

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14.10Depletion for Mining

 

Bolivar has been actively mined since 2007. As of the end of 2019, most mine production has been generated from the EGI area of the deposit with lesser historical production coming from the Skarn area (Figure 14-12); however, UG development to support mine production in the Bolivar West area (i.e. B_W) has been established during 2018 and 2019. Wireframes of all UG development and mine stopes were provided to SRK by Sierra Metals and were used to deplete the updated Mineral Resource model prior to the reporting of Mineral Resources.

 

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Source: Sierra Metals, 2020

 

Figure 14-12: Areas of Mine Production as of December 31, 2019

 

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14.11Mineral Resource Statement

 

CIM Definition Standards for Mineral Resources and Mineral Reserves (CIM, 2014) defines a Mineral Resource as:

 

“A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling”.

 

The “reasonable prospects for economic extraction” requirement generally implies that the quantity and grade estimates meet certain economic thresholds and that the Mineral Resources are reported at an appropriate cut-off grade (CoG) taking into account extraction scenarios and processing recoveries. To assess this at Bolivar, SRK has calculated an economic value for each block in terms of US dollars based on the grade of contained metal in the block, multiplied by the assumed recovery for each metal, multiplied by pricing established by Sierra Metals for each commodity. Costs for mining and processing are taken from data provided by Sierra Metals for their current underground mining operation.

 

The December��31, 2019, consolidated Mineral Resource statement for the Bolivar Mine is presented in Table 14-22.

 

Table 14-22: Consolidated Bolivar Mine Mineral Resource Statement as of December 31, 2019(1)(2)(3)

 

Category Tonnes
(Mt)
 Ag (g/t) Au (g/t) Cu (%) Ag (M oz) Au (k oz) Cu (t) 
Indicated  19.4  15.1  0.21  0.77  9.4  127.8  149,116 
Inferred  21.4  14.2  0.21  0.78  9.8  145.6  167,077 

Source: SRK, 2020

(1)  Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.

(2)  All figures are rounded to reflect the relative accuracy of the estimates.

(3)  Mineral Resources are reported at a value per tonne cut-off of US$24.25/t using the following metal prices and recoveries; Cu at US$3.08/t and 88% recovery; Ag at US$17.82/oz and 78.6% recovery, Au at US$1,354/oz and 62.9% recovery.

 

14.12Mineral Resource Sensitivity

 

To demonstrate the sensitivity of the Bolivar Mineral Resource to metal value cut-off, a grade-tonnage curve was developed to show changes in Mineral Resource tonnage and equivalent copper grade (Cu-Eq) relative to changes in the metal value cut-off. The grade-tonnage curve for the December 31, 2019 Bolivar MRE is provided in Figure 14-13. Cu-Eq grades are calculated incorporating recovery factors for gold and silver, and metal prices for copper, gold and silver as defined in Table 14-22 (see footnote).

 

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Source: SRK, 2020

 

Figure 14-13: Grade-Tonnage Curve for Indicated and Inferred Mineral Resources

 

14.13Previous Resource Estimates

 

An MRE for the Bolivar Mine was reported in October 2017 by SRK Consulting (U.S.), Inc. and is summarized in Table 14-23.

 

Table 14-23: Consolidated Bolivar Mine Mineral Resource Statement as of October 31, 2017–SRK Consulting (U.S.), Inc.

 

Category Tonnes
(000's)
 Ag
(g/t)
 Au
(g/t)
 Cu
(%)
 Ag
(koz)
 Au
(koz)
 Cu
(t)
 
Indicated  13,267  22.5  0.29  1.04  9,616  124  137,537 
Inferred  8,012  22.4  0.42  0.96  5,779  109  76,774 

Source: SRK, 2017

 

Compared to the 2017 estimate, the current Indicated Mineral Resource tonnage has increased by 46% (6.1 Mt), with an associated reduction in average copper grade of 26% and reduction in silver and gold grades of 33% and 29%, respectively. Overall metal content increased by 10,430 t of equivalent copper.

 

These changes are attributed to several factors, including:

 

·Incorporation of lower-grade mineralization above a metal value cut-off of US$24.25/t which previously was excluded from the interpreted mineralization domains.

 

·Incorporation of new zones of mineralization previously excluded from the geological model.

 

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·Upgrading of previous Inferred Resources to Indicated Resources based on additional drilling and a refined geological model.

 

Inferred Mineral Resource tonnage has increased by approximately 167% (13.4 Mt), with an associated reduction in average copper grade of 19% and reduction in silver and gold grades of 37% and 50%, respectively. Overall metal content has increased by 102,632 t of equivalent copper.

 

Changes to the Inferred Mineral Resource are attributed to the following factors:

 

·Incorporation of lower-grade mineralization above a metal value cut-off of US$24.25/t which previously was excluded from the interpreted mineralization domains.

 

·Incorporation of new zones of mineralization previously excluded from the geological model.

 

·Incorporation of newly discovered zones of mineralization based on additional exploration drilling conducted during 2017 to 2019.

 

14.14Relevant Factors

 

There are no other factors pertinent to the Mineral Resource statement other than those stated in the above sections which SRK would expect to have a material impact on the statement.

 

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15Mineral Reserve Estimates

 

A Mineral Reserve is the economically mineable part of a Measured and/or Indicated Resource. It includes diluting material and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-feasibility or Feasibility level as appropriate that include the application of Modifying Factors.

 

A Mineral Reserve has not been estimated for the Project as part of this PEA.

 

The PEA includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves.

 

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16Mining Methods

 

The conceptual mine plan considered in this PEA includes Inferred Mineral Resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the results of the PEA will be realized.

 

16.1Introduction

 

The Mineral Resources reported by SRK (as of December 31, 2019) are estimated at 19.4 Mt of Indicated and 21.4 Mt of Inferred based on a cut-off value of US$24.24/t. These resources form the basis of the mine plan considered in this PEA.

 

Sub-level stoping and room and pillar mining methods are currently used in the main areas of the mine to obtain a production rate of 5,000 tpd. The method used varies depending on geotechnical constraints, mineralization trends, dimensions, and mine production targets.

 

Using the resources estimated by SRK through December 2019, Sierra Metals performed a growth analysis to determine how the Bolívar Mine could achieve sustainable production of 7,000 tpd - 15,000 tpd. The analysis indicates that the production objectives are achievable through the expansion of the sub-level stoping mining method in the new production areas, which will allow the sustainability of the operation.

 

A new configuration of the mining method will allow greater recovery of resources and production rates. The mine design is shown in Figure 16-1 and Figure 16-2.

 

 

 

Source: Sierra Metals, 2020

 

Figure 16-1: Overview of Bolivar Mine Design – Plan View

 

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Source: SRK, 2020

 

Figure 16-2: Bolivar Overview – Plan View

 

16.2Current Mining Methods

 

Current production at Bolivar comes from the El Gallo Inferior, Chimenea 1 and 2 and the Bolivar West mineralized zones. Mineralized material is currently hauled to the surface using one of several adits or declines accessing the mineralized zones and is then dumped onto small pads outside the portals. The mineralized material is then loaded into rigid-frame, over-the-road trucks and hauled on a gravel road approximately 5.1 km south to the Piedras Verdes Mill. As explained in more detail in Section 18, the mine is constructing an underground tunnel that will enable mineralized material to be delivered via underground truck transport to a portal adjacent to the Mill. This development will eliminate the impact of bad weather on the current surface truck haulage system and will provide a lower cost and more reliable method of delivering mineralized material to the plant.

 

Future production will include mineralized material from Bolivar Northwest (BNW). The Bolivar NW mineralized zone is further broken down into BNW 1, BNW 2, BNW 4, BNW 6, BNW 7, BNW8 and BNW 9.

 

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Figure 16-3 shows a plan view of the Bolivar Mine, the geology shapes, and the mined out areas.

 

 

Source: Sierra Metals, 2020

 

Figure 16-3: Plan View of Bolivar Mineralized Zone Location and Mined Out Areas

 

Figure 16-4 shows an isometric view of the El Gallo Inferior area and the Chimenea 1 and Chimenea 2 mineralized zones.

 

 

Source: Sierra Metals, 2020

 

Figure 16-4: Isometric View of El Gallo Inferior, Chimenea 1 and Chimenea 2

 

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Figure 16-5 shows a rotated view, looking southwest, of Bolivar NW domains BNW4, 1, 2, 6, 7,8 and 9, and the as-built (mined out) shapes from previous mining.

 

 

Source: Sierra Metals, 2020

 

Figure 16-5: Isometric View of Bolivar W, Bolivar NW and Mined Out Areas

 

The Bolivar Mine is currently mined by the sub-level stoping and room and pillar methods and the specific method applied to a particular area of the mine is determined by geotechnical constraints, mineralization trends, dimensions and mine production targets.

 

The current distribution of mining method by area is summarized in Table 16-1.

