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SMTS Sierra Metals

Filed: 8 Dec 20, 4:56pm

Exhibit 99.1

 

 

 

Preliminary Economic Assessment, Yauricocha Mine, Yauyos Province, Peru

 
 

Effective Date: June 30, 2020

Report Date: November 19, 2020

 

Prepared for

 

Sierra Metals Inc.

 

Signed by Qualified Persons:

 

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

Andre Deiss, BSc. (Hons), Pr. Sci. Nat., 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)

 

  
 

Prepared by

 

SRK Consulting (Canada) Inc.

2US043.007

November 2020

 

 

 

 

 

 

Preliminary Economic Assessment, Yauricocha Mine, Yauyos Province, Peru

 

 

November 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, BC V6E 3X2

Canada

 
 

Tel:        +51 1 630 3100

Web:     www.sierrametals.com

Tel:       +1 604 681 4196

Web:    www.srk.com

 
 

Project No:    2US043.007

 

File Name:    Yauricocha_TR_PEA_2US043.007_20201119_rev47.docx

 
 

Copyright © SRK Consulting (Canada) Inc., 2020

 

 

 
    

 

 

 

 

SRK Consulting 
2US043.007 Sierra Metals Inc. 
Yauricocha_Technical_Report_PEA Page ii

 

Important Notice

 

This 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 November 2020

 

SRK Consulting 
2US043.007 Sierra Metals Inc. 
Yauricocha_Technical_Report_PEA Page iii

 

1Executive Summary

 

This PEA report was prepared as a Canadian National Instrument 43-101 (NI 43-101) Technical Report (Technical Report) for an updated Mineral Resource estimate prepared for Sierra Metals Inc. (Sierra), on the Yauricocha Mine (Yauricocha or Project), which is located in the eastern part of the Department of Lima, Peru. Sierra 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.

 

Sierra Metals prepared life of mine (LOM) production and development plans based on four production rate options ranging from the base case of 3,780 tonnes per day (tpd) to 7,500 tpd (Table 1-1). The specific details for these production options are described in Section 16, operating and capital cost information is provided in Section 21, and an economic analysis of each production rate option is provided in Section 22.

 

Table 1-1: LOM Production Rates

 

Tonnes/DayTonnes/YearComments
3,780 tpd (base case)1.3 MConstant production rate through LOM *
5,500 tpd2.0 MIncreases from 3,780 tpd to 5,500 tpd in 2024
6,500 tpd2.4 MReaches 6,500 tpd in 2024
7,500 tpd2.8 MReaches 7,500 tpd in 2024

Source: Sierra Metals, Redco, 2020

Note: * *3780 tpd used as the base case assumes that permits will be received to reach that level, which is in the initial process.

 

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 as allowed for by the Canadian Securities Administrators (CSA) NI 43-101 in PEA studies. The PEA is preliminary in nature; it 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, and there is no certainty that the results of the 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’ are used here as defined under NI 43-101 Standards of Disclosure for Mineral Projects. The QPs responsible for this report are listed in Sections 2.2 and 2.3. Additionally, Sierra is a producing issuer as defined in the NI 43-101 guidelines.

 

1.1Property Description and Ownership

 

The Yauricocha Mine is in the Alis district, Yauyos province, Department of Lima, approximately 12 km west of the Continental Divide and 60 km south of the Pachacayo railway station. The active mining area within the mineral concessions is located at coordinates 421,500 m east by 8,638,300 m north on UTM Zone 18L on the South American 1969 Datum, or latitude and longitude of 12.3105⁰ S and 75.7219⁰ W. It is geographically in the high zone of the eastern Andean Cordillera, and within one of the major sources of the River Cañete which discharges into the Pacific Ocean. The mine is at an average altitude of 4,600 masl (Gustavson, 2015).

 

CK November 2020

 

 

SRK Consulting 
2US043.007 Sierra Metals Inc. 
Yauricocha_Technical_Report_PEA Page iv

 

The current operation is an underground polymetallic sulfide and oxide operation, providing material for the nearby Chumpe process facility. The mine has been operating continuously under Sociedad Minera Corona S.A. (Minera Corona) ownership since 2002 and has operated historically since 1948. Sierra purchased 82% of Minera Corona in 2011.

 

1.2Geology and Mineralization

 

The Yauricocha Mine features several mineralized bodies, which have been emplaced along structural trends, with the mineralization itself related to replacement of limestones by hydrothermal fluids related to nearby intrusions. The mineralization varies widely in morphology, from large, relatively wide, tabular manto-style deposits to narrow, sub-vertical chimneys. The mineralization features economic grades of Ag, Cu, Pb and Zn, with local Au to a lesser degree. The majority of the deposits are related to the regional high-angle NW-trending Yauricocha fault or the NE-trending and less well-defined Cachi-Cachi structural trend. The mineralization generally presents as polymetallic sulfides but is locally oxidized to significant depths or related to more Cu-rich bodies.

 

1.3Status of Exploration, Development and Operations

 

The mine is concurrently undertaking exploration, development and operations. Exploration is ongoing near the mine and is supported predominantly by drilling and exploration drifting. The mine is also producing several types of metal concentrates from the underground mine areas.

 

1.4Mineral Processing and Metallurgical Testing

 

Yauricocha is consistently producing commercial quality copper concentrate, zinc concentrate, and lead concentrate. The lead concentrate produced in the oxide plant, because of its small tonnage and/or lower grades, is blended in the plant with the concentrate produced from the polymetallic circuit to generate a lead concentrate of commercial quality.

 

The plant has been subject to continuous improvements in recent years to improve recovery and deportment of metals. Recent improvements to the processing facilities include:

 

·Addition of one OK-50 flotation cell to increase Cu-Pb bulk flotation stage;

 

·Installation of x-ray slurry analyzer for six streams: flotation feed, middling Zn feed, copper final concentrate, lead final concentrate, zinc final concentrate and final tailings;

 

·Mechanical rod feeder for primary rod mill grinding for improved safety and production;

 

·Installation of five DR-180 cells in the Second Zn Cleaning Flotation Stage; four DR-180 cells in the Third Zn Cleaning Flotation Stage in order to improve the Zn concentrate grade and to increase the nominal plant capacity up to 4000 tpd; and

 

CK November 2020

 

 

SRK Consulting 
2US043.007 Sierra Metals Inc. 
Yauricocha_Technical_Report_PEA Page v

 

·Installation of 10 DR-180 cells in the Bulk Cleaning Flotation Stage arranged in three banks, with which the flotation retention time is increased from 9 minutes to 17 minutes:

 

First Cleaning Flotation Stage (comprising 5 cells);

 

Second Cleaning Flotation Stage (comprising 3 cells); and

 

Third Cleaning Flotation Stage (comprising 2 cells).

 

Table 1-2 shows the mill’s feed tonnages and head grades for the period of January 2019 to June 2020. In this period, there was no treatment of any oxide mineralized material. Table 1-3 shows the mill’s performance from 2013 to 2020.

 

Table 1-2: Mill Tonnage and Head Grades, January 2019 to June 2020

 

Period

Mineralized
Material

(tonnes)

Head Grade

Au

(g/t)

Ag

(g/t)

Pb

(%)

Cu

(%)

Zn

(%)

As

(%)

2020 Jun78,0800.6361.11.491.023.720.13
2020 May64,3640.6869.651.991.13.890.14
2020 Apr60,0900.5369.691.431.572.740.14
2020 Mar78,5530.6370.851.591.223.870.14
2020 Feb103,7640.6666.011.61.093.810.14
2020 Jan102,9080.7561.891.491.114.050.14
2019 Dec110,9390.759.331.471.223.990.13
2019 Nov101,8620.5558.741.660.934.090.15
2019 Oct108,9000.5662.271.521.014.070.13
2019 Sep100,0300.5163.021.541.113.570.15
2019 Aug106,9880.5966.771.821.143.940.14
2019 Jul100,2210.6469.251.691.113.860.15
2019 Jun99,5880.5568.841.81.093.580.13
2019 May101,5020.6559.551.50.943.330.14
2019 Apr*53,0750.6159.251.291.123.020.14
2019 Mar*51,7070.5964.911.481.173.290
2019 Feb88,0100.5963.081.281.063.570
2019 Jan94,0970.563.151.610.853.70
Averages89,1490.6164.11.581.093.720.12

Source: Sierra Metals, 2020

* production in March and April 2019 was affected by a strike at the mine.

 

CK November 2020

 

 

SRK Consulting 
2US043.007 Sierra Metals Inc. 
Yauricocha_Technical_Report_PEA Page ii

 

Table 1-3: Yauricocha Metallurgical Performance, 2013 to 2020*

 

PeriodStreamTonne

Tonnes/day

(@ 365 d/y)

Concentrate GradeMetal Recovery

Au

(g/t)

Ag

(g/t)

Pb

(%)

Cu

(%)

Zn

(%)

Au

(%)

Ag

(%)

Pb

(%)

Cu

(%)

Zn

(%)

2013Mineralized Material641,2681,757 831.50.74.1 100100100100
Cu Con.12,72835 1,0582.823.26.4 25.23.770.63.1
Pb Con.14,25839 1,30053.41.85.9 34.7806.33.2
Zn Con.45,412124.4 1220.6150.8 10.4310.888.7
2014Mineralized Material703,7131,928 841.80.74 100100100100
Cu Con.12,78235 1,1152.126.46.8 24.22.1683.1
Pb Con.18,05549 1,39858.61.54.9 42.883.95.33.2
Zn Con.48,657133 1150.81.450.6 9.53.113.288.5
2015Mineralized Material618,4601,694 791.60.63.4 100100100100
Cu Con.8,14522 1,2782.327.84.1 21.41.865.31.6
Pb Con.14,46340 1,65659.51.14.3 49.385.74.72.9
Zn Con.37,587103 910.61.250.7 7.12.113.490.1
2016Mineralized Material698,8721,9150.580.31.80.63.9100100100100100
Cu Con.9,068253.11362.62.126.36.88.1221.561.32.3
Pb Con.18,014491.71470.8591.24.89.147.286.35.63.1
Zn Con.47,5731300.495.20.71.251.54.98.12.614.288.9
2017Mineralized Material966,1382,6470.6661.50.73.9100100100100100
Cu Con.16,412452.7920.52.426.97.68.423.72.867.33.3
Pb Con.21,731601.81242.356.82.55.57.442.386.98.43.2
Zn Con.65,6711800.4110.80.91.451.45.311.4414.289.4
2018Mineralized Material985,6792,7000.658.41.30.93.8100100100100100
Cu Con.21,940602.2677.42.328.17.58.425.83.870.14.4
Pb Con.20,146552.21087.556.13.35.77.638.185.87.53
Zn Con.65,8231800.5101.40.81.850.95.211.64.113.488.7
2019Mineralized Material1,092,4102,9930.663.91.61.13.7100100100100100
Cu Con.30,931852.3593.91.829.461126.33.276.94.6
Pb Con.26,574732.11131.657.62.45.58.443.188.85.43.6
Zn Con.69,8631910.590.60.61.7514.99.12.610.188
2020*Mineralized Material483,5092,6570.766.31.61.23.7100100100100100
Cu Con.17,127941.9531.51.925.45.910.428.44.376.45.6
Pb Con.13,972772.2996.447.92.149.543.487.25.13.1
Zn Con.38,9252140.476.90.61.540.55.19.3310.687.5

Source: Sierra Metals, 2020

* January to June 2020

 

CK November 2020

 

 

SRK Consulting 
2US043.007 Sierra Metals Inc. 
Yauricocha_Technical_Report_PEA Page ii

 

In 2020, silver is preferably recovered with the lead sulfide concentrate and accounts for approximately 43% of the total silver recovered at Yauricocha. Copper concentrate recovers approximately 28% of the silver, and zinc concentrate recovers 9%. The overall silver recovery at Yauricocha totaled 81% during the first six months of 2020.

 

Yauricocha’s metallurgical laboratory has been testing samples from multiple sources, including polymetallic material from Esperanza, Cuerpo Contacto Occidental, from Mina Mario among others. In most of the cases the metallurgical test results show good amenability to conventional processing and potential to achieve commercial quality concentrates. Some samples show arsenic presence, while others achieve lower concentrate grades because of their higher oxides content. In all cases, laboratory personnel are continuously investigating improved process conditions for treating the new sources of mineralized material.

 

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”.

 

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 Yauricocha, 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 for their current underground mining operation.

 

SRK is of the opinion that the resource estimations are suitable for public reporting and are a fair representation of the in-situ contained metal for the Yauricocha deposit.

 

The June 30, 2020 consolidated Mineral Resource statement for the Yauricocha Mine is presented in Table 1-4. The detailed, individual tables for the various Yauricocha mining areas are presented in Section 14 of this report.

 

CK November 2020

 

 

SRK Consulting 
2US043.007 Sierra Metals Inc. 
Yauricocha_Technical_Report_PEA Page ii

 

Table 1-4: Consolidated Yauricocha Mine Mineral Resource Statement as of June 30, 2020 – SRK Consulting (Canada), Inc. (1) (2) (3) (4) (5) (6) (7) (8) (9)

 

Classification

Volume

(m3) '000

Tonnes

(K t)

Density

(kg/m3)

Ag

(g/t)

Au

(g/t)

Cu

(%)

Pb

(%)

Zn

(%)

As

(%)

Fe

(%)

NSR

(USD/t)

Ag

(M oz)

Au

(K oz)

Cu

(M lb)

Pb

(M lb)

Zn

(M lb)

 
 
Measured1,4584,9043.3655.810.591.130.832.590.1824.471138.893.5122.289.4280.1 
Indicated3,22611,0203.4238.390.501.200.522.050.1425.419813.6178.0291.1126.7498.9 
Measured + Indicated4,68415,9243.4043.750.531.180.622.220.1525.1210322.4271.5413.3216.2779.0 
Inferred3,34611,6333.4827.540.451.400.310.950.0726.658410.3167.4357.979.3242.5 

Notes

 

(1)  Mineral Resources have been classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") Definition Standards on Mineral Resources and Mineral Reserves, whose definitions are incorporated by reference into NI 43-101.

(2)  Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All fgures are rounded to reflect the relative accuracy of the estimates. Silver, gold, copper, lead, zinc, arsenic (deleterious) and iron assays were capped / cut where appropriate.

(3) The consolidated Yauricocha Mineral Resource estimate is comprised of Measured, Indicated and Inferred Resources in the Mina Central, Cuerpos Pequeños, Cuye, Mascota, Esperanza and Cachi-Cachi mining areas.

(4)  Polymetallic Mineral Resources are reported at Cut-Off Values (COVs) based on 2020 actual metallurgical recoveries and 2020 smelter contracts.

(5)  Metal price assumptions used for polymetallic feed considered CIBC, August 2020 long-term consensus pricing (Gold (US$1,502/oz), Silver (US$18.24/oz), Copper (US$3.05/lb), Lead (US$0.91/lb), and Zinc (US$1.06/lb).

(6)  Lead Oxide Mineral Resources are reported at COVs based on 2020 actual metallurgical recoveries and 2020 smelter contracts.

(7)  Metal price assumptions used for lead oxide feed considered CIBC, August 2020 long-term consensus pricing (Gold (US$1,502/oz), Silver (US$18.24/oz) and Lead (US$0.91/lb).

(8)  The mining costs are based on 2020 actual costs and are variable by mining method.