 

Table 16-1: Rock Mass Characteristics of El Gallo Inferior, Chimenea 1 and Chimenea 2 and Bolivar West

 

Domain Code Name Zone Mining Method
110 EGI 1 Gallo Inferior Sub Level Stoping
210 Chimenea 1 Chimenea1 Sub Level Stoping
220 Chimenea 2 Chimenea2 Sub Level Stoping
510 Bolivar West A 

Bolivar W

 Sub Level Stoping
520 Bolivar West B  Sub Level Stoping
530 Bolivar West C  Sub Level Stoping
540 Bolivar West D  Sub Level Stoping

Source: Sierra Metals, 2020

 

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16.2.1Sub-Level Stoping - Bolivar West

 

The longhole method is applied in the shallow dipping mineralized bodies in Bolivar West. Excavation for longholes with openings of 9.0 m and pillars of 7.0 m x 7.0 m for stope heights between 12.0 m and 15.0 m. From the access ramp, access to the mineralized material is established in the central part of the chamber and the mineral cut begins. A drive is developed within the mineralized material, then the drilling of long holes is carried out and extraction begins. Ramps are established in some cases in mineralized material to minimize waste extraction.

 

Figure 16-6 shows a typical section of the method.

 

 

Source: Sierra Metals, 2020

 

Figure 16-6: Typical Section Showing Sub-Level Stoping

 

16.2.2Sub-Level Stoping - El Gallo Inferior

 

The longhole method is applied to the mineralized structures at the El Gallo Inferior deposit. Each level has 20.0 m of vertical stope height and is accessed through a ramp to the central part of the level. A mineralized material drive is developed to the floor of the structure and then the cutting of the mineralized mineral begins through the mineralized material drive and continues with the drilling of longholes. Then, the mineralized material is extracted through the second ore drive made in the lower part of the level. After every 45.0 m of advance in the mineralized material drive, a perpendicular support pillar of 10.0 m is left.

 

Figure 16-7 shows a typical sub-level stoping section in both sectional and plan views.

 

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Source: Sierra Metals, 2020

 

Figure 16-7: Typical Section Showing Sub-Level Stoping

 

The primary access is made via ramps of 5.0 m x 5.0 m and then the accesses to the stopes and ore drives are developed with a section of 4.0 m x 4.0 m. The ramps are designed with a maximum gradient of 12%.

 

16.2.3Drilling, Blasting, Loading and Hauling

 

The electrohydraulic jumbos conduct the lateral development of the main tasks such as ramps, crossings or bypasses. The ramps have a section of 5.0 m x 5.0 m (width / height) and the accesses to the stopes and mineralized material drive have a section of 4.0 m x 4.0 m (width / height).

 

Raptor radial drilling jumbos are used for the production of the stopes. The drilling and blasting designs are developed by the technicians at the mine.

 

Two layouts for typical 4.0 m x 4.0 m development blast patterns are shown in Figure 16-8 and Figure 16-9. Blasting designs for longholes in Bolivar West and El Gallo Inferior are shown in Figure 16-10 and Figure 16-11 respectively. A drill jumbo is shown drilling a production blast pattern in El Gallo Inferior in Figure 16-12.

 

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Source: Sierra Metals, 2020

 

Figure 16-8: Typical 4 m x 4 m Development Blast Pattern 1

 

 

Source: Sierra Metals, 2020

 

Figure 16-9: Typical 4 m x 4 m Development Blast Pattern 2

 

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Source: Sierra Metals, 2020

 

Figure 16-10: Blasting Design for Longholes in Bolivar West

 

 

Source: Sierra Metals, 2020

 

Figure 16-11: Blasting Design for Longholes in El Gallo Inferior

 

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Source: SRK, 2017

 

Figure 16-12: Drill Jumbo Drilling a Blast Pattern in an El Gallo Inferior Production Stope

 

After blasting, the face is mucked by scoops, and mineralized material is loaded into trucks and hauled to the ramp portal on surface. Historically, approximately 10% of total production is waste. This percentage is estimated to increase slightly to 20% as the mine advances into areas outside of El Gallo Inferior. Waste rock is either placed in the stopes underground or hauled to the surface, and it is sometimes used as construction material.

 

16.2.4Mineralized Material and Waste Handling

 

The mineralized material and waste handling strategy in El Gallo Inferior is well established and has been applied to the future production mining areas of Bolivar W and Bolivar NW. It is recommended to perform a haulage simulation to validate the mineralized material and waste handling assumptions made for underground truck haulage from each of the three main mining areas (El Gallo Inferior, Bolivar W, Bolivar NW) to surface, as well as the surface truck haulage from surface dumps to the mill. Haulage simulation can confirm that the production targets are achievable and can identify possible traffic interference and bottlenecks.

 

The mine is in the process of developing a new tunnel mineralized material delivery system that will deliver mineralized material directly to the Piedras Verdes processing plant. This new system is described in Section 18.

 

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16.3Geomechanical Parameters

 

16.3.1Stability Design Criteria

 

The MATHEWS method (Stability graph) is the most used worldwide for large excavations (long holes), being necessary to know the Hydraulic Radius (RH = Area / Perimeter) and the Number of stability (N' = Q 'x A x B x C).

 

The design procedure is based on the calculation of two factors, N', which is the modified stability number, which represents the ability of the rock mass to remain stable under a given stress condition, and RH, which is the form factor or hydraulic radius, which takes into account the size and shape of the stope.

 

 

Q’: Tunnel Quality Index Q Modified

A: Stress factor in the rock

B: Adjustment factor for joint orientation

C: Gravitational adjustment factor

 

Induced Stress Adjustment = A

 

Factor “A” reflects the forces acting on the free faces of the open stope at depth. This factor is determined from the unconfined compressive strength of the intact rock and the acting stress parallel to the exposed face of the stope under consideration. The strength of intact rock can be determined by laboratory testing of the rock or by mapping estimates. Induced compressive stress is established from numerical modeling or estimated from published stress distributions such as those in Hoek & Brown (1980a), using measured or assumed in situ stress values. The stress factor in the rock, A, is therefore determined from the ratio σc / σ1, resistance of the intact rock to induced compressive stress, on the edge of the opening.

 

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Source: Sierra Metals, 2020

 

Figure 16-13: Stress Factor in Rock A, for Different Values of σc / σ1

 

Joint orientation adjustment = B

 

Factor B considers the influence of the joints on the stability of the stope faces. Many cases of structurally controlled failure occur along critical joints, which form a small angle with the free surface. The smaller the angle between the joint and the surface, the easier it is for the intact rock bridge, shown in Figure 16-14, to break due to blasting, stress, or another joint system. When the angle θ approaches 0, a slight increase in resistance occurs, since the blocks of jointed rock act as a beam. The influence of critical joints on the stability of the excavation surface is highest when the strike is parallel to the free surface and is smallest when the planes are perpendicular to each other. Factor B, which depends on the difference between the orientation of the critical joint and each face of the stope, can be determined from the diagram reproduced in Figure 16-15.

 

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Source: Sierra Metals, 2020

 

Figure 16-14: Orientation of the Critical Joint with Respect to the Excavation Surface (Potvin, 1988)

 

 

Source: Sierra Metals, 2020

 

Figure 16-15: Adjustment Factor B (Potvin, 1988)

 

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Gravitational Adjustment = C

 

Factor C is an adjustment for the effect of gravity. Failure can occur from the roof due to gravity-induced falls or from the pit walls due to landslides. Potvin (1988) suggested that both gravity-induced and shear-induced falls depend on the slope of the pit surface α. The factor C for these cases can be calculated from the relation C = 8 - 6 Cos α or determined from the diagram shown in Figure 16-16. This factor has a maximum value of 8 for vertical walls and a minimum value of 2 for horizontal chopping ceilings. The slip failure will depend on the inclination β of the critical joint, and the adjustment factor C is given in Figure 16-17.

 

 

Source: Sierra Metals, 2020

 

Stability graph according to Potvin (1988), modified by Nickson (1992): Stability graph showing areas of stable ground, sinking ground, and ground with support requirement. According to Potvin (1988), modified by Nickson (1992).

 

Figure 16-16: Gravity Adjustment Factor C, for Gravity Falls and Slumps (Potvin, 1988)

 

Using the values of N', the stability number, and the hydraulic radius RH, the pit stability can be estimated from Figure 16-18. This figure represents the open stope performance observed in various Canadian mines, which were tabulated and analyzed by Potvin (1988) and updated by Nickson (1992).

 

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Source: Sierra Metals, 2020

 

Figure 16-17: Gravity Adjustment Factor C, for Slip Failure Modes (Potvin, 1988)

 

 

Source: Sierra Metals, 2020

 

Figure 16-18: Stope Stability Graph for Large Excavations (Potvin, 1988)

 

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16.3.2Excavation Design for El Gallo Inferior

 

Excavation for longholes with a gap of 20.0 m (difference in sublevel elevations) x 40.0 m long as shown in Figure 16-19. For the calculation of the excavations and its stability, all the geomechanical parameters described above will be used.

 

σv = 8.92 Mpa

 

K = 0.60 (2.7 will be considered as the maximum value)

 

σH = 4.46 Mpa (It will be considered 24.08 Mpa, product of 2.7 = K)

 

σc = 170 Mpa, but 120 Mpa will be used (lithostatic average)

 

 

Source: Sierra Metals, 2020

 

Figure 16-19: El Gallo Inferior Cross-section

 

Table 16-2 to Table 16-6, and Figure 16-20, Figure 16-21 and Figure 16-22, show how some of the important geotechnical design criteria were determined.

 

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Table 16-2: Determination of Stope Stability – El Gallo Inferior 
     
Determination of stability of the Stope Gallo Inferior  
   
depth 350.00 M 
Specific weight 2.60 kn/m30.26 tn/m3
Vertical stress sv 8.92 Mpa 
k=kmin=kmax 0.60   
Horizontal stress 5.35 Mpa 
UCS 120.00 Mpa 
      

Hydraulic radius calculation            
             
  Height  Length  Area  Permiter  Radius Hydrauli 
Surface  m   m   m2   m   m 
North  20   20   400   80   5.00 
South  20   20   400   80   5.00 
Recumbent  20   40   800   120   6.70 
Hanging  20   40   800   120   6.70 
Roof  20   40   800   120   6.70 

 

Determine Q, using characteristic values of Gallo Inferior
 
   Q    
Roof - Skarn  11.28   28.20 
Wall - Ore  13.60   34.00 

Source: Sierra Metals, 2020

 

Table 16-3: Factor B and Factor C – El Gallo Inferior

 

Factor B Discontinuity Orientation  Correction Factor Wall 
  Difference Direction  Difference DiP  B    Manteo Wall  C 
Surface  m   m      Surface  m     
North  0.00   90.00   1.00  North  90   8.00 
South  0.00   90.00   1.00  South  90   8.00 
Recumbent  4.00   4.00   0.30  Recumbent  32   2.06 
Hanging  4.00   4.00   0.30  Hanging  32   2.06 
Roof  68.00   66.00   0.95  Roof  0   1.00 

Source: Sierra Metals, 2020

 

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Table 16-4: Estimation of Induced Stresses (Part 1) – El Gallo Inferior

 

 

Induced stresses on the roof of the excavation   
H20.0m  
A20.0m
H/A1.0 
sv8.92Mpa
sh124.08Mpa
sh1/sv2.7 
si/sv2.7 
si24.0786Mpa
UCS/si5.0 
A0.44 
    
Induced forces in backs (north-south wall) 
H25.0m 
A20.0m
H/A1.3 
sh124.08Mpa
sh224.08Mpa
sh2/sh11.0 
si/sh11.2 
si28.89Mpa
UCS/si4.2 
A0.34 

Source: Sierra Metals, 2020

 

Table 16-5: Estimation of Induced Stresses (Part 2) – El Gallo Inferior

 

Induced stresses in hanging and recumbent wall 
H20.0mAlong vertical 
A20.0m 
H/A1.0 
sv8.92Mpa
sh124.08Mpa
sh1/sv2.7 
sv/si-0.2 
si-1.78Mpa
UCS/si-67.3 
A0.1 
Tension zone
  
Induced forces in backs (north-south wall)
H25mAlong horizontal plane
A20m 
H/A1.3 
sh124.1Mpa
sh224.0786Mpa
sh2/sh11.0 
si/sh10.5 
si12.0393Mpa
UCS/si10 
A1.0 
Compression zone

Source: Sierra Metals, 2020

 

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Table 16-6: Stability Number – El Gallo Inferior

 

Surface RH (m)  A B C Est N Z Logit Value P % Est y/o Falla ELOS Caving
North 5 34 0.3 1 8 93 4.2 0.99 98% stable y 2% Unstable 3% Dil
South 5 28.2 0.3 1 8 77 4.1 0.98 98% stable y 2% Unstable 3% Dil
Recumbent 6.7 34 1 0.3 2.1 21 2.6 0.93 93% stable y 7% Unstable 3% Dil
Hanging 6.7 34 1 0.3 2.1 21 2.6 0.93 93% stable y 7% Unstable 3% Dil
Roof 6.7 28.2 0.4 1 1 12 2.2 0.9 80% stable y 20% Unstable 5% Dil

 

Source: Sierra Metals, 2020

 

 

Source: Sierra Metals, 2020

 

Figure 16-20: Hydraulic Radii – El Gallo Inferior

 

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Source: Sierra Metals, 2020

 

Figure 16-21: Maximum Spans - El Gallo Inferior

 

For the finite-element analysis (Rocscience Software), all the geomechanical parameters described above were used.

 

 

Source: Sierra Metals, 2020

 

Figure 16-22: Stability Factor of Excavations in El Gallo Inferior with Maximum Openings of 40 m (Stable, lower dilution) and 65 m (Unstable, higher dilution).

 

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Technical criteria were considered for the design of excavations in El Gallo Inferior. The results of geomechanical calculations are shown in Table 16-7.

 

Table 16-7: Geomechanical Calculation Results

 

Parameters Unid  Wall  Roof  observations
Dip          32   
      34   28  Andesite / Skarn roof
      21   12   
Critical HR  m   7.5   6.7  Potvin
Stope depth  m       350  Mine deepening
Density  t/m3   3.7   2.6   
óv  Mpa       8.92   
K          0.5  Maximum Tectonic Curve
óh  MPa       4.46  Maximum
Stope length for digging  m       45  Maximum
Open stope ceiling length  m       40  Maximum
Max height Sub-level body  m       20  Lower Dil (%) due to irregularity

Source: Sierra Metals, 2020

 

Estimation of the wall pillars to separate the work areas, the maximum opening of 45 m is obtained for the stopes.

 

 

Source: Sierra Metals, 2020

 

Figure 16-23: Column Stability

 

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From the graph in Figure 16-23, Wp / h = 0.50. As the height is known (h = 20.0 m), therefore Wp = 10.0 m. In summary, the pillar wall thickness between stopes (Wp) = 10.0 m. See Figure 16-24.

 

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Source: Sierra Metals, 2020

 

Figure 16-24: El Gallo Inferior – Plan Section

 

16.3.3Geomechanical Characterization of Bolivar West

 

Geomechanical mapping was carried out on a total of 5,864 m of exploration drill core (Cores de Bolívar W - 2017). This work enabled the geomechanical zoning (RMR) of the rocky massif for Bolivar West as shown in Figure 16-25.

 

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Source: Sierra Metals, 2020

 

Figure 16-25: Geomechanical Zoning of Bolivar West

 

RMR values in the range of 60 - 70 (Avg = 64) were obtained for the intact rocks in both upper and lower of the mineralized area as indicated in Figure 16-26 and Figure 16-27 from the logging of a total of 4,771.57 m of core.

 

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Source: Sierra Metals, 2020

Figure 16-26: Drilling Logging - Bolivar West

 

RMR values in the range of 40 - 60 (Avg = 58) were obtained for the mineralized zones, including the ceiling and floor contacts, as a result of logging 1,092.43 m of core.

 

 

Source: Sierra Metals, 2020

 

Figure 16-27: Drilling Logging – Bolivar West

 

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A preliminary geomechanical model was made which will be adjusted with more exploration and the development of Bolivar West.

 

 

Source: Sierra Metals, 2020

 

Figure 16-28: Geomechanical Model of Bolivar West Along the Mineralized Structure (RMR 20 - 40, poor quality)

 

The Bolivar West zone is divided into two sectors, the upper part being represented with red color (Figure 16-28) where the RMR values range 40 - 60 (regular) and the lower part represented with yellow color where the RMR values range 20 - 40 (poor).

 

16.3.4Excavation Design for Bolivar West

 

Excavation for longholes with a 9.0 m span with 7.0 m x 7.0 m pillars for 12.0 m stems and 8.0 m x 8.0 m for 15.0 m stems. For the calculation of the excavations and its stability, all the geomechanical parameters described above will be used.

 

σv = 6.88 Mpa

 

K = 0.5

 

σH = 3.44 Mpa

 

σc = 80 Mpa, but 70 Mpa (lithostatic average) will be used.

 

Table 16-8 to Table 16-12, and Figure 16-29 to Figure 16-32, show how some of the important geotechnical design criteria were determined.