(9)  The unit value COVs are variable by mining area and proposed mining method. The marginal COV ranges from US$25 to US$36.

 

CK November 2020

 

  

SRK Consulting 
2US043.007 Sierra Metals Inc. 
Yauricocha_Technical_Report_PEA Page ii

 

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 Prefeasibility 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

 

1.7.1Mining

 

The Yauricocha Mine is a producing operation with a long production history. The majority of mining is executed through mechanized sub-level caving with a relatively small portion of the mining using overhand cut and fill. The mine uses well-established, proven mining methods and is anticipated to continue to maintain an approximate 3,800 tpd (1.4 Mt/y) production rate for the remainder of 2020.

 

Polymetallic sulfide mineralized material accounts for more than 99% of the material mined at Yauricocha. Material classified as lead oxide can also be encountered, but it is a minor component of the overall tonnage in the mineralized zones currently being mined.

 

The mine is accessed by two shafts, Central shaft and Mascota shaft, and the Klepetko and Yauricocha tunnels. Mineralized material and waste are transported via the Klepetko tunnel at the 720 level (elevation 4,165 masl) which runs east-northeast from the mine towards the mill and concentrator, and the 4.7 km Yauricocha tunnel, commissioned in 2018, that also accesses the mine at the 720 level. The Yauricocha tunnel was added to increase haulage capacity and serves as a ventilation conduit. The Yauricocha shaft, currently under construction, will provide access down to 1370 level and is expected to be in production in 2021.

 

1.7.2Geotechnical

 

Geotechnical investigations have been conducted at the Yauricocha Mine to prepare a geotechnical model of ground conditions. The investigations involved preparing a major fault model, rock mass model, rock mass strength model, rock mass characterization, granular material (mineralized material) classifications; underground traverse mapping, core logging, laboratory tests, shafts inspections, subsidence studies, preparation of a geotechnical database, and the implementation of a data collection process. In 2017, SRK confirmed that these activities complied with international standards and industry best practices.

 

Mudflows, also known as mud rushes, are encountered at Yauricocha. At present, lower mined levels where mudflows are occurring are at the 820 level (elevation of 4,040 masl to 4,057 masl in the Antacaca and Catas mineralized material bodies) and the 870 level (elevation of 4,010 masl to 4,093 masl in the Rosaura and Antacaca Sur mineralized material bodies). All of the recorded mudflows have been located within mineralized material bodies near the contact with the Jumasha limestone and the adjacent granodiorite and Celendín formation. The current understanding of mudflow conditions is sufficient to support the drawpoint design adjustments implemented by Yauricocha, mucking operations, and dewatering programs.

 

CK November 2020

 

 

SRK Consulting 
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Yauricocha_Technical_Report_PEA Page iii

 

The ground control management level plans reviewed present a rock mass quality regime that is consistent with the conceptual geotechnical rock mass model, as well as the description of the domains and sub-domains from the 2015 technical report. The level plans, and accompanying development profile and installation procedures are well developed and appropriate for operational application. The ground support designs were not reviewed in detail as part of this study, but an observation was made that the ground support type for good ground did not include any surface support. Unless there is a thorough and regimented check-scaling procedure ensured, industry standard is to have surface support of mesh and/or shotcrete even in good ground.

 

SRK is of the opinion that the current understanding of subsidence and its effects is reasonable. The current understanding of in-situ and induced stress for the current mining areas is satisfactory, but for the deeper planned mining areas, site specific stress measurements and stress modelling are needed. The current understanding of the conditions leading to mudflow and the mitigation measures put in place are reasonable; however, the potential occurrence of a mud rush event is an ever-present risk, particularly when entering new mining areas. Dewatering practices need to be maintained, existing drawpoints monitored, and new areas investigated prior to being developed.

 

1.7.3Hydrogeology

 

Hydrogeological and hydrological information is available from multiple sources, including mine records and a large number of investigations and data compilations by external consultants. Mine operations have compiled significant information on flow rates and field water quality parameters (e.g., color, pH, conductivity, temperature) across much of the mine and developed maps summarizing locations and data. The numerous hydrogeological and hydrological studies completed by external consultants (Geologic, 2014, 2015; Hydro-Geo Consultores, 2010, 2012, 2016; Geoservice Ingenieria 2008, 2014, 2016; Helium, 2018) involved the collection of data from underground observations, pump tests, tracer tests, and surface water features.

 

Current observations and analyses suggest that inflow to both the subsidence (caving) zone and the mine will increase as the mine expands. Mitigation and management efforts should continue to understand the distribution of water and value in efforts to control or reduce inflow. Mud rushes pose a risk, as described in Section 16.

 

1.8Project Infrastructure

 

The Project is a mature producing mine and mill and all required infrastructure is fully functional. The Project has highway access with two routes to support the Project’s needs, and the regional capital Huancayo (population 340,000) is within 100 km. Personnel travel by bus to the site and are accommodated in four camps. There are currently approximately 1,700 personnel on-site with 500 employees and 1,200 contractors.

 

CK November 2020

 

 

SRK Consulting 
2US043.007 Sierra Metals Inc. 
Yauricocha_Technical_Report_PEAPage iv

 

The on-site facilities include the processing plant, mine surface facilities, underground mine facilities, tailings storage facility (TSF), and support facilities. The processing facility includes crushing, grinding, flotation, dewatering and concentrate separation, concentrate storage, and thickening and tailings discharge lines to the TSF.

 

The underground mine and surface facilities include headframes, hoist houses, shafts and winzes, ventilation structures, mine access tunnels, waste storage facilities, high explosives and detonator magazines, underground shops, and diesel and lubrications storage. The support facilities include four camps where personnel live while on-site, a laboratory, change houses and showers, cafeterias, school, medical facility, engineering and administrative buildings, and miscellaneous equipment and electrical shops to support the operations.

 

The site has existing water systems to manage water needs on-site. Water is sourced from the Ococha Lagoon, the Cachi-Cachi underground mine, and recycle/overflow water from the TSF, depending on end use. Water treatment systems treat the raw water for use as potable water or for service water in the plant. Additional systems treat the wastewater for further consumption or discharge.

 

Energy for the site is available through electric power, compressed air, and diesel. The electric power is supplied by contract over an existing 69 kV line to the site substation. The power is distributed for use in the underground or at the processing facility. The current power load is 10.5 MVA with approximately 70% of this being used at the mine and the remainder at the mill and other facilities. The power system is planned to be expanded to approximately 14 MVA in 2020/2021. A compressed air system is used underground with an additional 149 kW compressor system being added, and diesel fuel is used in the mobile equipment and in the 895-kW backup electrical generator.

 

The site has permitted systems for the handling of waste including a TSF, waste rock storage facility, and systems to handle other miscellaneous wastes. The TSF has a capacity for 12 months at the current production levels. The TSF is being expanded with another lift in 2019/2020 to provide three more years of capacity. The three additional lift stages in total will provide the Project with approximately nine years of additional capacity. An on-site industrial landfill is used to dispose of the Project’s solid and domestic waste. The Project collects waste oil, scrap metal, plastic, and paper which are recycled at off-site licensed facilities.

 

The site has an existing communications system that includes a fiber optic backbone with internet, telephone, and paging systems. The security on-site is managed through checkpoints at the main access road, processing plant, and at the camp entrances.

 

Logistics to the site are primarily by truck with the five primary concentrate products being shipped by 30 t to 40 t trucks to other customer locations in Peru. Materials and supplies needed for Project operation are procured in Lima and delivered by truck.

 

CK November 2020

 

 

SRK Consulting 
2US043.007 Sierra Metals Inc. 
Yauricocha_Technical_Report_PEAPage v

 

The infrastructure is well developed and functioning as would be expected for a mature operation. The TSF continues to develop and will require ongoing monitoring to assure the construction of the next lift is timely to support the operation. Ongoing monitoring of the stability of the embankment and operations practices is recommended to conform to industry best practices.

 

1.9Environmental Studies and Permitting

 

Sierra has all relevant permits required for the current mining and metallurgical operations. Sierra also has a Community Relations Plan that includes annual assessment, records, minutes, contracts and agreements. An Environmental Impact Assessment (EIA) was obtained on February 11, 2019.

 

1.10Capital and Operating Costs

 

The capital and operating costs presented here are for the base case production rate of 3,780 tpd. Capital and operating cost estimates for the higher production rates of 5,500 tpd, 6,500 tpd and 7,500 tpd are in Section 21. Capital and operating costs are based upon forward-looking information. This forward-looking information includes forecasts with material uncertainty which could cause actual results to differ materially from those presented herein.

 

Table 1-5 and Table 1-6 show the capital and growth capital cost (capex) summaries for the base case of 3,780 tpd respectively. Table 1-7 shows the operating cost (opex) summary for the base case of 3,780 tpd.

 

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Table 1-5: Capital Cost Forecast (US$000’s) – Base Case 3,780 tpd

 

Sustaining Capex

Total
(US$ 000s)

20212022202320242025202620272028202920302031203220332034
Exploration & Development               
Development79,8695,9226,1416,1346,1066,2706,1626,1756,1646,1606,1106,2036,1046,218-
Equipment10,3201,0801,0802,0401,500720720720720720720300-- 
Projects               
Central Shaft Rehab1,8001,000800------------
Personnel transportation4,550350-770-770-770-770-770-350-
Concentrator Plant5,4501,270380800300300300300300300300300300300-
Tunnel (Cx 5000 + Shotcrete Plant)2,3002,300-------------
Drainage System + Study2,2001,000600600-----------
Ventilation10,002879869868864888872874873872865878400  
Ramp Lv 1592 and Mascota3,2403,240-------------
Environmental1,1658282838383838383838383838383
Seismograph Study and Instrumentation2501505050-----------
Geomechanical Model Study500-250--250---------
Fuel Distribution System300300-------------
Total121,94517,57310,25211,3458,8549,2818,1388,9228,1408,9068,0788,5356,8876,95183

 

Source: Sierra Metals, 2020

 

Table 1-6: Growth Capex Forecast 3,780 Tonnes/Day

 

Growth Capex

Total
(US$ 000s)

20212022202320242025202620272028202920302031203220332034
Projects               
Yauricocha Shaft19,4007,0007,5004,900-----------
Access to Yauricocha Shaft5,5003,0002,500------------
Tailing Dam32,3403,2343,2343,2343,2343,2343,2343,2343,2343,2343,234   -
Ramp Lv 720 to Ramp Tatiana600600-------------
Mine Camp4,6501503,0001,500-----------
Studies (Increase production)500250250------------
Studies (geometallurgical)300150-150-----------
Closure9,4501,000650650650650650650650650650650650650650
Total72,74015,38417,13410,4343,8843,8843,8843,8843,8843,8843,884650650650650

 

Source: Sierra Metals, Redco, 2020

 

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Table 1-7: Opex Forecast 3,780 Tonnes/Day

 

Opex Total

Total
(US$ 000s)

20212022202320242025202620272028202920302031203220332034
Mine639,83947,46747,14447,10846,97047,79447,25247,31447,26247,24246,57247,03946,54247,11527,016
Plant198,86514,71214,60714,59614,55114,81814,64214,66214,64614,63914,55614,70914,54614,7348,446
G&A93,8006,7006,7006,7006,7006,7006,7006,7006,7006,7006,7006,7006,7006,7006,700
Total932,50468,87968,45168,40368,22169,31268,59568,67768,60868,58167,82968,44867,78968,54942,163

 

Source: Sierra Metals, Redco, 2020

 

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1.11Economic Analysis

 

The PEA considered four different production rates for the Yauricocha Mine:

 

1.3,780 tpd (base case);

 

2.5,500 tpd (in 2024);

 

3.6,500 tpd (in 2024); and

 

4.7,500 tpd (in 2024).

 

As detailed in Section 22, the four production rate options were evaluated financially, and the 7,500 tpd production rate had the highest post tax NPV. Sierra observes that there are some mineralized material and waste haulage issues due to mineralized zone geometry and distribution. As such, Sierra has decided that the 5,500 tpd production rate option is the recommended case for a future pre-feasibility study. Increased production rates beyond 5,500 tpd may be possible once Yauricocha has resolved the mineralized material and waste haulage issues.

 

The 5,500 tpd (2024) proposed mine plan has a capital requirement (initial and sustaining) of US$ 235 M over the 12-year LOM; efficiencies associated with higher throughputs are expected drive a reduction in operating costs on a per tonne basis. This PEA indicates an after-tax NPV (8%) at 5,500 tpd (in 2024) of US$ 359 M. Total operating cost for the LOM is US$ 915 M, equating to a total operating cost of US$ 45.25 per tonne milled and US$ 1.19 per pound copper equivalent. Economic estimates are based upon forward-looking information. This forward-looking information includes forecasts with material uncertainty which could cause actual results to differ materially from those presented herein.

 

A sensitivity analysis was performed for each mining plan to analyze the impact of the change on the main drivers: metal grades, operating and capital costs, and gross income. The analysis shows that the NPV is most sensitive to changes in gross income and operating costs, moderately sensitive to changes in capex and the grade of copper, and least sensitive to changes in the grades of silver, gold, lead and zinc.

 

The proposed mine plan is conceptual in nature and would benefit from further investigation.

 

1.12Conclusions and Recommendations

 

1.12.1Geology and Mineral Resources Estimation

 

SRK has the following recommendations for the geology and Mineral Resources at Yauricocha:

 

·Construct and compile a single reliable secure drilling and sampling database for the entire mine area, which can be easily verified, audited, and shared internally. This can be accomplished through commercially available SQL database management tools.

 

·Exploration should continue in the Esperanza area, which is locally open along strike and at depth.

 

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·Long-term exploration should be focused on areas such as the possible intersection of the Yauricocha fault and the Cachi-Cachi structural trend, where recent geophysical data are currently being generated to assist in targeting.

 

·Given the use of channel samples in the Mineral Resource estimations, SRK recommends ensuring that the channel samples are collected on a representative basis, and that they are collected across the entire exposed thickness of a mineralized zone. In addition, they should be weighed for each sample to ensure that appropriate quantities of material are sampled from both the harder, more difficult material and the higher-grade, softer material.

 

·SRK recommends reviewing the performance of the QA/QC program as soon as batches of results are returned. If any failures occur investigation and re-analysis of these samples and +/- five adjacent samples on either side of the respective failure should be completed as soon as possible to prevent any sample preparation or laboratory issues.

 

·No umpire laboratory checks of the Chumpe laboratory were completed in the period November 2019 to June 2020. SRK recommends that umpire duplicates be implemented on a regular basis for both coarse and pulp reject material.

 

·SRK recommends that density measurements of drillhole core be implemented as a regular practice to improve density relationships in mineralized and non-mineralized rock.

 

·Minera Corona should produce detailed internal documentation summarizing the procedures and methods similar to those described in this report.

 

Of note, SRK recommends developing internal standards and procedures for estimation and reporting of Mineral Resources. Although this is somewhat new for the mine personnel, SRK is of the opinion that sufficient talent and technology support exists to continue to develop this expertise.

 

·Exploration should be supported by a reasonably detailed litho-stratigraphic and structural model for the area to aid in exploration targeting. At present, this model does not exist and should be generated by mine and exploration personnel to produce fit for purpose models.

 

·SRK recommends that a standardized workflow is applied to the geological modelling to prevent significant changes in mineralized shape forms with minor additions of drillhole information. The integration of structure, stratigraphy and mineralized zone into a global model is essential in developing a comprehensive exploration and mining model. This will prevent inconsistencies and overlap between mineralized zones modelled.