 

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Table 16-8: Determination of Stope Stability – Bolivar West 

 

Source: Sierra Metals, 2020

 

Table 16-9: Factor B and Factor C – Bolivar West

 

Factor B Orientación de Discontinuidades Factor de Corección Pared
 Diferencia en Rumbo Diferencia en DIP B  Manteo Pared C
Surface    Surfacem 
North  0.80 North908.00
South  0.80 South908.00
Recumbent  1.00 Recumbent322.06
Hanging  0.30 Hanging322.06
Roof  0.80 Roof01.00

Source: Sierra Metals, 2020

 

Table 16-10: Estimation of Induced Stresses (Part 1) – Bolivar West

 

 

Source: Sierra Metals, 2020

 

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Table 16-11: Estimation of Induced Stresses (Part 2) – Bolivar West

 

 

Source: Sierra Metals, 2020

 

Table 16-12: Stability Number – Bolivar West

 

 

Surface RH (m)    A  B  C  Est N  Z  Logit Value P  % Est y/o Falla ELOS Caving
North  2.6   5   1   0.8   6.8   27   4.2   0.99  99% stable y 1% Unstable 1% Dil
South  2.6   5   1   0.8   6.8   27   4.2   0.99  99% stable y 1% Unstable 1% Dil
Recumbent  2.6   5   1   1   8   40   4.5   0.99  99% stable y 1% Unstable 1% Dil
Hanging  2.96   5   1   0.3   1.1   2   2   0.88  88% stable y 12% Unstable 1% Dil
Roof  2.3   5   0.3   0.8   1.9   2   2.5   0.92  92% stable y 8% Unstable 8% Dil

 

Source: Sierra Metals, 2020

 

 

Source: Sierra Metals, 2020

 

Figure 16-29: Hydraulic Radii – Bolivar West

 

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Figure 16-30: Stability and Failure Probabilities – Bolivar West

 

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Figure 16-31: Maximum Spans – Bolivar West

 

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Technical criteria were considered for the design of excavations in Bolivar West. The results of geomechanical calculations are shown in Table 16-13.

 

Table 16-13: Geomechanical Calculation Results

 

Parameters Unid Wall Roof observations
Dip     10  
   5 5 Andesite / Skarn roof
   2 2  
Critical HR m 2.3 2.6 Potvin
Stope depth m   270 Mine deepening
Density t/m3 3.7 2.6  
συ Mpa   6.88  
K     0.5 Maximum Tectonic Curve
σh MPa   3.44  
Stope length for digging m   9 Maximum
Open stope ceiling length m   9 Maximum
Max height Sub-level body m   12 - 15 Lower Dil (%) due to irregularity

 

Source: Sierra Metals, 2020

 

Comparison of empirical calculations with finite element modeling.

 

Excavation for longholes with a 9.0 m span with 7.0 m x 7.0 m pillars for 12.0 m height and 8.0 m x 8.0 m for 15.0 m height. For the calculation of the excavations and its stability, all the geomechanical parameters described above will be used.

 

 

Source: Sierra Metals, 2020

 

Figure 16-32: Stability Factor of the Excavations in Bolivar West with maximum openings of 9.0 m (stable and less dilution) and vertical pillars of 7.0 x7.0 m for heights of 12 m

 

The maximum openings for Bolivar West (upper area) are 9.0 m with vertical pillars of 7.0 m x 7.0 m for stope heights not greater than 12.0 m. For stope heights from 12.0 m to 15.0 m, the pillars should be 9.0 m x 9.0 m, restricting the openings to a maximum of 9.0 m.

 

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16.3.5Pillar Recovery Potential and Mining Method Alternatives

 

Pillar recovery operations are some of the most dangerous of all mining activities because of the potential for sudden rockfall and adjacent pillar collapse when removing the pillars. The strategic use of artificial active or passive ground support (e.g., bolting, timber sets, grout cans, tight backfilling, etc.) can reduce the rock fall risk. A slender vertical pillar is shown in Figure 16-33.

 

 

 

Source: SRK, 2019

 

Figure 16-33: Example of Slender Pillar

 

Although the Bolivar Mine has no immediate plans to recover any pillars, the future recovery of pillars remains a potential option that warrants further investigation and it is recommended that before any pillars are recovered, a formal stability analysis should be completed. Sierra Metals personnel have indicated their intention to develop methods for the safe extraction of pillars, as well as optimizing or modifying the current room and pillar mining method to improve the overall operation. These initiatives have the potential for increasing reserves and mine life in future resource updates. Recommendations are made below to initiate the study of pillar recovery.

 

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There is uncertainty in the tonnage and grade of material remaining in pillars. There are two primary causes for this uncertainty. First, while mined out areas are surveyed on a regular basis, some of the mined-out volume models are not updated with the latest information, or they are not in the correct position. This is especially true in El Gallo Superior where there is a low degree of confidence in the accuracy of the as-built models. The second cause of uncertainty is in the grade of the material left in pillars. Channel samples have been collected, but much of the information is stored in 2D AutoCAD® drawings and not in a usable form for reserve estimation purposes.

 

Sierra Metals completed a project to perform a whole mine survey using Light Detection and Ranging (LiDAR) technology in 2017. The site is planning to evaluate their existing channel samples database and, where necessary, collect new samples in order to increase the confidence in the grade estimation of the pillar material. Improving the mine as-built model and the channel samples database will allow the site to review, quantify, and prioritize pillar material for extraction.

 

Several potential mining options exist for pillar extraction. In the 2017 technical report, SRK recommended that a trade-off study be done to determine the feasibility of the pillar recovery scenarios listed below. At the time that this report was being prepared in 2020, the Bolivar Mine had not yet performed the trade-off study.

 

·Scenario 1: Pillar recovery with no backfill

 

oFocus on recovering pillars without additional support generated by backfilling mined out areas.

 

oRequirements:

 

Site visit and geotechnical characterization of existing pillars;

 

Pillar rating assessment;

 

Numerical modelling to characterize pillar stress conditions;

 

Pillar extraction sequence and impact on stability of other pillars; and

 

Assessment of pillar extraction.

 

·Scenario 2: Post pillar cut-and-fill with rock fill

 

oPotentially utilize rock fill to provide additional ground support for pillar recovery. May result in updated pillar dimensions for new areas.

 

oRequirements:

 

All as shown for Scenario 1; and

 

Empirical pillar design criteria.

 

Pillar design by mining levels including access (an update to the long-term mine layout);

 

Numerical simulation to assess impact of rock fill on pillar stability.

 

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Pillar optimization: grid location and orientation; and

 

Numerical simulation of optimized pillars with rock fill.

 

·Scenario 3: Post pillar cut-and-fill with compacted tailings

 

oWill result in confirmation or updates to pillar dimension recommendations, a backfill specification for the compacted tailings, and an updated mine layout and sequence;

 

oRequirements:

 

All under Scenario 1; and

 

Compacted tailings specifications;

 

Numerical simulation optimized pillars with tailing; and

 

Mine sequence evaluation.

 

·Scenario 4: Pillar-less cut-and-fill mining with cemented paste fill

 

oA new mining method for the operation where cut-and-fill mining occurs with ground support provided by cemented paste backfill;

 

·Requirements:

 

All under Scenario 1; and

 

Paste specifications;

 

Numerical modelling of support;

 

Trade-off for method implementation; and

 

Mine planning including new required infrastructure.

 

The mine does not produce enough waste rock to backfill all areas previously mined and recover the remaining pillars. The ability to utilize existing and future tailings as backfill may be an attractive option for both the handling of mine tailings and obtaining fill material for pillar recovery.

 

An additional pillar recovery scenario identified would not require backfill. The scenario is to develop a recovery sublevel in waste directly underneath the vertical pillars as shown in Figure 16-34. The proposed method would serve to undercut the remaining pillars with a recovery sublevel then to drill upholes into the pillars and blast to induce pillar caving. As pillars are recovered, all structural support would be removed, allowing the ground to collapse.

 

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Source: Sierra Metals, 2020

 

Figure 16-34: Proposed Pillar Recovery Program Scheme

 

Sierra Metals will carry out a study to determine the feasibility of recovering pillars with the options proposed by SRK, in addition to conducting geomechanical studies for the new and existing areas to change and / or improve the configuration of the mining method that allows us to use paste or other filling, and to not leave pillars during the operation.

 

16.3.6Hydrological

 

A hydrogeological review has not been undertaken by SRK. The mine is currently considered “dry” and has been historically dry with periodic water inflows into the portals due to seasonal rains. Currently, the mine does not require any large-scale dewatering.

 

16.4Proposed Mine Plan

 

16.4.1Proposed Mine Plan

 

The conceptual mine plan developed by Sierra Metals is based on the implementation of sub-level stoping throughout the Bolivar Mine. Sierra Metals evaluated the relative advantages of longhole stoping and determined that this method improved mine production in the Bolivar NW and Bolivar West (Lower Area) zones where the dip angle is greater than 30 degrees.

 

The longhole design was applied to the Bolivar NW mineralized structures. Each level has a vertical height of 20.0 m, a crown pillar of 5.0 m, and is accessed through a ramp to the central part of the level. A stope is then excavated to the floor elevation and initial cutting of the mineralized material begins into the stope and continues with longhole drilling. Mineralized material is extracted and every 45.0 m of advance in the gallery will leave 10.0 m of perpendicular pillar. Figure 16-35 shows a typical section through two stopes.

 

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Source: Sierra Metals, 2020

 

Figure 16-35: Typical Section Bolivar NW

 

In Bolivar West, the longhole method will be applied in mineralized bodies with dips greater than 30 degrees. In shallower mineralized bodies, room and pillar methods will be used. For the room and pillar stopes, the mineralized bodies will be extracted with 8.0 m high stopes using 4.0 m high initial drifts, and sill pillars will be left every 16.0 m as shown in Figure 16-36.

 

 

 

Source: Sierra Metals, 2020

 

Figure 16-36: Typical Room and Pillar Section Bolivar West (Lower Area)

 

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Drilling

 

·Drilling is conducted from the mineralized material drive using radial drilling with rod extensions.

 

Blasting

 

·ANFO (ammonium nitrate fuel oil), detonating cord, non-electric detonators, and electric delay detonators are used in blasting.

 

Loading and Hauling

 

·LHD equipment is used for the extraction, loading and hauling of mineralized material where it is loaded onto trucks for transport to the processing plant.

 

Ventilation

 

·Good ventilation conditions are required at the production level to extract diesel fumes and blasting gases. The conceptual ventilation modeling considers the entry of clean air into the mine through ramps that are distributed along the levels and are extracted through ramps.

 

Ground Support

 

·The longhole extraction method requires good rock mass conditions in hanging walls and zones of mineralization.

 

·Crosscut drives at the extraction level are supported with case hardened bolts or bolts and steel mesh.

 

·When developing in mineralized material, ground supports (bolts, screen, mesh) are used as required.

 

16.4.2Dilution and Recovery Factor

 

Sierra Metals estimated the historic unplanned dilution and mine recovery factors from longhole stoping at Bolivar mine (8% and 95% respectively). Sierra Metals applied these factors to the Indicated and Inferred Resources to determine potential mill feed for consideration in the mine plan.

 

Mill feed grades (including unplanned dilution and mine recovery) were reported with densities extracted from the SRK model to determine tonnages (dry tonnes). The SRK model considers an average density of 3.4 t/m3 for mineralized material and 2.7 t/m3 for waste.

 

Planned mining dilution is obtained directly from the optimization exercise and is not applied to the results of the software, unlike the mining recovery, which is applied to the results obtained from the optimization exercise.

 

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Dilution

 

External dilution (unplanned dilution) is derived from low grade or waste grade material outside the stope design boundaries. This dilution is the result of over-break arising from poor drilling and blasting techniques, adverse geological structures, and failure within zones of adjacent weak rock.

 

External dilution is expected, even under the best of circumstances, and an allowance was always made for it during the mine planning process.

 

An external dilution factor of 8% for sub-level stoping at Bolivar was provided by Sierra Metals and is based on historical production information. However, it is recommended that Bolivar develop a robust reconciliation program to better understand the amount of external dilution, and to evaluate mining practices that could be used to reduce dilution

 

Mining Recovery

 

Mining recovery can also be described as potential mineralized material loss during the mining process. The principal causes of mineralized material loss are:

 

·Mineralized material left behind in the form of permanent crown pillars, sill pillars, rib pillars and post pillars;

 

·Underbreak – the mineralized material is not broken during blasting and remains intact;

 

·Mineralized material loss within stope – the blasted material is left in the stope due to poor access for the LHD, entrapped by falls of waste rock from walls, left on the floor, or broken material that hangs up on flatter footwalls (footwalls with a shallower dip angle). When using modern software, the permanent pillars are removed from the mineable stope shapes prior to evaluating the in-situ Mineral Resources that may be converted to Mineral Reserves.

 

Underbreak and material loss within the stope are referred to as mining recovery. Given the selective nature of the sub-level stoping mining method with good LHD access, a mining recovery factor of 95% has been used.

 

Net Smelter Return (NSR)

 

The mineral deposits at Bolivar are polymetallic with copper, silver and gold metals contributing to the total value of mineralized material. A net smelter return (NSR) calculation was performed on each block model block considering the grade, metal price, metallurgical recovery and smelter terms. The smelter terms summarized for this report include the applicable concentrate treatment charges, refining charges, deductions, price participation, and penalty element payments.

 

Metal Prices and Exchange Rate: The metal price assumptions are shown in Table 16-14 and are based on long-term consensus pricing. The metal price assumptions have been derived from CIBC Global Mining Group Consensus Commodity prices dated September 30, 2020, as provided by Sierra Metals.

 

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Table 16-14: Unit Value Metal Price Assumptions

 

Cu (US$/lb)  Ag (US$/oz)  Au (US$/oz) 
 3.05   20.0   1,541 

Source: Sierra Metals, 2020

 

Metallurgical Recoveries: Metallurgical recoveries were provided by Sierra Metals and are based on projected recoveries resulting from an ongoing mill upgrade program. Table 16-15 summarizes the metallurgical recoveries used in calculating the NSR factors.

 

Table 16-15: Metallurgical Recoveries

 

Process Recovery Cu %  Ag %  Au % 
Copper Concentrate  88   78.7   62.43 

Source: Sierra Metals, 2020

 

Net Smelter Return (NSR) Calculation

 

The parameters used in the NSR calculation are summarized in Table 16-16. An NSR value was calculated for each cell in the block models using these parameters.

 

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Table 16-16: NSR Calculation Parameters

 

NSR
Parameter Unit Value 
Metal Prices
Cu Price US$/lb  3.05 
Ag Price US$/oz  20.0 
Au Price US$/oz  1,541 
Process Recoveries
Cu %  88 
Ag %  78.7 
Au %  62.43 
Concentrate Grades
Cu %  25 
Ag g/t  570 
Au g/t  6.8 
Moisture content %  8 
Freight, Insurance and Marketing
Transport losses %  0.5 
Transportation US$/wmt  42 
Port US$/wmt  9 
Load US$/wmt  40 
Marketing US$/dmt  10 
Insurances US$/wmt  10 
Total US$/dmt  102.92 
Smelter Terms
Cu payable %  96 
Ag payable %  90 
Au payable %  92 
Cu minimum deduction %  1 
Ag minimum deduction oz/t  0 
Au minimum deduction oz/t  0 
Treatment Charges/Refining Charges (TC/RC)
Cu Concentrate TC US$/dmt  69.00 
Cu Refining charge US$/lb Cu  0.069 
Cu Refining cost US$/t Cu  152.12 
Cu Price Participation US$/dmt  0 
Average Penalties US$/dmt  10 
Ag Refining charge US$/oz  0.35 
Au Refining charge US$/oz  6 
Total treatment cost US$/t Cu  727.68 
Total cost of sales US$/t Cu  879.80 
Net Smelter Return Factors
Cu US$/t/%  48.8171 
Ag US$/t/g/t  0.4444 
Au US$/t/g/t  28.1940 

Source: Sierra Metals, 2020

 

The resulting NSR equation coded into the block model was:

 

NSR = 48.8171 X Copper Grade + 0.4444 X Silver Grade + 28.1940 X Gold Grade

 

The cut-off value calculation used by Sierra Metals in the proposed mine plan is based on historical information and considers reducing production costs associated with increased production (Table 16-17). Conceptual economic envelopes vary according to direct and indirect mining costs, processing costs, concentrate shipment, and general and administration (G&A) costs.

 

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Non-isolated mining blocks with an average NSR value above the economic cut-off value ($20.35/t) and with existing access are classified as economic and included in the conceptually economic envelope. Mining blocks that do not meet the criteria described above are classified as waste. A cost breakdown used for the cut-off calculation, including mining, processing plant and G&A costs, is given in Table 16-17

 

Table 16-17: NSR Calculation Parameters – Site Operating Costs Per Tonne

 

Cost ElementCost per Tonne
Mine Cost ($/t)$ 12.27
Plant Cost ($/t)$ 6.22
G & A$1.87
Economic Cut-Off ($/t)$ 20.35

Source: Sierra Metals, 2020

 

Stope Evaluation

 

Sierra Metals utilized design-based resource estimation of the stopes using geological block models and Deswik ™ software. The SO Stope Optimization tool (Deswik.SO) was used for production stopes and for sequencing production and mine development, Deswik.Sched was used. Table 16-18 shows the parameters for sub-level stoping.