 

·Classification of certain areas should be reviewed to determine if opportunities exist to refine the scripted classification scheme, or that based on estimation pass (in the case of Minera Corona models) to a hybrid approach taking into account the confidence in the estimation and the reasonableness of the classification distribution.

 

·Modelling variogram anisotropy for each of the mineralized domains can be improved by considering relevant transformation e.g. gaussian or log transforms of the composites before producing the experimental variograms. Ideally, modelled variograms should be back-transformed before the estimation. Certain commercially available software can complete this process seamlessly.

 

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·Local and global grade anisotropy occur within the larger mineralized bodies. The sensitivity of utilizing a local anisotropy in highly informed data areas, whereas utilizing a global trend in poorly informed areas should be investigated.

 

·The models estimated internally by the mine should endeavor to regularize certain estimation parameters (such as sample selection criteria) so that these do not vary significantly between metals.

 

·SRK recommends that Minera Corona implement short term grade control models to track and reconcile with production.

 

1.12.2Mineral Processing and Metallurgical Testing

 

SRK is of the opinion that Yauricocha’s processing facility is reasonably well operated and shows flexibility to treat multiple mineralized material sources. The metallurgical performance, i.e., metal recovery and concentrate grade has been consistent throughout the period evaluated allowing the mine to produce commercial quality copper concentrate, lead concentrate, and zinc concentrate.

 

The spare capacity in their oxide circuit is an opportunity to source material from third-party mines located in the vicinity. The presence of arsenic is being well managed by blending mineralized material in order to control arsenic concentration in the final concentrates. Gold deportment seems an opportunity that Yauricocha may want to investigate, particularly by evaluating gravity concentration in the grinding stage, or alternatively in the final tails, or both.

 

1.12.3Mining

 

SRK has the following recommendations for the mining at Yauricocha:

 

·The Yauricocha shaft project should be monitored closely in order to ensure timely access to mineralized zones below 1070 level.

 

·A consolidated 3D LOM design should be completed to improve communication of the LOM plan, infill drilling requirements, and general mine planning and execution.

 

·Further technical-economic evaluations of the production rate expansion options should be undertaken via pre-feasibility and feasibility studies.

 

1.12.4Geotechnical and Hydrogeological

 

SRK’s geotechnical and hydrogeological recommendations are as follows:

 

·Continue collecting geotechnical characterization data from mined drifts and exploration drillholes;

 

·Maintain a central geotechnical database;

 

·Develop and maintain geotechnical models, including structures and rock mass wireframes;

 

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·Conduct a program of stress measurement in the deeper planned mining areas;

 

·Conduct numerical stress analyses of mining-induced stress effects on planned mining;

 

·Continue short-term to long-term dewatering programs with drainage systems;

 

·Examine the current mine sequence and simulate the optimal mine sequence to reduce safety risks and the risk of sterilizing mineralized material due to unexpected ground problems; and

 

·Revisit the current ground control management plans to check that they are appropriate for the deeper mining areas.

 

·Continue to actively dewater ahead of production mining and monitor for conditions that could lead to mud rushes.

 

1.12.5Infrastructure

 

Ongoing monitoring of the stability of the TSF embankment and operations practices is recommended to conform to industry best practices.

 

1.12.6Recovery Methods

 

SRK recommends that Yauricocha improve its control of plant operations by installing more instrumentation and an automation control system. Doing so could lead to more consistent plant operation, reduced electrical energy and reagent consumption, and ultimately initiate a continuous improvement of the plant’s unit operations and overall performance.

 

1.12.7Environmental Studies and Permitting

 

Social and environmental activities are currently of high importance in Peru; therefore, SRK recommends that the company’s commitments and agreements be fulfilled in detail and in a timely manner. Reputational and legal risks can arise due to this issue.

 

1.13Recommended Work Program Costs

 

Table 1-8 lists the estimated costs for the recommended work that is not considered to be covered by on-going operating expenditures.

 

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Table 1-8: Summary of Costs for Recommended Work

 

CategoryWorkUnitsCost US$
Geology and ResourcesInfill Drilling (1)25,000 m2,500,000
Exploration Drilling - Yauricocha Expansion (1)25,000 m2,500,000
Structural and litho-stratigraphic model1100,000
Training110,000
QA/QC and Re-analysis50012,500
GeotechnicalAnnual data and analysis review and data collectionN/A100,000
Stress measurements130,000
Production Rate IncreasesPrefeasibility study1500,000
Total 5,752,500

Source: SRK, 2020

 

(1)   Drilling costs assume US$100/m drilling costs.

 

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Table of Contents

 

1Executive Summaryiii

 

1.1Property Description and Ownershipiii

 

1.2Geology and Mineralizationiv

 

1.3Status of Exploration, Development and Operationsiv

 

1.4Mineral Processing and Metallurgical Testingiv

 

1.5Mineral Resource Estimateii

 

1.6Mineral Reserve Estimateii

 

1.7Mining Methodsii

 

1.7.1Miningii

 

1.7.2Geotechnicalii

 

1.7.3Hydrogeologyiii

 

1.8Project Infrastructureiii

 

1.9Environmental Studies and Permittingv

 

1.10Capital and Operating Costsv

 

1.11Economic Analysisii

 

1.12Conclusions and Recommendationsii

 

1.12.1Geology and Mineral Resources Estimationii

 

1.12.2Mineral Processing and Metallurgical Testingiv

 

1.12.3Miningiv

 

1.12.4Geotechnical and Hydrogeologicaliv

 

1.12.5Infrastructurev

 

1.12.6Recovery Methodsv

 

1.12.7Environmental Studies and Permittingv

 

1.13Recommended Work Program Costsv

 

2Introduction and Terms of Reference6

 

2.1Terms of Reference and Purpose of the Report6

 

2.2Qualifications of Consultants (SRK)6

 

2.3Qualifications of Consultants (Sierra Metals)7

 

2.4Details of Inspection8

 

2.5Sources of Information8

 

2.6Effective Date8

 

2.7Units of Measure8

 

3Reliance on Other Experts9

 

4Property Description and Location10

 

4.1Property Location10

 

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4.2Mineral Titles11

 

4.2.1Nature and Extent of Issuer’s Interest13

 

4.3Royalties, Agreements and Encumbrances14

 

4.3.1Debt14

 

4.3.2Royalties and Special Taxes14

 

4.4Environmental Liabilities and Permitting15

 

4.5Other Significant Factors and Risks16

 

5Accessibility, Climate, Local Resources, Infrastructure and Physiography17

 

5.1Topography, Elevation and Vegetation17

 

5.2Accessibility and Transportation to the Property17

 

5.3Climate and Length of Operating Season17

 

5.4Sufficiency of Surface Rights18

 

5.5Infrastructure Availability and Sources18

 

5.5.1Power18

 

5.5.2Water18

 

5.5.3Mining Personnel18

 

5.5.4Potential Tailings Storage Areas18

 

5.5.5Potential Waste Rock Disposal Areas19

 

5.5.6Potential Processing Plant Sites19

 

6History20

 

6.1Prior Ownership and Ownership Changes20

 

6.2Exploration and Development Results of Previous Owners20

 

6.3Historic Production22

 

7Geological Setting and Mineralization23

 

7.1Regional Geology23

 

7.2Local Geology24

 

7.3Significant Mineralized Zones29

 

8Deposit Types30

 

8.1Mineral Deposit30

 

8.2Geological Model31

 

9Exploration32

 

9.1Relevant Exploration Work32

 

9.2Sampling Methods and Sample Quality33

 

9.3Significant Results and Interpretation33

 

10Drilling40

 

10.1Type and Extent40

 

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10.2Procedures43

 

10.2.1Drilling43

 

10.2.2Channel Sampling44

 

10.3Interpretation and Relevant Results44

 

11Sample Preparation, Analyses, and Security45

 

11.1Security Measures45

 

11.2Sample Preparation for Analysis45

 

11.2.1Chumpe Laboratory45

 

11.2.2ALS Minerals47

 

11.3Sample Analysis47

 

11.3.1Chumpe Laboratory47

 

11.3.2ALS Minerals Laboratory48

 

11.4Quality Assurance/Quality Control Procedures48

 

11.4.1Standards49

 

11.4.2Blanks57

 

11.4.3Duplicates (Check Samples)59

 

11.4.4Actions61

 

11.4.5Results61

 

11.5Opinion on Adequacy61

 

12Data Verification63

 

12.1Procedures63

 

12.2Limitations63

 

12.3Opinion on Data Adequacy64

 

13Mineral Processing and Metallurgical Testing65

 

13.1Testing and Procedures65

 

13.2Metallurgical Performance66

 

14Mineral Resource Estimates69

 

14.1Drillhole/Channel Database70

 

14.2Geological Model70

 

14.2.1Mina Central71

 

14.2.2Esperanza72

 

14.2.3Mascota74

 

14.2.4Cuye75

 

14.2.5Cachi-Cachi77

 

14.2.6Cuerpos Pequeños78

 

14.2.7Geological Models as Resource Domains80

 

14.3Assay Capping and Compositing82

 

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14.3.1Outliers83

 

14.3.2Compositing85

 

14.4Density88

 

14.5Variogram Analysis and Modeling90

 

14.6Block Model93

 

14.7Estimation Methodology94

 

14.8Model Variation96

 

14.8.1Visual Comparison96

 

14.8.2Comparative Statistics98

 

14.8.3Swath Plots100

 

14.9Resource Classification102

 

14.10Depletion104

 

14.11Mineral Resource Statement105

 

14.12Mineral Resource Sensitivity114

 

14.13Relevant Factors118

 

15Mineral Reserve Estimates119

 

16Mining Methods120

 

16.1Introduction120

 

16.2Mine Access and Materials Handling121

 

16.3Current Mining Methods123

 

16.4Mining Method125

 

16.4.1Sub-level Caving (SLC)125

 

16.4.2Overhand Cut and Fill (OCF)127

 

16.5Mining Method Parameters127

 

16.6Parameters Relevant to Mine Designs129

 

16.6.1Geotechnical Data129

 

16.6.2Rock Mass Characterization138

 

16.7Stope Optimization147

 

16.7.1Dilution and Recovery Factor147

 

16.7.2Net Smelter Return (NSR)149

 

16.7.3Metal Prices and Exchange Rate149

 

16.7.4Metallurgical Recoveries149

 

16.7.5Net Smelter Return (NSR) Calculations150

 

16.7.6Cut-off153

 

16.7.7Stope Optimization153

 

16.8Mine Production154

 

16.9Mine Production Schedule154

 

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16.10Mine Development160

 

16.11Waste Storage164

 

16.12Major Mining Equipment164

 

16.13Ventilation169

 

17Recovery Methods180

 

17.1Operational Results181

 

17.2Polymetallic Circuit184

 

17.2.1Copper Concentrate184

 

17.2.2Lead Concentrate184

 

17.2.3Zinc Concentrate184

 

17.3Oxide Circuit185

 

17.4Processing Methods186

 

17.5Plant Design and Equipment Characteristics190

 

17.6Consumable Requirements191

 

18Project Infrastructure192

 

18.1Access, Roads, and Local Communities195

 

18.2Process Support Facilities195

 

18.3Mine Infrastructure – Surface and Underground196

 

18.3.1Underground Access and Haulage198

 

18.3.2New Yauricocha Shaft198

 

18.3.3Central Shaft and Central Incline Shaft198

 

18.3.4Mascota Shaft198

 

18.3.5Cachi-Cachi Shaft199

 

18.3.6Subsidence in Central and Mascota Zones199

 

18.3.7Tunnel Haulage199

 

18.3.8Ventilation199

 

18.4Additional Support Facilities200

 

18.5Water Systems200

 

18.5.1Water Supply200

 

18.5.2Potable Water200

 

18.5.3Service Water201

 

18.5.4Water Treatment201

 

18.6Energy Supply and Distribution201

 

18.6.1Power Supply and Distribution201

 

18.6.2Compressed Air202

 

18.6.3Fuel202

 

18.7Tailings Management Area203

 

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18.7.1Expansion of TSF (Stage 5 and 6)204

 

18.8Waste Rock Storage205

 

18.9Other Waste Handling206

 

18.10Logistics206

 

18.11Off-Site Infrastructure and Logistics Requirements206

 

18.12Communications and Security206

 

19Market Studies and Contracts207

 

20Environmental Studies, Permitting, and Social or Community Impact208

 

20.1Required Permits and Status208

 

20.1.1Required Permits208

��

20.1.2State of Approved Permits208

 

20.2Environmental Study Results215

 

20.3Environmental Aspects218

 

20.4Operating and Post Closure Requirements and Plans221

 

20.5Post-Performance Reclamation Bonds222

 

20.6Social and Community223

 

20.7Mine Closure224

 

20.8Reclamation Measures During Operations and Project Closure225

 

20.8.1Reclamation Measures During Operations and Project Closure225

 

20.8.2Temporary Closure225

 

20.8.3Progressive Closure226

 

20.8.4Final Closure229

 

20.9Closure Monitoring230

 

20.10Post-Closure Monitoring231

 

20.11Reclamation and Closure Cost Estimate232

 

21Capital and Operating Costs233

 

21.1Capital Cost Forecast233

 

21.2Operating Cost Forecast234

 

22Economic Analysis243

 

22.1Risk Assessment251

 

23Adjacent Properties254

 

24Other Relevant Data and Information255

 

25Interpretation and Conclusions256

 

25.1Geology and Exploration256

 

25.2Mineral Resource Estimate256

 

25.3Mineral Processing and Metallurgical Testing257

 

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25.4Mineral Reserve Estimate257

 

25.5Mining Methods257

 

25.5.1Mining257

 

25.5.2Geotechnical257

 

25.5.3Hydrology258

 

25.6Recovery Methods259

 

25.7Infrastructure259

 

25.8Environmental Studies and Permitting259

 

25.9Economic Analysis259

 

25.10Foreseeable Impacts of Risks260

 

26Recommendations261

 

26.1Recommended Work Programs261

 

26.1.1Geology and Mineral Resource Estimation261

 

26.1.2Mining262

 

26.1.3Geotechnical and Hydrogeological263

 

26.1.4Infrastructure263

 

26.1.5Recovery Methods263

 

26.1.6Environmental Studies and Permitting263

 

26.2Recommended Work Program Costs264

 

27References265

 

28Glossary270

 

28.1Mineral Resources270

 

28.2Mineral Reserves270

 

28.3Definition of Terms271

 

28.4Abbreviations273

 

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List of Tables

 

Table 1-1: LOM Production Ratesiii
Table 1-2: Mill Tonnage and Head Grades, January 2019 to June 2020     v
Table 1-3: Yauricocha Metallurgical Performance, 2013 to 2020*     ii
Table 1-4: Consolidated Yauricocha Mine Mineral Resource Statement as of June 30, 2020 – SRK Consulting (Canada), Inc. (1) (2) (3) (4) (5) (6) (7) (8) (9)     ii
Table 1-5: Capital Cost Forecast (US$000’s) – Base Case 3,780 tpd     ii
Table 1-6: Growth Capex Forecast 3,780 Tonnes/Day     ii
Table 1-7: Opex Forecast 3,780 Tonnes/Day     iii
Table 1-8: Summary of Costs for Recommended Work     vi
Table 2-1: LOM Production Rates6
Table 2-2: Site Visit Participants8
Table 4-1: Royalty and Special Tax Scale15
Table 6-1: Prior Exploration and Development Results (1)21
Table 6-2: Historic Yauricocha Production (From Mine Production Reports)22
Table 10-1: Yauricocha Exploration and Development Drilling40
Table 11-1: Chumpe LLOD48
Table 11-2: ALS Minerals LLOD48
Table 11-3: CRM Certified Means and Expected Tolerances50
Table 11-4: 2017-2019 CRM Means and Tolerances51
Table 11-5: 2018 CRM Performance Summary – ALS Minerals52
Table 11-6: 2018 and 2019 CRM Performance Summary – Chumpe Lab55
Table 11-7: 2019 - 2020 Chumpe Blank Failures57
Table 13-1: Yauricocha Metallurgical Performance, January 2019 to June 202066
Table 13-2: Concentrate Metal Recoveries, January 2019 to June 202066
Table 14-1: Raw Sample Mean Grades per Mineralized Zone81
Table 14-2: Summary of Main Resource Domain Groups in Geological Models82
Table 14-3: Capping Limits for Dominant Volumes in Mineral Resource Areas85
Table 14-4: Composite Statistics88
Table 14-5: Datamine Normalized Modelled Semi-Variogram Models92
Table 14-6: Block Model Parameters93
Table 14-7: Estimation Parameters95

 

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Table 14-8: Unit Value Price Assumptions106
Table 14-9: Metallurgical Recovery Assumptions106
Table 14-10: Unit Value Cut-off by Mining Method (US$/t)107
Table 14-11: Consolidated Yauricocha Mine Mineral Resource Statement as of 30 June, 2020 – SRK Consulting (Canada), Inc. (1) (2) (3) (4) (5) (6) (7) (8) (9)108
Table 14-12: Individual Mineral Resource Statements for Yauricocha Mine Areas as of June 30, 2020 – SRK Consulting (Canada), Inc.(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)109
Table 16-1: Mining Method by Mineralization Area and Zone124
Table 16-2: Parameters for SLC129
Table 16-3: Parameters for Mechanized OCF129
Table 16-4: Summary Statistics of RMRB(89) from the Tunnel Mapping130
Table 16-5: Summary Statistics of Geological Strength Index (GSI) from the Tunnel Mapping130
Table 16-6: Summary of Diamond Cored Drillholes Since 2015131
Table 16-7: Rock Mass Characterization for Domain135
Table 16-8: Summary of Uniaxial Compressive Strength (UCS) by Domain138
Table 16-9: Summary of Elastic Modulus (E) by Domain138
Table 16-10: Summary of Poisson Ratio (PR) by Domain138
Table 16-11: Intact Rock Strength Parameters – Limestone141
Table 16-12: Intact Rock Strength Parameters – Intrusive141
Table 16-13: Rock Mass Strength Parameters143
Table 16-14: Rock Mass Strength Parameters144
Table 16-15: Mining Recovery and Dilution Factors148
Table 16-16: Unit Value Metal Price Prices149
Table 16-17: Metallurgical Recoveries150
Table 16-18: NSR Calculation Parameters150
Table 16-19: Operating Cost153
Table 16-20: Economic Cut-Off Value by Mining Method (US$/t)153
Table 16-21: Stope Optimization Software Inputs154
Table 16-22: Reported Mine and Mill Production, 2012 to 2020154
Table 16-23: LOM Production Rates155
Table 16-24: LOM Production Schedule for 3,780 Tonnes/Day156
Table 16-25: LOM Production Schedule for 5,500 Tonnes/Day (5,500 tpd in 2024)157

 

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Table 16-26: LOM Production Schedule for 6,500 Tonnes/Day (6,500 tpd in 2024)158
Table 16-27: LOM Production Schedule for 7,500 Tonnes/Day (7,500 tpd in 2024)159
Table 16-28: Development Meters in Mine Plan160
Table 16-29: LOM Development Schedule for 3,780 Tonnes/Day162
Table 16-30: LOM Preparation Schedule for 3,780 Tonnes/Day162
Table 16-31: LOM Waste Schedule for 3,780 Tonnes/Day162
Table 16-32: LOM Development Schedule for 5,500 Tonnes/Day162
Table 16-33: LOM Preparation Schedule for 5,500 Tonnes/Day162
Table 16-34: LOM Waste Schedule for 5,500 Tonnes/Day162
Table 16-35: LOM Development Schedule for 6,500 Tonnes/Day162
Table 16-36: LOM Preparation Schedule for 6,500 Tonnes/Day162
Table 16-37: LOM Waste Schedule for 6,500 Tonnes/Day163
Table 16-38: LOM Development Schedule for 7,500 Tonnes/Day163
Table 16-39: LOM Preparation Schedule for 7,500 Tonnes/Day163
Table 16-40: LOM Waste Schedule for 7,500 Tonnes/Day163
Table 16-41: Current List of Major Underground Mining Equipment at Yauricocha164
Table 16-42: Main Planned Underground Mining Equipment (3,780 tpd)166
Table 16-43: Main Planned Underground Mining Equipment (5,500 tpd - 2024)166
Table 16-44: Main Planned Underground Mining Equipment (6,500 tpd - 2024)167
Table 16-45: Main Planned Underground Mining Equipment (7,500 tpd - 2024)167
Table 16-46: Production of Equipment and Person168
Table 16-47: Yauricocha Mine Intake and Exhaust Airway Capacities171
Table 16-48: Ventilation Requirements for Equipment and Personnel (3,780 tonnes/day)172
Table 16-49: Ventilation Requirements by Year (3,780 tpd)172
Table 16-50: Ventilation Requirements by Year - Mine Production 5,500 tpd174
Table 16-51: Ventilation Requirements by Year - Mine Production 6,500 tpd175
Table 16-52: Ventilation Requirements by Year - Mine Production 7,500 tpd177
Table 17-1: Mill Tonnage and Head Grades, January 2019 to June 2020181
Table 17-2: Yauricocha Polymetallic Circuit, 2013 to 2020* Performance182
Table 17-3: Yauricocha Oxide Circuit, 2013 to 2018 Performance185
Table 17-4: Yauricocha Plant, Major Process Equipment190
Table 17-5: Polymetallic and Oxide Circuits – Consumables191

 

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Table 18-1: Makeup Water Source and Use200
Table 18-2: Chumpe Diesel Storage Capacity (US Gallons and Litres)203
Table 18-3: Yauricocha Location Diesel Storage Capacity (US Gallons and Litres)203
Table 18-4: Tailings Storage Facility (Stage 5 Expansion)204
Table 19-1: Metal Price Forecast207
Table 20-1: Approved Operation and Closure Permits210
Table 20-2: Air Quality Monitoring (EIA extract)220
Table 20-3: Environmental Noise Monitoring (EIA extract)221
Table 20-4: Water Quality Monitoring (EIA extract)221
Table 20-5: Closure Plan – Annual Calendar for Guarantee Payment223
Table 20-6: Community Engagement Activities223
Table 20-7: Closed Components228
Table 20-8: Components for Future Closure229
Table 20-9: Closure Plan – Summary of Investment per Periods (US$)232
Table 21-1: Opex Forecast 3,780 Tonnes/Day235
Table 21-2: Sustaining Capex Forecast 3,780 Tonnes/Day235
Table 21-3: Growth Capex Forecast 3,780 Tonnes/Day236
Table 21-4: Opex Forecast 5,500 Tonnes/Day (2024)237
Table 21-5: Sustaining Capex Forecast 5,500 Tonnes/Day (2024)237
Table 21-6: Growth Capex Forecast 5,500 Tonnes/Day (2024)238
Table 21-7: Opex Forecast 6,500 Tonnes/Day (2024)239
Table 21-8: Sustaining Capex Forecast 6,500 Tonnes/Day (2024)239
Table 21-9: Growth Capex Forecast 6,500 Tonnes/Day (2024)240
Table 21-10: Opex Forecast 7,500 Tonnes/Day (2024)241
Table 21-11: Sustaining Capex Forecast 7,500 Tonnes/Day (2024)241
Table 21-12: Growth Capex Forecast 7,500 Tonnes/Day (2024)242
Table 22-1: Commodity Prices (CIBC, Consensus Commodity Forecast, August 2020)243
Table 22-2: Summary Economic Forecast244
Table 22-3: Incremental NPV and IRR Forecast245
Table 22-4: Incremental NPV and Profitability Index (PI) Forecast245
Table 22-5: Sensitivity Analysis NPV, 3,780 TPD (US$)247
Table 22-6: Sensitivity Analysis NPV, 5,500 TPD (US$)248

 

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Table 22-7: Sensitivity Analysis NPV, 6,500 TPD (US$) (2024)249
Table 22-8: Sensitivity Analysis NPV, 7,500 TPD (US$) (2024)250
Table 22-9: Yauricocha Mine - Risk Assessment252
Table 26-1: Summary of Costs for Recommended Work264
Table 28-1: Definition of Terms271
Table 28-2: Abbreviations273

 

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List of Figures

 

Figure 4-1: Yauricocha Location Map10
Figure 4-2: Yauricocha Mineral Title Map12
Figure 7-1: Local Geology Map (grid lines are 4 km x 4 km)27
Figure 7-2: Geologic Map of Yauricocha Mine Area28
Figure 9-1: Doña Leona Exploration Target Area35
Figure 9-2: El Paso-Éxito Exploration Target Area36
Figure 9-3: Victoria and Alida Exploration Target Areas37
Figure 9-4: Kilcaska Exploration Target Area38
Figure 10-1: Extent of Drilling and Sampling Plan View41
Figure 10-2: Extent of Drilling and Sampling Sectional View42
Figure 11-1: ALS Minerals Laboratory CRM (PLSUL-32) Performance53
Figure 11-2: Yauricocha Mine Chumpe Laboratory CRM (PLSUL-24) Performance56
Figure 11-3: Yauricocha Mine Chumpe Laboratory Blank (TR-18137) Performance58
Figure 11-4: Yauricocha Mine Chumpe Duplicate Analyses’ Performances60
Figure 13-1: Mineralized Material Tonnes Processed and Metal Grades (Excluding Silver)67
Figure 13-2: Mineralized Material Tonnes Processed and Silver Grade (g/t)67
Figure 14-1: Modeled Mineralized Areas Estimated at Yauricocha Mine69
Figure 14-2: Mina Central Mineralized Model72
Figure 14-3: Esperanza Mineralized Model73
Figure 14-4: Cross-section of Esperanza Geological Model Showing Composite Ag Grades74
Figure 14-5: Mascota Mineralized Model75
Figure 14-6: Cuye Mineralized Model76
Figure 14-7: Example of Cachi-Cachi Models78
Figure 14-8: Cuerpos Pequeños Mineralized Model79
Figure 14-9: Log Cumulative Probability Plots for Capping Analysis – Esperanza84
Figure 14-10: Raw Sample Length Histogram for Mina Central and Esperanza86
Figure 14-11: Sample Length vs. Ag, Pb, Cu and Zn Grade Plot for Mina Central87
Figure 14-12: Total Metal Content vs. Density Regressions89
Figure 14-13: Examples of Modelled Variograms for Mina Central and Esperanza91
Figure 14-14: Visual Block to Composite Comparison – Mina Central96

 

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Figure 14-15: Visual Block to Composite Comparison – Esperanza97
Figure 14-16: Visual Block to Composite Comparison – Mascota97
Figure 14-17: Mina Central and Esperanza Ordinary Kriging Result Comparison to Declustered Capped Composite Values99
Figure 14-18: Mina Central and Esperanza Swath Plots101
Figure 14-19: Example of Scripted and Re-classed Classification for Esperanza103
Figure 14-20: Example of Scripted and Re-classed Classification for Mina Central103
Figure 14-21: Example of Scripted and Re-classed Classification for Mascota Oxide Cu Pb-Ag104
Figure 14-22: Example of Mining Depletion in Block Models – Mina Central105
Figure 14-23: Mina Central Value vs. Tonnage Chart for M&I Resource Categories114
Figure 14-24: Esperanza Value vs. Tonnage Chart for M&I Resource Categories115
Figure 14-25: Cuye Value vs. Tonnage Chart for M&I Resource Categories115
Figure 14-26: Mascota Value vs. Tonnage Chart for M&I Resource Categories116
Figure 14-27: Cachi-Cachi Value vs. Tonnage Chart for M&I Resource Categories116
Figure 14-28: Cuerpos Pequeños Value vs. Tonnage Chart for M&I Resource Categories117
Figure 14-29: Yauricocha Value vs. Tonnage Chart for all Resource Categories117
Figure 16-1: Yauricocha Mine Showing Mining Areas (Plan View)121
Figure 16-2: Yauricocha Long Section Showing Mining Areas and Mineralized Zones (Looking Northeast)122
Figure 16-3: Yauricocha Isometric Showing Mining Areas and Mineralized Zones124
Figure 16-4: Typical Sub-level Cave Layout, 870 Level - Piso 12 in Antacaca Sur (Plan View)126
Figure 16-5: Isometric View of Drawpoints in Mina Central (Looking West)126
Figure 16-6: Schematic Showing Overhand Cut and Fill Mining (Long Section)127
Figure 16-7: Laubscher Estimating for Drawpoints Design128
Figure 16-8: Final Stope Design for Yauricocha128
Figure 16-9: Conceptual Geotechnical Model (Plan View)131
Figure 16-10: Stereogram of Main Joint Families134
Figure 16-11: Major Fault (Isometric View)134
Figure 16-12: Example Ground Control Management Level Plan135
Figure 16-13: Timeline for Laboratory Test136
Figure 16-14: Rock Mechanics Laboratory Tests (Intrusive and Limestone) Between 2012 to 2019136
Figure 16-15: Soil Mechanics Laboratory Tests (Mineralized Material) Between 2012 to 2019137

 

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Figure 16-16: Laboratory Tests Spatially Georeferenced (Northeast View)137
Figure 16-17: Intact Rock Strength Envelope Hoek – Brown (Limestone)140
Figure 16-18: Intact Rock Strength Envelope Hoek – Brown (Intrusive)140
Figure 16-19: Humidity Content Test141
Figure 16-20: Cohesion vs Humidity (Mineralized Material)142
Figure 16-21: Internal Friction Angle vs Humidity (Mineralized Material)142
Figure 16-22: Uniaxial Compressive Strength vs Humidity (Mineralized Material)143
Figure 16-23: Ground Support Types144
Figure 16-24: Example of Ground Support Design Profile145
Figure 16-25: LOM Production – Tonnes per Year and %Grade156
Figure 16-26: LOM Production – Tonnes per Year and NSR156
Figure 16-27: LOM Production – 5,500 Tonnes per Year and %Grade157
Figure 16-28: LOM Production – 5,500 Tonnes per Year and NSR157
Figure 16-29: LOM Production – 6,500 Tonnes per Year and %Grade158
Figure 16-30: LOM Production – 6,500 Tonnes per Year and NSR158
Figure 16-31: LOM Production – 7,500 Tonnes per Year and %Grade159
Figure 16-32: LOM Production – 7,500 Tonnes per Year and NSR159
Figure 16-33: Mine Design Distribution of Mine Workings and Mineralized Areas161
Figure 16-34: Zone III Ventilation Isometric View170
Figure 16-35: Zone II and Zone V Ventilation Isometric View171
Figure 17-1: Yauricocha Mill Concentrate Production and Recoveries183
Figure 17-2: Yauricocha Block Flow Diagram187
Figure 17-3: Flowsheet Polymetallic Plant188
Figure 17-4: Flowsheet Oxide Plant189
Figure 18-1: Project Infrastructure Location194
Figure 18-2: Routes from Lima to the Project195
Figure 18-3: Mining Area Infrastructure197
Figure 22-1: Sensitivity Analysis – NPV vs. Production Rate245
Figure 22-2: Sensitivity Analysis – 3,780 TPD247
Figure 22-3: Sensitivity NPV vs. Discount Rate – 3,780 TPD247
Figure 22-4: Sensitivity Analysis – 5,500 TPD248
Figure 22-5: Sensitivity NPV vs. Discount Rate – 5,500 TPD248

 

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Figure 22-6: Sensitivity Analysis – 6,500 TPD249
Figure 22-7: Sensitivity NPV vs. Discount Rate – 6,500 TPD249
Figure 22-8: Sensitivity Analysis – 7,500 TPD250
Figure 22-9: Sensitivity NPV vs. Discount Rate – 7,500 TPD250

 

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2Introduction and Terms of Reference

 

2.1Terms of Reference and Purpose of the Report

 

This report presents a Preliminary Economic Assessment (PEA) designed to give an indication of the economic viability of the Yauricocha property. The assessment is based on Indicated and Inferred Resources estimated by SRK and effective as of June 30, 2020. The mine plan presented in this PEA considers the Mineral Resources depleted to June 30, 2020.