 

Table 16-18: Parameters for Sub-Level Stoping Mining Method

 

Mining Method ParameterSub-Level StopingUnit
Minimum Stope Length (m)3m
Stope Height (m)According to each OBm
Stope Width (m)According to each OBm
Pillar Width (m)According to each OBm
Minimum Stope Dip (°)40°
Maximum Stope Dip (°)90°
Span (m)According to each OBm
Stope OrientationPerpendicular to mineralized zones°
Marginal Cut Off20.35$/t

Source: Sierra Metals, 2020

 

16.5Mineable Inventory

 

The mineable inventory provides the basis for the various life of mine (LOM) production scenarios described in this PEA report which range from 5,000 tpd (base case) up to 12,000 tpd. The mineable inventory consists of the Mineral Resource Estimate (Table 16-19) and tonnes and grade for each stope shape were further processed in spreadsheets to apply the mining recovery (95%) and external dilution (8% at 0 grade) as shown in Table 16-20.

 

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Table 16-19: Resource Report

 

 

December 2019 Resource Report
 
ClassificationDomain CodeNameTonnes (Mt)Grade Cu (%)Grade Ag (gpt)Grade Au (gpt)
 110 8,157,416.400.6511.780.18
 120El Gallo104,025.601.2019.070.29
 130 1073066.41.2029.340.13
 150 170,517.601.3526.890.10
 210Chimenea 1356,240.001.3226.390.02
Indicated220Chimenea 2776,755.200.7116.720.02
 340Bolivar NW4,403,421.300.687.850.48
 430Skarn346,302.000.7215.830.07
 440 919,922.400.7818.400.12
 510 662,475.900.7111.130.00
 520Bolivar W375,760.200.8624.030.01
 530 2,005,747.201.1231.320.01
 Total 19,351,650.200.7715.130.21
 
ClassificationDomain Code Tonnes (Mt)Grade Cu (%)Grade Ag (gpt)Grade Au (gpt)
 110 6,750,946.800.659.930.17
 140 60,314.400.598.890.04
 160El Gallo198,075.600.6314.340.15
 220Chimenea 236,444.800.519.060.00
 310 1,301,488.350.7730.150.44
 320 672,646.500.7825.950.38
 330 46,830.300.6218.590.42
 340Bolivar NW2,139,465.750.547.910.34
 350 192,085.650.8719.870.20
 360 257,031.900.7414.490.05
 370 1,531,272.150.587.280.38
Inferred380 42,203.850.589.820.14
 390 3,053,908.951.0813.970.04
 410 483,894.000.5318.550.19
 420Skarn201,650.400.5523.090.23
 430 184,514.402.1523.760.06
 440 194,274.001.8428.170.09
 530 512,2181.2747.250.01
 540 1,380,8620.8410.350.40
 550 757,9511.0022.420.01
 610Bolivar W129,0820.8422.660.08
 620 368,0860.669.280.18
 630 441,8051.2620.800.24
 640 450,1600.644.470.20
 Total 21,387,212.350.7814.190.21

Source: Sierra Metals, 2020

 

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Table 16-20: Mineable Inventory

 

Report of Resources Affected by Dilution / Recovery
 
ClassificationDomain CodeNameTonnes (Mt)Grade Cu (%)Grade Ag (gpt)Grade Au (gpt)
 110 8,369,5090.6010.910.17
 120El Gallo106,7301.1217.650.27
 130 1,100,9661.1227.170.12
 150 174,9511.2524.900.10
 210Chimenea 1365,5021.2224.430.02
Indicated220Chimenea 2796,9510.6615.480.02
 340Bolivar NW4,517,9100.637.270.45
 430Skarn355,3060.6714.660.07
 440 943,8400.7217.040.11
 510 679,7000.6610.310.00
 520Bolivar W385,5300.7922.250.01
 530 2,057,8971.0329.000.01
 Total 19,854,7930.7114.010.19
 
ClassificationDomain Code Tonnes (Mt)Grade Cu (%)Grade Ag (gpt)Grade Au (gpt)
 110 6,926,471.420.609.190.16
 140 61,882.570.548.230.03
 160El Gallo203,225.570.5813.280.14
 220Chimenea 237,392.360.488.390.00
 310 1,335,327.050.7127.910.41
 320 690,135.310.7224.030.35
 330 48,047.890.5817.220.39
 340 2,195,091.860.507.320.32
 350Bolivar NW197,079.880.8118.400.19
 360 263,714.730.6813.420.04
 370 1,571,085.230.536.740.35
Inferred380 43,301.150.539.090.13
 390 3,133,310.581.0012.930.04
 410 496,475.240.4917.180.18
 420 206,893.310.5021.380.21
 430Skarn189,311.771.9922.000.05
 440 199,325.121.7126.090.08
 530 525,535.721.1743.750.01
 540 1,416,764.920.789.580.37
 550 777,657.930.9220.760.01
 610Bolivar W132,437.720.7820.980.07
 620 377,656.650.618.590.16
 630 453,291.721.1719.260.22
 640 461,864.160.604.140.18
 Total 21,943,279.870.7213.140.20
 
 

Modifying Factors

Dilution8.0Recovery95.00

Source: Sierra Metals, 2020

 

The combined total for the mineable inventory is the sum of the mineralized material in Table 16-20 which is approximately 41.8 M tonnes.

 

16.6Mine Design

 

The mine design is formulated to integrate the main mining areas. Currently there are two mine openings for access to trucks, one in the Bolivar Mine accessing the Bolivar West and Bolivar NW areas and a second in the Fierro Mine accessing the El Gallo, Skarn, and Chimeneas areas.

 

The main dimensions are:

 

·Ramps will have a cross-section of 5.0 m x 5.0 m (width x height);

 

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·Access to mining areas will have cross-sectional dimensions of 4.0 m x 4.0 m (width x height);

 

·The ventilation raisebore holes have a diameter of 3.0 m;

 

·Maximum ramp gradient of 12%;

 

·Truck loading station and drains will be installed in the main accesses; and

 

·In order to improve the productivity of the haulage equipment, mineralized material passes (ø 3 m) will be built and electro-hydraulic hoppers will be installed to load mineralized material directly into the trucks.

 

Sierra Metals estimates that 163,813 m of combined horizontal and vertical development meters are required to achieve the mine plans proposed in this PEA (Table 16-21 and Figure 16-37).

 

Table 16-21: Bolivar Mine – Development Meters in the LOM Plan

 

Development TypeMeters
Horizontal159,225
Vertical4,588
Total163,813

Source: Sierra Metals, 2020

 

 

Source: Sierra Metals, 2020

 

Figure 16-37: Mine Design and Mineralized Areas

 

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16.7Mine Production Schedule (Base Case)

 

Sierra Metals prepared LOM production and development plans based on production rates ranging from a base case of 5,000 tpd to 15,000 tpd (Table 16-22) and these production schedules are financially evaluated in Section 22.

 

Table 16-22: LOM Production Rates

 

Tonnes/Day (tpd)Tonnes/Year (t/y)Comments
5,000 (base case)1.8 MConstant production rate through LOM
7,0002.5 MIncreases from 5,000 tpd to 7,000 tpd in 2024
10,0003.6 MReaches 10,000 tpd in 2024
10,0003.6 MReaches 10,000 tpd in 2026
12,0004.3 MReaches 12,000 tpd in 2024
12,0004.3 MReaches 12,000 tpd in 2026
15,0005.4 MReaches 15,000 tpd in 2024

 

Source: Sierra Metals, 2020

 

The base case LOM production and development schedule generated for the Bolivar mineable inventory based on 5,000 tpd (1.8 M t/y) is shown in Table 16-23, Figure 16-38, Figure 16-39 and Table 16-24.

 

The start date of this schedule is January 2020 as this is the month immediately following the cut-off date of the mined-out data used in this report. Typical mining rates of 5,000 tpd mineralized material and 500 tpd waste were applied as these are the rates the mine has been reportedly operating at in early 2020. The mine has made significant improvements to the on-site management team and increased its engineering resources in 2019, and the mine has greatly improved the mechanical availability of its underground mining fleet which has allowed for increases in daily production.

 

LOM production and development tables and figures for the production rates greater than the base case (shown in Table 16-22) are provided in the following pages (Table 16-25 to Table 16-36, and Figure 16-40 to Figure 16-51.