 

Sierra prepared LOM production and development plans based on four production rate options ranging from the base case of 3,780 tpd to 7,500 tpd (Table 2-1). The specific details for these production options are described in Section 16, operating and capital cost information is provided in Section 21, and an economic analysis of each production rate option is provided in Section 22.

 

Table 2-1: LOM Production Rates

 

Tonnes/DayTonnes/YearComments
3,780 tpd (base case)1.3 MConstant production rate through LOM *
5,500 tpd2.0 MIncreases from 3,780 tpd to 5,500 tpd in 2024
6,500 tpd2.4 MReaches 6,500 tpd in 2024
7,500 tpd2.8 MReaches 7,500 tpd in 2024

Source: Sierra Metals, Redco, 2020

Note: *3780 tpd used as the base case assumes that permit will be received to reach that level, which is in the initial process.

 

The reader is reminded that PEA studies are indicative and not definitive and that the Mineral Resources used in the proposed mine plan include Inferred Resources as allowed for by the CSA NI 43-101 in PEA studies. The PEA is preliminary in nature; it 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, and there is no certainty that the results of the PEA will be realized.

 

2.2Qualifications 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.

 

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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:

 

·Andre Deiss, B.Sc. (Hons), Pr.Sci.Nat., MSAIMM, SRK Principal Consultant (Resource Geology), is the QP responsible for geology and Mineral Resources, Sections 7 through 12, 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, SME-RM, SRK Associate Consultant (Metallurgy), is the QP responsible for mineral processing, metallurgical testing and recovery methods Sections 13, 17, and portions of Sections 1, 25 and 26 summarized therefrom, of this Technical Report.

 

2.3Qualifications of Consultants (Sierra Metals)

 

The following individuals from Sierra Metals, by virtue of their education, experience and professional association, are considered 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, Mining Engineer, MBA, FAusIMM, 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.

 

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2.4Details of Inspection

 

Table 2-2 shows recent site visit participants.

 

Table 2-2: Site Visit Participants

 

PersonnelExpertiseDate(s) of VisitDetails of Inspection
Andre DeissResource Geology, Mineral ResourcesApril 28 – May 23, 2019Reviewed geology, resource estimation methodology, sampling and drilling practices, and examined drill core.
Daniel SepulvedaMetallurgy and ProcessApril 28 – May 23, 2019Reviewed metallurgical test work, tailings storage, and process plant.

 

2.5Sources of Information

 

The sources of information used in the preparation of this report include data and reports supplied by Sierra Metals personnel as well as documents cited throughout the report and referenced in Section 27.

 

2.6Effective Date

 

The effective date of this report is June 30, 2020.

 

2.7Units of Measure

 

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

 

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3Reliance on Other Experts

 

The consultants’ opinions contained herein are based on information provided to the consultants by Sierra Metals throughout the course of the investigations.

 

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 Yauricocha Mine and reproduced them for this report. Sierra has assured SRK that the mineral titles, surface ownership and permitting are all valid and in good order. As such, 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 Yauricocha Mine is in the Alis district, Yauyos province, Department of Lima, approximately 12 km west of the Continental Divide and 60 km south of the Pachacayo railway station. The active mining area within the mineral concessions is located at coordinates 421,500 m east by 8,638,300 m north on UTM Zone 18L on the South American 1969 Datum, or latitude and longitude of 12.3105⁰ S and 75.7219⁰ W. It is geographically in the high zone of the eastern Andean Cordillera and within one of the major sources of the River Cañete, which discharges into the Pacific Ocean. The mine is at an average altitude of 4,600 masl. Figure 4-1 shows the project location.

 

 

Source: Sierra Metals, 2020

 

Figure 4-1: Yauricocha Location Map

 

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4.2Mineral Titles

 

The mining concession Acumulación Yauricocha (Figure 4-2) was transferred from Empresa Minera del Centro del Peru, the Peruvian state-owned mining entity, to Minera Corona in 2002 (Empresa Minera, 2002) for the sum of US$4,010,000, plus an agreement to invest US$3,000,000 to project development or to the community, which has been completed. The Accumulation Yauricocha includes the mineral rights on 18,685 ha. It includes areas in the communities of San Lorenzo de Alis, Laraos, Tinco, Huancachi, and Tomas. Dia Bras purchased 82% of Minera Corona in May 2011. On December 5, 2012, Dia Bras Exploration changed its name to Sierra Metals Inc. According to information provided by Sierra, the mineral concessions are not subject to an expiration date and remain in effect as long as these two conditions are met:

 

1.Renewal payment is made to the Peruvian federal government in the amount of US$3 per hectare (ha); and

 

2.Annual minimum production amount of US$100 per year, per hectare.

 

Included within the above area is a processing site concession with an area of 148.5 ha with a permitted capacity of 3,000 dry tpd. This has been authorized by Resolution No. 279- 2010-MEM-DGM/V on July 14, 2010.

 

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Source: Sierra Metals, 2019

 

Figure 4-2: Yauricocha Mineral Title Map

 

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4.2.1Nature and Extent of Issuer’s Interest

 

As part of the mineral concessions transfer from Empresa Minera del Centro del Peru in 2002 (see Section 4.2), Minera Corona acquired approximately 677 ha of land and associated surface rights. A portion of the San Lorenzo Alis community is located within the 677 ha.

 

In 2007, Minera Corona entered into an additional agreement with the San Lorenzo Alis community (Villaran, 2009). Under this agreement, Minera Corona owns the surface rights and may conduct mining operations in the subject 677 ha through August 2, 2037, or until mine closure, whichever comes first. In exchange, Minera Corona is obligated to pay the San Lorenzo Alis community an annual fee. This fee is paid by Minera Corona every two years beginning on January 1, 2009, and surface rights remain in good standing. However, in February 2013 an addendum was signed which establishes that the payments must be made every year. This right of usufruct (beneficial use) has been registered before the Public Registry of Lima, Office of Cañete (Public Registry of Lima et al, 2013).

 

Minera Corona has in place several land surface agreements by means of which the title holders of the land surfaces within the area of the Acumulación Yauricocha mining concession, grants Minera Corona the right to use the superficial surface and execute mining activities. The agreements entered by Minera Corona in this regard, are the following:

 

Lease Agreement: Huacuypacha

 

Minera Corona has entered into a lease agreement with Mr. Abdon Vilchez Melo, regarding the surface land within the real property named Huacuypacha, located in Tinco, district of Alis, province of Yauyos, Department of Lima. This land is not registered in the Public Registry. By means of this agreement, Minera Corona acquired the right to use said land, including access to water boreholes.

 

This agreement has been renewed in four opportunities. The term of the agreement expires on December 31, 2021.

 

Lease Agreement: Queka and Cachi-Cachi

 

Minera Corona has entered into a lease agreement with the Family Varillas, in relation to land containing 56 ha located in district of Alis, province of Yauyos, Department of Lima. This land is not registered in the Public Registry. By means of this agreement, the landowner granted the use of the referred land in favor of Minera Corona for a total payment of S/.31,500. In addition to the payment obligation, Minera Corona has assumed the obligation to take care of all the environmental liabilities that its activities could generate.

 

This agreement has been amended in two opportunities. The term of the agreement expired on March 7, 2012. However, Minera Corona has signed a new agreement extending the term of the lease until March 7, 2022 in exchange for a one-time payment of S/.210,000.

 

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4.3Royalties, Agreements and Encumbrances

 

4.3.1Debt

 

On March 11, 2019, the Company entered into a new six-year senior secured corporate credit facility (“Corporate Facility”) with Banco de Credito de Peru that provides funding of up to $100 million effective March 8, 2019. The Corporate Facility provides the Company with additional liquidity and will provide the financial flexibility to fund future capital projects as well as corporate working capital requirements. The Company will also use the proceeds of the new facility to repay existing debt balances. The most significant terms of the agreement are:

 

·Term: 6-year term maturing March 2025;

 

·Principal Repayment Grace Period: 2 years;

 

·Principal Repayment Period: 4 years; and

 

·Interest Rate: 3.15% + 3-Month London Interbank Offered (LIBOR).

 

The Corporate Facility is subject to customary covenants, including consolidated net leverage and interest coverage ratios and customary events of default. The Company is in compliance with all covenants as of March 31, 2019. On March 11, 2019, Dia Bras Peru drew down $21.4 million from this facility. Interest is payable quarterly and interest payments will begin on the drawn and undrawn portions of the facility starting in June 2019.

 

Principal payments on the amount drawn from the facility will begin in March 2021. The Company repaid the amount owed on the Corona Acquisition Facility on May 11, 2019 using funds drawn from the new facility. The loan is recorded at amortized cost and is being accreted to face value over 6 years using an effective interest rate of 5.75%.

 

4.3.2Royalties and Special Taxes

 

In 2011, the Peruvian Congress passed a new Mining Law effective in 2012. Under this law, a Special Tax and Royalty is introduced which applies to the operating margin of producing mining companies. The margin rates for a given interval of Earnings Before Interest and Tax (EBIT) are shown in Table 4-1. The total royalty is the summation of the special mining tax and the mining royalty.

 

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Table 4-1: Royalty and Special Tax Scale

 

EBIT MarginSpecial Mining Tax – Margin RateMining Royalty – Margin Raw
0.00% 5.00%0.00%0.00%
5.00% 10.00%2.00%1.00%
10.00% 15.00%2.40%1.75%
15.00% 20.00%2.80%2.50%
20.00% 25.00%3.20%3.25%
25.00% 30.00%3.60%4.00%
30.00% 35.00%4.00%4.75%
35.00% 40.00%4.40%5.50%
40.00% 45.00%4.80%6.25%
45.00% 50.00%5.20%7.00%
50.00% 55.00%5.60%7.75%
55.00% 60.00%6.00%8.50%
60.00% 65.00%6.40%9.25%
65.00% 70.00%6.80%10.00%
70.00% 75.00%7.20%10.75%
75.00% 80.00%7.60%11.50%
80.00% 85.00%8.00%12.00%
85.00% 90.00%8.40% 

Source: Gustavson, 2015

 

4.4Environmental Liabilities and Permitting

 

The mine known as “Acumulación Yauricocha Unit” is located on the property of the San Lorenzo de Alis and Laraos Communities and in the buffer zone of the Nor Yauyos-Cochas landscape reserve. It was established by the Supreme Decree N° 033-2001-AG (06/03/2001) which has a Master Plan 2006-2011 by the National Institute of Natural Resources and Natural Protected Area Office (INRENA, Instituto Nacional de Recursos Naturales, and IANP, Intendencia de Áreas Naturales Protegidas).

 

Sierra has managed its operations in Acumulación Yauricocha based on:

 

·The Environmental Adjustment and Management Plan (PAMA, Plan de Adecuación y Manejo Ambiental) presented by CENTROMIN (approved by Directorial resolution N° 015-97-EM/DGM, 01/03/1997);

 

·The modification of the implementation nine projects of the PAMA of the Yauricocha Production Unit presented by CENTROMIN (approved by Directorial resolution N° 159-2002-EM-DGAA, 05/23/2002);

 

·The implementation of the PAMA “Yauricocha" Administrative Economic Unit by Sierra (approved by Directorial resolution N° 031-2007-MINEM-DGM, 02/08/2007);

 

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·The Mine Closure Plan (PCM) at feasibility level of the Yauricocha Mining Unit, presented by Sierra (approved by Directorial resolution N° 258-2009-MINEM-AAM, 08/24/2009);

 

·Authorization to operate the Mill N° 4 (8'x10') and the amendment of the "Yauricocha Chumpe" Benefit Concession to the expanded capacity of 2500 TMD, presented by Sierra (approved by Resolution N° 279-2010-MINEM-DGM-V, 07/14/2010);

 

·The Yauricocha Mining Unit Mine Closure Plan Update, presented by Sierra (approved by Directorial resolution N° 495-2013-MINEM-AAM, 12/17/2013);

 

·Supporting Technical Reports to the PAMA (ITS, Informe Técnico Sustentatorio) "Expanding the capacity of the Processing Plant Chumpe of the Accumulated Yauricocha Unit from 2500 to 3000 TMD" (approved by Directorial resolution N° 242-2015-MINEM-DGAAM, 06/09/2015);

 

·Supporting Technical Report to the PAMA (ITS) "Technological improvement of the domestic waste water treatment system" (approved by Directorial resolution N° 486-2015-MINEM-DGAAM, 11/12/2015); and

 

·Approval of the amendment of the Closure Plan of the Yauricocha Mining Unit (approved by Directorial resolution N° 002-2016-MINEM-DGAAM, 01/08/2016).

 

The Supporting Technical Reports are prepared in compliance with the Supreme Decree N° 054-2013-PCM (article Art. 4) and R.M. N° 120-2014-MEM/DM, and refer to the modification of mining components, or extensions and upgrades in the mining unit, in exploration and exploitation projects when the environmental impacts are insignificant.

 

Environmental liabilities and permitting are discussed in further detail in Section 20. A list of approved environmental and closure permits is included in Section 20.1 Required Permits and Status.

 

4.5Other Significant Factors and Risks

 

SRK is not aware of any additional significant factors or risks that affect access, title, right, or ability to perform work on the property.

 

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5Accessibility, Climate, Local Resources, Infrastructure and Physiography

 

Sections 5.1, 5.2, 5.3 and 5.4 of this Report have been excerpted from NI 43-101 Technical Report on the Yauricocha Mine, prepared by Gustavson Associates, report date May 11, 2015 and are shown in italics. Standardizations have been made to suit the format of this report; any changes to the text have been indicated using [brackets].

 

5.1Topography, Elevation and Vegetation

 

The topography of the Yauricocha mining district is abrupt, typical alpine terrain. Pliocene erosion is clearly recognizable in the undulating, open fields to the northeast of the Continental Divide while to the southeast the terrain is cut by deep valleys and canyons. The extent of this erosion is evidenced by mountain peaks with an average elevation of 5,000 masl.

 

To the southeast of the Continental Divide, the high valleys are related to the Chacra Uplift. Below 3,400 m elevation, this grand period of uplift is clearly illustrated by deep canyons that in some cases are thousands of meters deep. Valleys above 4,000 masl clearly demonstrate the effects of Pliocene glaciations, with well-developed lateral and terminal moraines, U-shaped valleys, hanging valleys and glacial lakes.

 

Vegetation in the Yauricocha area is principally tropical alpine – rain tundra. The flora is varied with species of grasses, bushes, and some trees. The biological diversity is typical of Andean alpine communities.

 

5.2Accessibility and Transportation to the Property

 

The principal access to the Mine is the main Lima – Huancayo – Yauricocha highway. The highway is paved (asphalt) for the first 420 km, along the Lima – Huancayo – Chupaca interval. From Chupaca to the Mine the road is unpaved.

 

Another important access route is along the southern Pan-American Highway from Lima through Cañete to Yauricocha, through the valley of the Rio Cañete, for a distance of 370 km. The road is paved (asphalt) from Lima to Pacarán, and from Pacarán to the mine it is unpaved.

 

5.3Climate and Length of Operating Season

 

The climate in the region is cool, with two well-demarcated seasons with daytime temperatures above 20º C; the nights are cool with temperatures below 10º C. Operations are carried out year-round. The wet season extends from November to April, and during April and May there is broad vegetative cover. The dry season covers the remainder of the year.

 

During the wet season, snow and hail feed the glaciers, which subsequently feed streams that descend the mountainsides and feed the lakes below.

 

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The climate factors do not affect the length of the operating season, and the mine operates continuously year-round.

 

5.4Sufficiency of Surface Rights

 

Overall, the property position including mineral concessions and surface rights are expected to be sufficient for foreseeable mine activities. The project infrastructure is located within the area where Sierra Metals has surface rights. The Cachi-Cachi mine is located within the area of mineral rights, but outside of the area of surface rights. Cachi-Cachi is an underground mine, and surface access to Cachi-Cachi is located within the area of surface rights.

 

Of the 20 km length of the property along strike, approximately 4 km have been developed near the center of the property.

 

5.5Infrastructure Availability and Sources

 

5.5.1Power

 

The primary power is provided through the existing power system, Sistema Interconectado Nacional (SINAC) to the Oroya Substation. A three phase, 60 hertz, 69 kV power line owned and operated by Statkraft (SN Power Peru S.A.) through its subsidiary, Electroandes S.A. delivers electricity from the Oroya Substation to the Project substation at Chumpe. Power is transformed to 69 kV line voltage and approximately 9 MVA is supplied to the mine and 3.75 MVA is supplied to the processing plant.

 

5.5.2Water

 

Water is sourced from Ococha Lagoon, Cachi-Cachi underground mine, and recycle/overflow water from the TSF depending on end use.

 

5.5.3Mining Personnel

 

The largest community in the area is Huancayo located approximately 100 km to the east-northeast. Huancayo and the surrounding communities have a combined population of approximately 340,000. Huancayo is the capital of the Junin Region of Peru.

 

The employees live on-site at four camps and a hotel with capacity to house approximately 2,000 people. The camps include the supervisory camp, the mill camp, and the mining camp that also houses mining contractors. There are approximately 1,700 people (500 employees and 1,200 contractors) currently working on the site.

 

5.5.4Potential Tailings Storage Areas

 

Tailings from the Chumpe Mill are stored in the TSF. The tailings undergo flocculation and settling and are then processed through a thickener and piped to the existing permitted TSF. The dam up to Stage 7 has a capacity of 7,773 km3. Currently, the construction of Stage 5 Phase 1 (4531 masl) has been completed for a capacity of 1,003 km3. The construction of Phase 2 of Stage 5 (4533 masl) is to be restarted in November 2020, continuing with Stage 6 in 2021 and Stage 7 in 2022.

 

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5.5.5Potential Waste Rock Disposal Areas

 

The Project site has existing permitted waste disposal areas as well as systems to handle miscellaneous wastes.

 

5.5.6Potential Processing Plant Sites

 

The site has an existing mineral processing site that has been in use for several years.

 

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6History

 

6.1Prior Ownership and Ownership Changes

 

The silver of Yauricocha was initially documented by Alexander von Humboldt in the early 1800s. In 1905, the Valladares family filed the claims of what is today the Yauricocha Mine. The Valladares family mined high grade silver mineralized material for 22 years and in 1927, Cerro de Pasco Corporation acquired the Yauricocha claims. In 1948, Cerro de Pasco commenced mining operations at Yauricocha until the Peruvian Military Government nationalized Cerro de Pasco Corporation and Yauricocha became a production unit of State-owned Centromin Peru S.A. for 30 years. In 2002, the Yauricocha unit was privatized and purchased by Sociedad Minera Corona S.A. (Minera Corona). Dia Bras (renamed Sierra Metals Inc. in 2012) acquired 82% of the total equity of Minera Corona in May 2011.

 

Sierra Metals retains a controlling ownership status in the Yauricocha Mine, through their subsidiary Minera Corona. An unnamed private interest holds 18.16% equity ownership in Yauricocha, with Sierra Metals holding the remaining 81.84%.

 

6.2Exploration and Development Results of Previous Owners

 

Prior to the 1970s detailed production records are unavailable. Since 1973, Company records indicate that Yauricocha has produced 13.6 Mt of mineralized material containing 63 Moz of silver as well as 378 kt of lead, 117 kt of copper and nearly 618 kt of zinc. Since 1979, Yauricocha has averaged 413,000 t of production per year. The historical estimates presented below predate CIM and NI 43-101 reporting standards and therefore cannot be relied upon. These estimates were not used as a basis for the current Resource as the material has already been mined and processed.

 

Table 6-1 summarizes exploration and mining statistics under Minera Corona ownership. Mineral inventory is derived from Company reports to Peruvian regulatory authorities and are not CIM compliant. Mine production is derived from actual mine production records.

 

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Table 6-1: Prior Exploration and Development Results (1)

 

YearExploration
(m)
Development
and Infill
(m)
Exploration 
&
Development
Drilling (DM)
By Company
(m)
Drilling (DDH)
Contractor
(m)
Mine
Production
(t)
Mineral
Inventory
(t)
20022,7261,1603,8861,887NA124,37734,463
20033,3071,6484,9553,415NA212,677571,520
20041,7782,2454,0232,970NA233,4861,001,350
20052,0042,0304,0343,1608,043373,546702,524
20067881,9982,7862,99910,195487,9096,371,845
20078261,6402,4664,7516,196546,6524,773,198
20087961,5842,3805,37913,445690,2224,720,606
20098721,0401,9124,95513,579802,7374,974,593
20104546321,0864,6153,527837,3895,379,526
20116849271,6115,1959,071816,2894,943,770
20129216091,53011,53231,257872,8695,246,000
20131,7308392,56910,65316,781840,7116,394,000
20146803311,0119,35730,45589,091NA
20151202203429,73533,214802,2515,337,000 (2)
20169205,3196,2399,1454,202847,467NA
20178657,6558,5207,38449,7151,009,6358,917,000 (3)
20181,1205,0736,1935,10336,7711,074,475NA
20199563,2264,1824,65345,9831,127,4808,439,000 (4)
2020*351,8631,8981,07610,212457,029NA

Source: Sierra Metals, 2020

* January to June 30, 2020

 

(1)Except as noted below, Mineral Inventory included Proven and Probable Reserves and Indicated Resources as reported to the Peruvian Exchange and is not CIM compliant. These numbers are for historic information purposes only.
(2)Proven and Probable Reserves estimated by Gustavson on May 11, 2015 (excludes Resources)
(3)Proven and Probable Reserves estimated by SRK, as of July 31, 2017 (excludes Resources)
(4)Proven and Probable Reserves estimated by SRK as of October 31, 2019 (excludes Resources)

 

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6.3Historic Production

 

Historic production is shown in Table 6-2 and is based on Yauricocha Mine production reports.

 

Table 6-2: Historic Yauricocha Production (From Mine Production Reports)

 

Fiscal YearData SourceDate EndedMineralized Material Processed
(t)
Ag
(oz)
Cu
(t)
Zn
(t)
Pb
(t)
2001Reported Actual12/31/2001235,0001,124,08653015,1368,402
2002Reported Actual12/31/2002124,000592,5383567,7364,965
2003Reported Actual12/31/2003213,000898,06680311,3896,540
2004Reported Actual12/31/2004356,800643,0001,04614,952996
2005Reported Actual12/31/2005374,642868,0002,49122,6576,883
2006SNL Standardized Estimate12/31/2006269,333915,7173,90220,6207,070
2007Reported Actual12/31/2007NANA5,330NANA
2008Reported Actual12/31/2008NA1,832,5505,45620,46611,560
2009Reported Actual12/31/2009790,743NANANANA
2010Reported Actual12/31/2010837,839NANANANA
2011Reported Actual12/31/2011816,2891,230,0003,3489,9468,723
2012Reported Actual12/31/2012872,8692,143,9714,11022,62815,966
2013Reported Actual12/31/2013837,4961,866,7692,95523,05016,808
2014Reported Actual12/31/2014890,9102,121,5653,49124,61021,189
2015Reported Actual12/31/2015829,8051,791,0562,52519,08617,885
2016Reported Actual12/31/2016897,1691,688,1832,84924,85916,529
2017Reported Actual12/31/20171,023,4911,414,0875,31634,08812,685
2018Reported Actual12/31/20181,106,6481,315,1017,55334,71311,938
2019Reported Actual12/31/20191,092,4102,244,35411,80940,45617,225
2020*Reported Actual6/30/2020483,5091,030,9445,68518,0227,685

Source: Sierra Metals, 2020

* January to June 30, 2020

 

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7Geological Setting and Mineralization

 

Sections 7.1, 7.2 and 7.3 of this Report has been excerpted from NI 43-101 Technical Report on the Yauricocha Mine, prepared by Gustavson Associates, report date May 11, 2015 and are shown in italics. Some new information has also been provided by Sierra Metals. Standardizations have been made to suit the format of this report; any changes to the text have been indicated by the use of [brackets].

 

7.1Regional Geology

 

Most of the stratigraphy, structure, magmatism, volcanism and mineralization in Peru are spatially- and genetically-related to the tectonic evolution of the Andean Cordillera that is situated along a major convergent subduction zone where a segment of the oceanic crust, the Nazca Plate, slips beneath the overriding South American continental plate. The Andean Cordillera has a metamorphic rock basement of Proterozoic age on which Hercynian Paleozoic sedimentary rocks accumulated and were, in turn, deformed by plutonism and volcanism to Upper Paleozoic time. Beginning in the Late Triassic time, following Atlantic Ocean rifting, two periods of subduction along the western margins of South America resulted in the formation of the present Andes: the Mariana-type subduction from the Late Triassic to Late Cretaceous and Andean-style subduction from the Late Cretaceous to the present. Late Triassic to late Cretaceous Mariana-type subduction resulted in an environment of extension and crustal attenuation producing an oceanic trench, island arcs, and back arc basin from west to east. The back-arc basin reportedly has two basinal components, the Western Basin and Eastern Basin, which are separated by the Cusco – Puno high, probably part of the Maranon Arch. The basins are largely comprised of marine clastic and minor carbonate lithologies of the Yura and Mara Groups overlain by carbonates of the Ferrobamba Formation. The western back-arc basin, called the ‘Arequipa Basin’, is the present Western Andean Cordillera of Peru; the site of a Holocene magmatic belt that spans the Andes and was emplaced from Late Oligocene to 25 Ma.

 

The Western Andean Cordillera is recognized for its world class base- and precious-metal deposits, many of which have been intermittently mined since Incan time. Most of the metal deposits in Peru are spatially and genetically associated with metal-rich hydrothermal fluids generated along magmatic belts that were emplaced along convergent plate tectonic lineaments. Furthermore, many of these primary base-metal deposits have undergone significant supergene enrichment due to uplift and weathering over the last 30 Ma.

 

Radiometric studies have correlated the igneous host rocks and attendant hydrothermal alteration for some of the largest and richest porphyry copper deposits in the world along the Western Andean Cordillera from 6° to 32° south, including the Chalcobamba – Tintaya iron-gold-copper skarn and porphyry belt (30 to 35 Ma) in the main magmatic arc, southward through the Santa Lucia district (25 to 30 Ma) and into Chile. The Andahuaylas-Yauri Porphyry Copper Belt, a well-known 300 km long porphyry copper belt related to middle Eocene to early Oligocene calc-alkaline plutonism, is situated along the northeastern edge of the Western Andean Cordillera.

 

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7.2Local Geology

 

The local geology of the Yauricocha Mine has been well understood by Minera Corona personnel for a number of years and is summarized as follows. Figure 7-1 and Figure 7-2 show the local surface geology of the Yauricocha area.

 

Goyllarisquizga Formation

 

The oldest rocks exposed in the area are the lower Cretaceous Goyllarisquizga arenites. This formation is approximately 300 m thick and comprises thick gray and white arenites, locally banded with carbonaceous lutites as well as small mantos of low-quality coal beds and clay. In the vicinity of Chaucha, these arenites have near their base interbedded, red lutite. The arenites crop out in the cores of the anticlines southwest of Yauricocha, as beds dispersed along the Chacras uplift, and isolated outcrops in the Éxito zone.

 

Jumasha Formation

 

The mid-Cretaceous Jumasha Formation consists of massive gray limestone, averages 700 m thick, and concordantly overlies the Goyllarisquizga Formation. Intercalations of carbonaceous lutites occur at its base near the contact with the arenites. These layers are succeeded by discontinuous lenses of maroon and grey limestone, occasionally with horizons of lutite and chert about 6 m thick. Also present are pseudo-breccias of probable sedimentary origin and a basaltic sill.

 

Celendín Formation

 

The Celendín Formation concordantly overlies the Jumasha Formation and contains finely stratified silicic lutites with intercalations of recrystallized limestone of Santoniana age as well as the France Chert. The average thickness in the Yauricocha area is 400 m.

 

Casapalca Red Beds

 

The Casapalca red beds lay concordantly on the Celendín Formation with a gradational contact. It has been assigned an age between upper Cretaceous and lower Tertiary, but because of the absence of fossils its age cannot be precisely determined. It is composed primarily of calcareous red lutites, pure limestones, and reddish arenaceous limestone. Lava flows and tuffaceous beds have been occasionally reported.

 

Intrusions

 

Major intrusive activity occurred during the Miocene period. Radiometric K-Ar ages derived from biotite samples taken in the Yauricocha and Éxito areas yield an average age of 6.9 Ma. The intrusives cut the sediments at a steep angle and exhibit sharp contacts, as well as a tendency to follow the regional strike and dip of the structure. The intrusions vary in size from bodies of several hundred square meters to large masses that cover several square kilometers. Small intrusive compositions vary from granodiorite to quartz monzonite at margins and are typically porphyritic with phenocrysts of plagioclase, orthoclase, biotite, hornblende and quartz. The plagioclases vary from orthoclase to andesine.

 

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Metamorphism

 

All of the intrusions have produced metamorphic aureoles in the surrounding rocks. The extent, type, and grade of metamorphism vary greatly with the type of rock intruded. The rocks have been altered to quartzites, hornfelsed lutites, and recrystallized limestones. Locally, the intrusions have produced narrow zones of skarn of variable width. These skarn zones contain epidote, zoisite, tremolite, wollastonite, phlogopite, garnet, chlorite and diopside.