 

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Table 16-23: LOM Production Schedule for 5,000 Tonnes/Day

 

Production MineAños202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043Total
Tonnes Oret1,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,0001,800,000398,07341,798,073
Tonnes Wastet376,101458,721431,383376,101376,101376,101376,101376,101376,101376,101376,101376,101376,101376,101376,101376,101376,101376,101376,101376,101376,101320,818293,48183,1758,733,487
Tonnes Totalt2,176,1012,258,7212,231,3832,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,176,1012,120,8182,093,481481,24850,531,560
Cu%0.880.880.880.820.720.700.700.700.700.700.700.700.700.700.700.700.700.700.700.700.670.620.620.620.72
Agg/t20.7620.5820.0019.7515.3912.3312.3312.3312.3312.3312.3312.3312.3312.3312.3312.3312.3312.3312.3312.3311.559.899.899.8913.56
Aug/t0.110.100.110.080.150.210.210.210.210.210.210.210.210.210.210.210.210.210.210.210.220.250.250.250.19
Cu eq%1.131.131.131.040.950.930.930.930.930.930.930.930.930.930.930.930.930.930.930.930.910.850.850.850.95
TPDtpd5,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0001,106 

 

Source: Sierra Metals, 2020

 

   
   
Source: Sierra Metals, 2020 Source: Sierra Metals, 2020
   
Figure 16-38: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year Figure 16-39: LOM Production – Tonnes per Year and Tonnes Per Day

 

Table 16-24: LOM Development Schedule for 5,000 Tonnes/Day

 

Total Meters 

 

task DevelopmentAños202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043Total
Horizontalm6,8578,3577,8576,8576,8576,8576,8576,8576,8576,8576,8576,8576,8576,8576,8576,8576,8576,8576,8576,8576,8575,8575,3571,516159,225
Verticalm1982982981981981981981981981981981981981981981981981981981981989898444,588
Totalm7,0548,6548,1547,0547,0547,0547,0547,0547,0547,0547,0547,0547,0547,0547,0547,0547,0547,0547,0547,0547,0545,9545,4541,560163,813

 

Source: Sierra Metals, 2020

 

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Table 16-25: LOM Production Schedule for 7,000 Tonnes/Day (7,000 tpd in 2024)

 

Production MineAños202020212022202320242025202620272028202920302031203220332034203520362037Total
Tonnes Oret1,800,0001,800,0001,800,0001,800,0002,520,0002,520,0002,520,0002,520,0002,520,0002,520,0002,520,0002,520,0002,520,0002,520,0002,520,0002,520,0002,520,0001,838,07341,798,073
Tonnes Wastet376,101458,721486,301655,915526,541526,541526,541526,541526,541526,541526,541526,541526,541526,541526,541525,933301,462137,1078,733,487
Tonnes Totalt2,176,1012,258,7212,286,3012,455,9153,046,5413,046,5413,046,5413,046,5413,046,5413,046,5413,046,5413,046,5413,046,5413,046,5413,046,5413,045,9332,821,4621,975,18050,531,560
Cu%0.880.880.880.820.710.700.700.700.700.700.700.700.700.700.700.680.630.620.72
Agg/t20.7620.5820.0019.7514.5212.3312.3312.3312.3312.3312.3312.3312.3312.3312.3311.8410.129.9413.56
Aug/t0.110.100.110.080.170.210.210.210.210.210.210.210.210.210.210.200.250.280.19
Cu eq%1.131.131.131.040.940.930.930.930.930.930.930.930.930.930.930.910.860.870.95
TPDtpd5,0005,0005,0005,0007,0007,0007,0007,0007,0007,0007,0007,0007,0007,0007,0007,0007,0005,106 

 

Source: Sierra Metals, 2020

 

 

Source: Sierra Metals, 2020

Source: Sierra Metals, 2020

  
Figure 16-40: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by YearFigure 16-41: LOM Production – Tonnes per Year and Tonnes Per Day

 

Table 16-26: LOM Development Schedule for 7,000 Tonnes/Day (7,000 tpd in 2024)

 

Total Meters 

 

Tak DevelopmentAños202020212022202320242025202620272028202920302031203220332034203520362037Total
Horizontalm6,8578,3578,85711,9579,6009,6009,6009,6009,6009,6009,6009,6009,6009,6009,6009,6005,5002,502159,225
Verticalm198298338358277277277277277277277277277277277177127524,588
Totalm7,0548,6549,19412,3149,8769,8769,8769,8769,8769,8769,8769,8769,8769,8769,8769,7765,6262,554163,813

 

Source: Sierra Metals, 2020

 

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Table 16-27: LOM Production Schedule for 10,000 Tonnes/Day (10,000 tpd in 2024)

 

Production MineAños20202021202220232024202520262027202820292030203120322033Total
Tonnes Oret1,800,0001,800,0001,800,0001,800,0003,600,0003,600,0003,600,0003,600,0003,600,0003,600,0003,600,0003,600,0003,600,0002,198,07341,798,073
Tonnes Wastet376,101458,721595,712804,084752,201752,201752,201752,201752,201752,201752,201751,290324,521157,6528,733,487
Tonnes Totalt2,176,1012,258,7212,395,7122,604,0844,352,2014,352,2014,352,2014,352,2014,352,2014,352,2014,352,2014,351,2903,924,5212,355,72550,531,561
Cu%0.880.880.880.820.710.700.700.700.700.700.700.700.640.620.72
Agg/t20.7620.5820.0019.7513.8612.3312.3312.3312.3312.3312.3312.3310.729.8913.56
Aug/t0.110.100.110.080.180.210.210.210.210.210.210.210.240.250.19
Cu eq%1.131.131.131.040.940.930.930.930.930.930.930.930.880.850.95
TPDtpd5,0005,0005,0005,00010,00010,00010,00010,00010,00010,00010,00010,00010,0006,106 

 

Source: Sierra Metals, 2020

 

   

Source: Sierra Metals, 2020

 

Source: Sierra Metals, 2020

Figure 16-42: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year Figure 16-43: LOM Production – Tonnes per Year and Tonnes Per Day

 

Table 16-28: LOM Development Schedule for 10,000 Tonnes/Day (10,000 tpd in 2024)

 

Total Meters 

 

Tak DevelopmentAños202020212022202320242025202620272028202920302031203220332034203520362037Total
Horizontalm6,8578,3578,85711,9579,6009,6009,6009,6009,6009,6009,6009,6009,6009,6009,6009,6005,5002,502159,225
Verticalm198298338358277277277277277277277277277277277177127524,588
Totalm7,0548,6549,19412,3149,8769,8769,8769,8769,8769,8769,8769,8769,8769,8769,8769,7765,6262,554163,813

  

Source: Sierra Metals,2020

 

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Table 16-29: LOM Production Schedule for 10,000 Tonnes/Day (10,000 tpd in 2026)

 

Production MineAños202020212022202320242025202620272028202920302031203220332034Total
Tonnes Oret1,800,0001,800,0001,800,0001,800,0002,520,0002,520,0003,600,0003,600,0003,600,0003,600,0003,600,0003,600,0003,600,0003,600,000758,07341,798,073
Tonnes Wastet376,101458,721486,301655,915663,957773,732752,201752,201752,201752,201751,897751,229450,031280,47776,3228,733,487
Tonnes Totalt2,176,1012,258,7212,286,3012,455,9153,183,9573,293,7324,352,2014,352,2014,352,2014,352,2014,351,8974,351,2294,050,0313,880,477834,39550,531,561
Cu%0.880.880.880.820.710.700.700.700.700.700.700.700.690.620.620.72
Agg/t20.7620.5820.0019.7514.5212.3312.3312.3312.3312.3312.3312.3311.9910.0210.1513.56
Aug/t0.110.100.110.080.170.210.210.210.210.210.210.210.200.250.310.19
Cu eq%1.131.131.131.040.940.930.930.930.930.930.930.930.910.860.890.95
TPDtpd5,0005,0005,0005,0007,0007,00010,00010,00010,00010,00010,00010,00010,00010,0002,106 

 Source: Sierra Metals, 2020

 

   

Source: Sierra Metals, 2020

 

Source: Sierra Metals, 2020

Figure 16-44: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year Figure 16-45: LOM Production – Tonnes per Year and Tonnes Per Day

 

Table 16-30: LOM Development Schedule for 10,000 Tonnes/Day (10,000 tpd in 2026)

 

Total Meters 

 

Task DevelopmentAños2020202120222023202420252026202720282029203020312032Total
Horizontalm6,8578,35710,85716,10716,45716,45716,45716,45716,45716,45712,4575,326526159,225
Verticalm198298348448474474474474474474324113154,588
Totalm7,0548,65411,20416,55416,93116,93116,93116,93116,93116,93112,7815,439541163,813

 

Source: Sierra Metals, 2020

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Table 16-31: LOM Production Schedule for 12,000 Tonnes/Day (12,000 tpd in 2024)

 

Production MineAños 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Total
Tonnes Oret 1,800,000 1,800,000 1,800,000 1,800,000 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 4,220,000 138,073 41,798,073
Tonnes Wastet 376,101 458,721 595,712 883,363 902,641 902,641 902,641 902,641 902,641 902,641 683,030 291,864 28,850 8,733,487
Tonnes Totalt 2,176,101 2,258,721 2,395,712 2,683,363 5,222,641 5,222,641 5,222,641 5,222,641 5,222,641 5,222,641 5,003,030 4,511,864 166,923 50,531,561
Cu% 0.88 0.88 0.88 0.82 0.71 0.70 0.70 0.70 0.70 0.71 0.68 0.62 0.62 0.72
Agg/t 20.76 20.58 20.00 19.75 13.60 12.33 12.33 12.33 12.33 12.56 11.79 10.07 9.89 13.56
Aug/t 0.11 0.10 0.11 0.08 0.19 0.21 0.21 0.21 0.21 0.22 0.22 0.24 0.25 0.19
Cu eq% 1.13 1.13 1.13 1.04 0.94 0.93 0.93 0.93 0.93 0.95 0.92 0.85 0.85 0.95
TPDtpd 5,000 5,000 5,000 5,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 11,722 384  