 

Structure

 

The Andean Cordillera uplift has dominated the structural evolution of the Yauricocha area through episodes of folding, fracturing, and brecciation associated with the local structure having a general NW-SE strike principally expressed as follows:

 

Folds

 

Various folds make up the principal structures of the Yauricocha area. The Purísima Concepcíon anticline and the France Chert syncline occur in the Mina Central area, while the Cachi-Cachi anticline and Huamanrripa al Norte syncline and the Quimpara syncline occur immediately to the south of Lake Pumacocha, north of Mina San Valentíne.

 

The Purísima Concepcíon anticline, located southwest of the Yauricocha Mine in the Mina Central area, is well defined by a tightly folded basaltic sill 17 m thick. The axial trace trends approximately N50W with a gentle SE plunge of 20°. In the axis of this anticline and towards Flanco East, the basaltic sill contains occurrences of disseminated gold in horizontal, silicic breccias.

 

The France Chert syncline is a tight fold, also in the Mina Central area, but located northeast of the mine. Its axial trace changes trend from N35W in the south to N65W in the north and has a SE40 plunge. The Yauricocha mineral deposit is found in the west flank of this fold and in banded limestones without subsidiary folding.

 

In the Mina Central area, the NW strike of the folded sediments was rotated about 30° clockwise horizontally. This distortion can be attributed to a basement shear fault that strikes NE-SW. The axial trace of the Cachi-Cachi-Prometida anticline strikes approximately N80W to N70W and its flanks dip to the north (Prometida) and south (Cachi-Cachi) with a plunge to the east. Mineralization in the vicinity of the major North Intrusive located 2 km north of Mina Central is associated with this fold.

 

The Quimpara syncline, located 1 km south of the discharge stream of Pumacocha Lake, has an axial trace that strikes N45W. Its east flank is in contact with the intrusive at an angle dipping 70° to 75°W. Its west flank dips about 80°E conformably with beds of dark gray limestone that are recrystallized in the vicinity of the contact. Garnets, magnetite and copper oxides occur in the same contact.

 

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Fractures

 

Diverse systems of fractures were developed during episodes of strong deformation.

 

Folding occurred before and/or contemporaneous with intrusive emplacement. Primary fractures developed during folding along with longitudinal faults parallel to the regional strike of the stratigraphy. These faults combined to form the Yauricocha Fault along the Jumasha limestone- Celendín lutite contact. The Yauricocha Fault extends a great distance from the SE of the Ipillo mine continuing to the north behind Huamanrripa hill, parallel to and along Silacocha Lake.

 

After the intrusions were emplaced, the strike of the folds NW of the mine was rotated by strong horizontal forces some 30°. As a result of this rotation, three sets of shears and joints were developed: NW-SE, NE-SW and E-W with dips of 50-80° NE or SW first, then 60-85° SE or NW, and finally N or S with nearly vertical dips. This set of fractures forms fault blocks that cut the dominant lithologies of the area and join with the Yauricocha Fault. The Yauricocha Fault is the most significant fault in the mining district and is a strong control on mineralization.

 

Contacts

 

The contacts of the Jumasha limestone-Celendín lutite, the Jumasha limestone-intrusions, and Celendín lutite-intrusions had major influence on the development of folds, fractures and ascension of mineralizing fluids.

 

Breccias

 

The breccias that occur in the Yauricocha area typically follow structural lineaments and occur predominantly in the limestones associated with contacts and intersections of fractures. They form tabular and chimney-like bodies. Tectonic breccias, forming near intrusions or contacts, constitute some of the principal receptive structures for mineralization.

 

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Source: Sierra Metals, 2020

 

Figure 7-1: Local Geology Map (grid lines are 4 km x 4 km)

 

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Source: Sierra Metals, 2020

 

Figure 7-2: Geologic Map of Yauricocha Mine Area

 

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7.3Significant Mineralized Zones

  

Mineralization at the Yauricocha Mine is represented by variably oxidized portions of a multiple-phase polymetallic system with at least two stages of mineralization, demonstrated by sulfide veins cutting brecciated polymetallic sulfide mineralized bodies. The mineralized bodies and quartz-sulfide veins appear to be intimately related and form a very important structural/mineralogical assemblage in the Yauricocha mineral deposit. Comments made herein regarding the characteristics of the Yauricocha district apply directly to the Yauricocha Mine.

 

All parts of the property with historic exploration or current production activity are in the current area of operations. This area is nearly centered within the concession boundary and there is both space and potential to expand the resources and the operation both directions along the strike of the Yauricocha Fault.

 

Minera Corona has developed local classifications describing milling and metallurgical characteristics of mineralization at Yauricocha: polymetallic, oxide, and copper. “Polymetallic” mineralization is represented by Pb-Zn sulfides, often with significant Ag values, “oxide” refers to mineralization that predominantly comprises oxidized sulfides and resulting supergene oxides, hydroxides and/or carbonates (often with anomalous Au), and the “copper” classification is represented by high values of Cu with little attendant Pb-Zn.

 

More details on the mineralized zones are provided in Section 14.

 

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8Deposit Types

 

Section 8.1 of this Report has been excerpted from NI 43-101 Technical Report on the Yauricocha Mine, prepared by Gustavson Associates, report date May 11, 2015, and is shown in italics. Some new information has also been provided by Sierra Metals. Standardizations have been made to suit the format of this report; any changes to the text have been indicated by the use of [brackets].

 

8.1Mineral Deposit

 

Mineralization in the Yauricocha district is spatially and genetically related to the Yauricocha stock, a composite intrusive body of granodioritic to quartz monzonitic composition that has been radiometrically dated at late Miocene (approximately 7.5 million years old) (Giletti and Day, 1968). The stock intrudes tightly folded beds of the late Cretaceous Jumasha and Celendín Formations and the overlying Casapalca Formation (latest Cretaceous and Paleocene?). Mineralized bodies are dominantly high-temperature polymetallic sulfide bodies that replaced limestone. Metal-bearing solutions of the Yauricocha magmatic-hydrothermal system were highly reactive and intensely attacked the carbonate wall rock of the Jumasha and Celendín Formations, producing the channels in which sulfides were deposited.

 

Base and precious metals were largely precipitated within several hundred meters of the stock (Lacy, 1949; Thompson, 1960). Skarn is developed adjacent to the stock but does not host appreciable amounts of economic mineralization (Alverez and Noble, 1988). Mineralization typically exhibits both vertical and radial zoning and there is a pronounced district zoning, with an inner core of enargite (the principal copper mineral) giving way outward to an enargite-chalcopyrite-bornite zone, which in turn is succeeded to the west by zones characterized by sphalerite, galena and silver (Lacy, 1949; Thompson, 1960).

 

The mineralized zones at Yauricocha are partially to completely oxidized and extend from the surface to below level 1220. Supergene enrichment is closely related to oxidation distribution. Supergene covellite, chalcocite and digenite are found where the sulfide minerals are in contact with oxidized areas.

 

Mineralization at Yauricocha very closely resembles that typified by polymetallic Ag-Au deposits, which comprise quartz-sulfide-carbonate fissure vein equivalents of quartz-sulfide and carbonate-base metal deposits. These deposits are best developed in Central and South America, where they have been mined since Inca times as important Ag sources. Quartz and pyrite of the quartz-sulfide Au +/- Cu mineralization suite typically occur early in the paragenetic sequence; carbonate-hosted mineralization and some polymetallic Ag-Au veins evolved at a later stage. Predominant controls on mineralization are structural, where dilatational structures, voids resulting from wall rock dissolution, and/or rheologic dissimilarities at contacts between units serve as enhanced fluid pathways for mineralizing solutions.

 

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8.2Geological Model

 

The geological model used for the Yauricocha deposit has been developed and verified through extensive exploration and mining activities during more than 50 years of mining. SRK is of the opinion that the geological model is appropriate and will continue to serve the company going forward.

 

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9
Exploration

 

Since 2016, surface exploration has focused more on areas surrounding the Central Mine, mainly to the south of the mine in the areas of Doña Leone, El Paso, Success, Kilcaska and the South Yauricocha Fault. The work has consisted of detailed geological mapping, sampling for geochemical interpretation and focusing on areas with strong anomalies. During 2017, the Canadian company, Quantec Geoscience Ltd., was contracted to perform a surface geophysical study using the TITAN 24 DC resistivity induced polarization (DCIP) and Magnetotelluric (MT) methods.

 

The Yauricocha mining district contains multiple polymetallic deposits represented by skarn and replacement bodies and intrusion-hosted veins related to Miocene-era magmatism. Mineralization is strongly structurally controlled with the dominant features being the Yauricocha Fault and the contact between the Jumasha limestones and the Celendín Formation (especially the France Chert). Exploration is being conducted to expand the mineralized zones currently being exploited as well as on prospects in the vicinity of the operations.

 

Exploration in or close to the mining operations is of higher priority since it is performed under existing governmental and community permits. Any exploration success can be quickly incorporated into defined resources and reserves and thus the business plan.

 

9.1Relevant Exploration Work

 

Exploration in the district has been ongoing and work has been successful in delineating several targets (described above) for future drilling or exploration development. This work has included detailed geological mapping of the areas, surface rock chip sampling, and limited trench / channel sampling.

 

The 2020 planned underground and surface drilling programs have been revised due to the impact of the Covid pandemic. As a direct consequence of the 2019 underground exploration drilling mineralization discoveries in the Esperanza (lead and zinc dominant mineralization) and Cuye (copper dominant mineralization) areas, approximately 5,600 m of diamond drilling is planned for further exploration of these areas in 2020.

 

During the period of June 3, 2017 to September 6, 2017, a geophysical survey was carried out with the TITAN 24 DCIP and MT survey methods. A total of 20 DCIP-MT profiles (23 differentials) were carried out, ranging from 400 to 500 m covering 54.2 kilometers. Based on this work, several anomalous areas were identified, and priority has been given to diamond drilling these areas from surface. The most relevant geophysical targets in order of priority are Doña Leona, El Paso-Éxito Victoria and Alida.

 

Doña Leona is located 2.5 km southeast of the Yauricocha Mine. There are historical workings in the area which have been sampled. Kilcaska is situated 7.5 km southeast of the Yauricocha Mine. Historically, the polymetallic Francolina and Felicidad mineralized bodies were exploited. El Paso-Éxito is located 3.5 km southeast of the Yauricocha Mine, in the vicinity of the Éxito and Antonia Mines. The Éxito and Antonia Mines are historical Pb, Zn, Cu and Ag producers. Victoria is situated 1.5 km southeast of the Yauricocha Mine in an area where narrow polymetallic veins have been mined historically.

 

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The Doña Leona and Kilcaska targets are scheduled to be evaluated with a revised initial stage of approximately 9,000 m of diamond drilling at a budgeted cost of US$ 1.2 M during 2020. The exploration at Doña Leona is focused on replacement metasomatic mineralization.

 

9.2Sampling Methods and Sample Quality

 

Sampling of exploration targets generally features rock chip or hand samples taken by geologists from surface outcrops using rock hammers and chisels. These samples are point samples and should be considered indicative of mineralization rather than representative of any volume or tonnage.

 

In cases where channel or trench samples are collected, these are done so using pickaxes, shovels, chisels, hammers, and other hand tools, and are likely more representative of the mineralization as they are taken across the strike of mineralization observed at surface.

 

Regardless, the results of exploration related sampling in this context are used as guides for future drilling programs, rather than resource estimation.

 

9.3Significant Results and Interpretation

 

There have been satisfactory results with exploration diamond drilling in the Cuye mineralized area where additional mineralization has been identified and designated as Cuye iii and Cuye Sur respectively. Similarly, in the Esperanza area additional polymetallic mineralization was identified and designated as Esperanza ii. Neither of these zones have been included in the 2020 Mineral Resources as they require additional drilling to define the morphologies and grade distribution of the mineralized zones.

 

The 2017 surface geophysical survey interpretation has identified several resistivity anomalies in the Doña Leona, El Paso-Éxito, and Victoria areas located within less than 10 km of the current Yauricocha Mine area.

 

Replacement-type alteration within the Jumasha limestones, intense brecciation, silicification and localized skarns have been observed during surface mapping of the Doña Leona area. Doña Leona’s interpreted low resistivity geophysical anomalies (less than 205 ohm/p) are the focus of exploration drilling (Figure 9-1). A low resistivity anomaly can be indicative of metallic mineralization, whereas a narrow high resistivity zone surrounding a very low resistivity zone can be an indication of alteration such as silicification. Surface geochemical sampling of the structures of non-mined areas has yielded results as high as 22.36% zinc, 11.45% lead, 0.19% copper and 43.5 ppm silver. Re-sampling of historically mined areas has yielded values as high as 10.78% zinc, 5.36% lead, 0.01% copper and 58.8 ppm silver.

 

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In the El Paso-Éxito target area, granodiorite and diorite intrusives were observed during geological mapping within the limestones and marbles of the Jumasha and Pariatambo Formations. The Chonta Fault lies to the extreme west of the area. Contact metasomatism and skarn development have been observed at contacts between the intrusives and the limestones. Therefore, these contacts are the focus of the current exploration drilling. The geophysical resistivity anomalies are not as prominent as those interpreted at Doña Leona (Figure 9-2). Furthermore, the most prominent anomaly is significantly deeper below surface. The historical Éxito Mine yielded grades of 14.00% zinc, 3.00% lead, 0.60% copper and 37.3 ppm silver. In the surrounding area, geochemical sampling has yielded results of 95 to 10,000 ppm lead, 76 to 10,000 ppm zinc and 50 to 490 ppm copper. These geochemical results are lower than the results at other exploration targets and the largest geophysical anomaly is significantly deeper than the other exploration target areas. Hence, the El Paso-Éxito exploration target is of a lower priority for exploration purposes and is not considered as part of the 2020 revised exploration drilling program.

 

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Source: Sierra Metals, 2020

 

Figure 9-1: Doña Leona Exploration Target Area

 

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Source: Sierra Metals, 2020

 

Figure 9-2: El Paso-Éxito Exploration Target Area

 

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The Victoria and Alida exploration areas are in proximity to the northwest – southeast trending Yauricocha Fault. Extensive outcrops of granodiorites have been observed in contact with the Jumasha Formation limestones. Argillic and phyllic alteration occur at these contacts. Historically, narrow veins were mined in the area, yielding grades in the region of 2.80% copper, 0.70% zinc, 0.60% lead and 6.00% arsenic. The arsenic values could pose a future mining issue as arsenic is a deleterious element. Surface quartz veins and stockwork have been geochemically sampled, producing grades as high as 3.00% zinc, 1.00% lead and 0.60% copper. Marble and skarn outcrop geochemical sampling have yielded values as high as 8.30% lead, 6.80% zinc, 0.80% copper and 93.3 ppm silver. A large low resistivity geophysical anomaly is a future exploration drilling target area in the future (Figure 9-3) and therefore not part of the revised exploration drilling for 2020.

 

 

Source: Sierra Metals, 2020

 

Figure 9-3: Victoria and Alida Exploration Target Areas

 

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Additional mapping and sampling have been conducted in the South Yauricocha Fault and South Kilcaska areas (Figure 9-4). The Éxito granodiorite intrusives are in contact with the calcareous rocks of the Jumasha Formation.