 

Source: Sierra Metals, 2020

 

   

Source: Sierra Metals, 2020

 

Source: Sierra Metals, 2020

   
Figure 16-46: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year Figure 16-47: LOM Production – Tonnes per Year and Tonnes Per Day

 

Table 16-32: LOM Development Schedule for 12,000 Tonnes/Day (12,000 tpd in 2024)

 

Total Meters 

 

Task DevelopmentAños 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Total
Horizontalm 6,857 8,357 8,857 11,957 12,600 15,600 16,457 16,457 16,457 16,457 12,657 9,157 7,359 159,225
Verticalm 198 298 338 358 427 497 474 474 474 374 259 259 159 4,588
Totalm 7,054 8,654 9,194 12,314 13,026 16,096 16,931 16,931 16,931 16,831 12,916 9,416 7,518 163,813

 

Source: Sierra Metals, 2020

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Table 16-33: LOM Production Schedule for 12,000 Tonnes/Day (12,000 tpd in 2026)

 

Production MineAños 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Total
Tonnes Oret 1,800,000 1,800,000 1,800,000 1,800,000 2,520,000 2,520,000 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 3,638,073 41,798,073
Tonnes Wastet 376,101 458,721 486,301 655,915 691,477 855,927 902,641 902,641 902,641 902,034 693,570 502,208 403,311 8,733,487
Tonnes Totalt 2,176,101 2,258,721 2,286,301 2,455,915 3,211,477 3,375,927 5,222,641 5,222,641 5,222,641 5,222,034 5,013,570 4,822,208 4,041,384 50,531,560
Cu% 0.88 0.88 0.88 0.82 0.71 0.70 0.70 0.70 0.70 0.70 0.70 0.68 0.62 0.72
Agg/t 20.76 20.58 20.00 19.75 14.52 12.33 12.33 12.33 12.33 12.33 12.33 11.66 10.05 13.56
Aug/t 0.11 0.10 0.11 0.08 0.17 0.21 0.21 0.21 0.21 0.21 0.21 0.21 0.26 0.19
Cu eq% 1.13 1.13 1.13 1.04 0.94 0.93 0.93 0.93 0.93 0.93 0.93 0.90 0.87 0.95
TPDtpd 5,000 5,000 5,000 5,000 7,000 7,000 12,000 12,000 12,000 12,000 12,000 12,000 10,106  

 

Source: Sierra Metals, 2020

 

   

Source: Sierra Metals, 2020

 

Source: Sierra Metals, 2020

   
Figure 16-48: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year Figure 16-49: LOM Production – Tonnes per Year and Tonnes Per Day

 

Table 16-34: LOM Development Schedule for 12,000 Tonnes/Day (12,000 tpd in 2026)

 

Total Meters 

 

Task DevelopmentAños 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Total
Horizontalm 6,857 8,357 8,857 11,957 12,600 15,600 16,457 16,457 16,457 16,457 12,657 9,157 7,359 159,225
Verticalm 198 298 338 358 427 497 474 474 474 374 259 259 159 4,588
Totalm 7,054 8,654 9,194 12,314 13,026 16,096 16,931 16,931 16,931 16,831 12,916 9,416 7,518 163,813

 

Source: Sierra Metals, 2020

 

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Table 16-35: LOM Production Schedule for 15,000 Tonnes/Day (15,000 tpd in 2024)

 

Production MineAños 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total
Tonnes Oret 1,800,000 1,800,000 1,800,000 1,800,000 5,400,000 5,400,000 5,400,000 5,400,000 5,400,000 5,400,000 2,198,073 41,798,073
Tonnes Wastet 376,101 458,721 705,062 1,034,327 1,128,302 1,128,302 1,128,302 1,128,302 799,037 579,729 267,306 8,733,487
Tonnes Totalt 2,176,101 2,258,721 2,505,062 2,834,327 6,528,302 6,528,302 6,528,302 6,528,302 6,199,037 5,979,729 2,465,379 50,531,560
Cu% 0.88 0.88 0.88 0.82 0.70 0.70 0.70 0.70 0.70 0.66 0.62 0.72
Agg/t 20.76 20.58 20.00 19.75 13.35 12.33 12.33 12.33 12.33 11.25 9.89 13.56
Aug/t 0.11 0.10 0.11 0.08 0.19 0.21 0.21 0.21 0.21 0.23 0.25 0.19
Cu eq% 1.13 1.13 1.13 1.04 0.94 0.93 0.93 0.93 0.93 0.90 0.85 0.95
TPDtpd 5,000 5,000 5,000 5,000 15,000 15,000 15,000 15,000 15,000 15,000 6,106  

 

Source: Sierra Metals, 2020

 

   

Source: Sierra Metals, 2020

 

Source: Sierra Metals, 2020

   
Figure 16-50: LOM Production – Tonnes, Cu Grade and Cu Equivalent Grade by Year Figure 16-51: LOM Production – Tonnes per Year and Tonnes Per Day

 

Table 16-36: LOM Development Schedule for 15,000 Tonnes/Day (15,000 tpd in 2024)

 

Total Meters 

 

Task DevelopmentAños 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total
Horizontalm 6,857 8,357 8,357 11,957 12,600 15,600 16,457 16,457 16,457 16,457 12,657 159,225
Verticalm 198 298 348 548 593 593 593 593 393 293 141 4,588
Totalm 7,054 8,654 13,204 19,404 21,163 21,163 21,163 21,163 14,963 10,863 5,015 163,813

 

Source: Sierra Metals, 2020

 

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16.8Waste Storage

 

Currently, development waste material is hauled by LHD and placed into historical workings resulting in approximately 30% to 40% fill factor. Consideration should be given to investing in equipment to pack the waste rock into the stope to improve the fill factor and to increase the amount of underground storage capacity. Historically, approximately 90% of waste material has been stored underground in old mine workings with the remainder sent to surface for use in construction.

 

For the early stage of development in Bolivar NW and Bolivar West, waste material will be hauled to surface and then hauled for placement underground in El Gallo Inferior and other historical mined out areas. Initial review indicates that the development waste material from these areas can be stored underground in historical mine openings. Further analysis of the initial development waste handling and storage strategy is required. If underground storage in historical mine openings is not a viable solution, due to lack of space or operationally difficult to transfer waste material from the new mining areas to the historical mining areas, then an analysis of the surface storage locations will be required.

 

16.9Major Mining Equipment

 

The major underground mining equipment currently used at Bolivar Mine is listed in Table 16-37.

 

Table 16-37: Current List of Major Underground Mining Equipment at Bolivar

 

EQUIPMENT MINE OPERATION (August 2020)Quantity
JBL01Jumbo Raptor 441
JBL02Jumbo Raptor 441
JBF07Jumbo Development Troidon 66-Xp1
JBF09Jumbo Development Troidon 66-Xp1
JBF10Jumbo Development Troidon 66-Xp1
JBA01Jumbo rock Bolting Bolter 881
Total Jumbo Drill6
ST005Scooptram ST141
ST006Scooptram ST141
ST008Scooptram ST141
ST009CAT R1700G1
Total Scooptram4
CM015Dumper MT-431 B1
 Trucks 14 m39
Total Trucks10
AM001Scalers SV-111
Total Scaling equipment1
CF001Wheel Loader 980 H1
Total Wheel Loaders1
AN001ANFO Loader AL600R1
Total ANFO Loader equipment1

 

Source: Sierra Metals, 2020

 

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Bolivar Mine also has surface equipment to haul mineralized material to the Piedras Verdes processing plant. This equipment consists of 18-t average capacity trucks (e.g., FMX 440 Volvo, 30-t nominal capacity).

 

Equipment performance was calculated and validated using actual operational performance data provided by Bolivar Mine. The equipment performance was used to estimate the quantity of equipment required for the production and development plans considered in this PEA. The maximum number of equipment required to meet the production plans is listed by year and shown in Table 16-38 to Table 16-44. The number of underground personnel required to operate the equipment is also listed for reference.

 

Table 16-38: Main Planned Underground Mining Equipment (5,000 tpd)

 

Equipment2020202120222023/2040204120422043
Jumbo3333332
Raptor3333332
Scoop4444442
Trucks9999993
Personal13413913813413112930

 

Source: Sierra Metals, 2020

 

Table 16-39: Main Planned Underground Mining Equipment (7,000 tpd - 2024)

 

Equipment20202021202220232024/2034203520362037
Jumbo33344432
Raptor333