 

 

Source: Sierra Metals, 2020

 

Figure 9-4: Kilcaska Exploration Target Area

 

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Hydrothermal breccias in conjunction with the development of marbles and skarns within the limestones have been observed in the area. Argillic and phyllic alteration occurs along vein contacts. The hydrothermal breccias outcrop and are intensely oxidized and leached. Historically, the mineralized bodies of Francolina and Felicidad have been mined at average grades of 4.27% zinc, 2.15% lead, 0.30% copper and 23.30 ppm silver. Recent surface geochemical sampling results yielded values as high as 0.99% lead, 0.97% zinc, 1.00% copper and 97.0 ppm silver. Polymetallic mineralization similar to the Éxito Mine is the focus of the exploration drilling at Kalcaska and has been included in the 2020 revised surface exploration drilling program.

 

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10Drilling

 

10.1Type and Extent

 

Minera Corona’s Geology Department owns and operates two electro-hydraulic drills, the reach of which varies between 80 m and 150 m with a core diameter of 3.5 cm. The company also utilizes, or has previously utilized, the services of drilling contractors (MDH and REDRILSA) for deeper drillholes reaching up to 900 m in length. Core diameters are generally HQ and NQ, although selected infill drilling within the mine is drilled using a TT-46 (46 mm) diameter.

 

Exploration (establishing continuity of mineralization) and development (reserve and production definition) drilling conducted by Minera Corona from 2002 to 2020 is detailed in Table 10-1.

 

Table 10-1: Yauricocha Exploration and Development Drilling

 

Year

Exploration and
Development
(m)

Drilling (DDH) by
Company
(m)

Drilling (DDH) by
Contractor
(m)

20023,8861,887-
20034,9553,415-
20044,0232,970-
20054,0343,1608,043
20062,7862,99910,195
20072,4664,7516,196
20082,3805,37913,445
20091,9124,95513,579
20101,0864,6153,527
20111,6115,1959,071
20121,53011,53231,257
20132,56910,65316,781
20141,0119,35730,455
20153429,73533,214
20166,2399,14542,020
20178,5207,38449,715
20186,1935,10336,771
20194,1824,65345,983
20201,8981,07610,212

Source: Sierra Metals, 2020

 

Approximately 13,000 m of infill diamond drilling is planned for 2020 reserve and production definition purposes.

 

In addition to the drilling at Yauricocha, extensive channel sampling of the mineralized bodies is completed for grade control and development purposes. Channel sampling is conducted on perpendicular lines crossing the various mineralized bodies. Spacing between samples is variable, but generally the spacing is 2 m to 4 m. Material is collected on tarps across the channel sampling intervals and is then transferred to bags marked with the relevant interval. These data points are utilized in the Mineral Resource estimation. The general distribution of drilling and channel samples is shown in Figure 10-1 and Figure 10-2.

 

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Source: SRK, 2020

 

Figure 10-1: Extent of Drilling and Sampling Plan View

 

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Source: SRK, 2020

 

Figure 10-2: Extent of Drilling and Sampling Sectional View

 

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10.2Procedures

 

10.2.1Drilling

 

Modern drill collar locations are surveyed underground by the mine survey team. Where these types of surveys have been completed, collar locations are assumed to be accurate to less than 0.1 m. Historic drilling was not surveyed to the same level of detail, potentially decreasing the accuracy of the collar positions in space compared to modern holes. This effect would potentially decrease the accuracy of the geological model and resource estimation in these areas, but SRK notes that the majority of the areas supported by this historic drilling have already been mined.

 

While drillholes are currently surveyed down-hole for all new exploration drilling, this has not always been the case. Historic drill holes, as well as selected more recent holes that were not deemed to be long enough or otherwise designated non-critical for surveying, were not surveyed down-hole and the collar azimuth and dip are the only points of reference for the drillhole. SRK notes that all new holes now have down-hole surveys, and that most of these are in areas which are incorporated in the current update to the Mineral Resource estimation. While the nominal spacing of the survey has been 50 m, several newer holes have been surveyed every 5 m to discern any potential risk of deviation affecting the accuracy of the interpretation.

 

An SRK 2019 study conducted of the deviation for the drillholes which had been downhole surveyed highlighted that the average deviations (of more than 3,500 measurements) down-hole are only -0.06° bearing and 0.09° inclination. This would indicate that the lack of down-hole survey information is not necessarily a risk at Yauricocha, although SRK recommends continuing the practice of surveys at nominal intervals of 25 to 50 m to ensure quality of information.

 

SRK visited the core logging and sampling facilities at the mine site in early 2015, mid-2017, and in April 2019, and notes that the logging facility is clean and sufficiently equipped. Logging is conducted on paper and transferred to ExcelTM worksheets. Details recorded include geotechnical information such as recovery and RQD, geologic information (lithology, alteration, mineralization, etc.), sampling information, as well as other parameters, which may not get incorporated into the digital database. Samples are selected by the geologist and placed in numbered plastic bags, along with a bar-coded sample ticket for tracking. Bags are tied tightly to prevent contamination during handling and transport.

 

Drill recovery is generally over 97%, and there appears to be no relationship between grade distribution and recovery.

 

Drill cores are split by hydraulic or manual methods where core is broken or poorly indurated and is sawn by rotary diamond saw blade when the core is competent. In both scenarios, care is taken to ensure that the sample is collected in a consistent and representative manner. SRK notes that sampling is only conducted in segments of core that are noted as having obvious mineralization during logging. This results in several occurrences where the first sample in a drillhole may be a very high grade one, or that there may be multiple high-grade samples with un-sampled intervals in between. These intervals have been considered as un-mineralized based on the assumptions made for the sampling or lack thereof and are flagged with a lowest-limit-of-detection value. For arsenic (As), which is regarded as a deleterious element the intervals were left blank as well as for iron (Fe), which is utilized to establish polymetallic mineralized zones in-situ density.

 

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10.2.2Channel Sampling

 

Channel samples are collected underground by the geology staff. Samples are collected via hammer and chisel, with rock chips collected on a tarp for each sample and transferred to sample bags. Typical sample intervals are 1 m along the ribs of crosscuts within stopes for the large mineralized zones, and 2 m across the back of the stopes for the small mineralized zones. Ideal weights are between 2.5 kg and 3 kg. The samples are placed in a plastic bag labeled with a permanent marker on the outside. A sample ticket displaying the number and bar code is inserted in the bag. The bags are tied to prevent outside contamination during their handling and transportation to the assay lab.

 

SRK notes that samples are not weighed to ensure representativeness, but geologists are involved in the channel sampling efforts to direct the samplers to collect samples, which visually are representative of the mineralization.

 

10.3Interpretation and Relevant Results

 

Drilling and sampling results are interpreted by Minera Corona site geologists and are reviewed in cross sections and plan / level maps. The relevant results are those featuring significant intervals of geologic or economic interest, which are then followed-up by further drilling or exploration development.

 

SRK notes that other sampling types are described in the documentation at Yauricocha, such as point samples, muck samples, and others. These sampling types are used for specialized purposes only and are not used in the resource estimation.

 

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11Sample Preparation, Analyses, and Security

 

11.1Security Measures

 

Core and channel sample material is stored at the mine site in a secure building and the boxes are well labeled and organized. The entire mine site is securely access-controlled. Samples submitted to third-party laboratories are transported by mine staff to the preparation laboratory in Lima. The channel samples are processed at Minera Corona’s Chumpe laboratory located in the processing plant under the supervision of company personnel.

 

The on-site laboratory currently is not independently certified. Channel sample locations are surveyed underground by mine survey staff. Sample start and end-point locations are assumed to be accurate to centimeter accuracy.

 

11.2Sample Preparation for Analysis

 

Samples are generally prepared by a primary and secondary laboratory:

 

·Primary: Chumpe Laboratory –Yauricocha Mine Site; Non-ISO Certified; and

 

·Secondary: ALS Minerals (ALS) – Lima; ISO 9001:2008 Certified.

 

The majority of the sample preparation is completed at the Chumpe laboratory, except in cases where checks on the method of preparation are desired and ALS conducts sample preparation on duplicate check assays.

 

11.2.1Chumpe Laboratory

 

Most historical core samples, and effectively all channel samples, have been prepared and analyzed by the Chumpe laboratory. Detailed procedures have been documented by Minera Corona and are summarized below (in italics).

 

Sample Reception

 

Channel samples and selected mine infill drilling are collected in the field by the geology staff and transported by Yauricocha personnel from the Yauricocha Mine or Klepetko Adit and are received at the reception counter at the Chumpe laboratory entrance. A log entry is made to record the number of samples being received. These samples are generally between 1.5 and 3.0 kg; are damp and received in plastic bags.

 

Preparation

 

Equipment used in sample preparation includes:

 

·1 – Primary Jaw Crusher (Denver), Jaw capacity – 5” x 6”, Output – 70%, passing ¼ inch;

 

·1 – Secondary Jaw Crusher (FIMA), Jaw capacity – 5” x 6”, Output –80%, passing No. 10 mesh;

 

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·1 – Pneumatic Pulverizer, Make – Tmandina;

 

·2 – Sample Dryers, with temperature regulator;

 

·1 – ½” Stainless steel splitter, Make – Jones;

 

·Five compressed air nozzles;

 

·Stainless steel trays, 225 x 135 x 65 mm;

 

·Stainless steel trays, 300 x 240 x 60 mm;

 

·Plastic or impermeable cloth; and

 

·2” brushes.

 

Preparation Procedure

 

Prior to beginning sample preparation, workers verify that:

 

·The equipment is clean and free from contamination;

 

·The crushers and pulverizers are functioning correctly; and

 

·The numbering of the sample bags is such that all bags are unique and identifiable.

 

The procedure at Chumpe to reduce the sample to a pulp of 150 g, at 85% passing 200 mesh is:

 

·Transfer the sample to the appropriate tray, depending on the volume of the sample, noting the tray number on the sample ticket;

 

·Insert a blank sample (silica or quartz) in each batch;

 

·Place in the Sample Dryer at a temperature of 115ºC;

 

·Code the sample envelopes with the information from the sampling ticket noting the sample code, the tray number, date and the quantity of samples requested on the sample ticket;

 

·Once dry, remove and place the tray on the worktable to cool;

 

·Pass 100% of the sample through the Primary Jaw Crusher when particle sizes exceed 1 inch, the resulting product is 70% passing ¼ inch;

 

·Pass the sample through the Secondary Crusher, the resulting product is 80% passing -10 mesh;

 

·Clean all equipment after crushing of each sample using compressed air;

 

·Weigh the -10-mesh coarse material and record;

 

·Dump the complete sample into the Jones Splitter and split/homogenize to obtain an approximate 150 g split. Clean the splitter after each sample with compressed air;

 

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·Put the 150 g sample in numbered envelopes in the tray for the corresponding sample sequence;

 

·Pulverize sample using the cleaned ring pulverizer until achieving a size fraction of 85% - 200 mesh. Clean the ring apparatus after each sample with the compressed air hose;

 

·Transfer the pulverized sample to the impermeable sample mat, homogenize and pour into the respective coded envelope; and

 

·Clean all materials and the work area thoroughly.

 

11.2.2ALS Minerals

 

For core samples, bagged split samples are transported by the internal transport service from the core logging facility. Samples are transported by truck to Lima for submission to the ALS Minerals laboratory in Lima. ALS records samples received and weights for comparison to the Yauricocha geologist’s records for sampling.

 

Samples prepared at ALS Minerals exclusively include the 2016 to present exploration diamond drilling. SRK has not visited the ALS Minerals lab in Lima but notes that ALS Minerals-Lima is an ISO-Certified preparation and analysis facility and adheres to the most stringent standards in the industry. The PREP-31 method of sample preparation was used for all samples processed through ALS Minerals. This includes jaw crushing to 70% less than 2 mm, with a riffle split of 250 g, then pulverized using ring pulverizers to >85% passing 75 mm. Samples are tracked in barcoded envelopes throughout the process using internal software tracking and control measures. ALS is an industry leader in sample preparation and analysis and uses equipment that meets or exceeds industry standards.

 

11.3Sample Analysis

 

Samples are generally analyzed by a primary and secondary laboratory:

 

·Primary: Chumpe Laboratory –Yauricocha Mine Site; Non-ISO Certified;

 

·Secondary: ALS Minerals – Lima; ISO 9001:2008 Certified; and

 

·Note: ALS is the primary laboratory for all diamond exploration drilling samples.

 

The Chumpe laboratory provides all analyses used in the drilling/sampling database supporting the Mineral Resource estimation, whereas the ALS Laboratory is used exclusively as an independent check on the Chumpe laboratory for these samples.

 

11.3.1Chumpe Laboratory

 

Core and channel samples from the mine are assayed utilizing two procedures. Silver, lead, zinc, and copper are assayed by atomic absorption (AA) on an aqua-regia digest. Gold is assayed by fire assay (FA) with an AA finish. Lower limits of detection (LLOD) are shown in Table 11-1, and are higher than those for ALS Minerals as Chumpe does not run the same multi-element analysis.

 

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Table 11-1: Chumpe LLOD

 

ElementLLODUnit
Ag3.43ppm
Au0.03ppm
Cu0.01%
Pb0.01%
Zn0.01%

 

Source: Sierra Metals, 2020

 

11.3.2ALS Minerals Laboratory

 

The core samples analyzed at ALS are analyzed for a suite of 35 elements using inductively coupled plasma atomic emission spectroscopy (ICP-AES) on an aqua-regia digest, generally used to discern trace levels of multiple elements. Samples are also analyzed using an AA method on an aqua-regia digest for accuracy at higher mineralized grade ranges. Au is analyzed using FA (gravimetric finish) with an AA finish. Lower limits of detection for the critical elements are shown in Table 11-2.

 

Table 11-2: ALS Minerals LLOD

 

ElementLLODUnit
Ag0.2000ppm
Au0.0050ppm
Cu0.0001%
Pb0.0001%
Zn0.0001%

 

Source: Sierra Metals, 2020

 

11.4Quality Assurance/Quality Control Procedures

 

Part of this section has been excerpted from NI 43-101 Technical Report on the Yauricocha Mine, prepared by Gustavson Associates, report date May 11, 2015 and is shown in italics. Standardizations have been made to suit the format of this report; any changes to the text have been indicated by the use of [brackets].

 

Prior to 2012, Minera Corona did not utilize the services of an independent lab for data verification. The company used an internal QA/QC procedure at its assay lab (Chumpe) located in the processing plant. Historically, the results have compared well with the metal contained in concentrates and further work on a formal external QA/QC procedure had not been pursued. Beginning in 2012, Minera Corona began to use external check assays as part of the validation system for the Chumpe lab data stream.

 

The current procedure includes certified standards, blanks, pulp duplicates, and sample preparation size review. These are processed at approximately one per 20 samples. External labs receive approximately one sample for each 15 processed internally. Gustavson did not have the opportunity to fully observe the laboratory operation; however, Gustavson has examined QA/QC records of certified standards for 2011 through 2014.

 

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The results of the historical QA/QC show that the Chumpe laboratory generally performed well with respect to the standard blanks and duplicates submitted from the exploration department, but SRK notes that this has not been the case over the entire project history, with the Chumpe lab consistently missing targets for certain types of QA/QC. This resulted in a limited program of pulverized duplicate samples for every sample interval being submitted to ALS Minerals in Lima as a check on the Chumpe lab, where the results showed a consistent bias. Historically, Chumpe lab appeared to under-report Ag compared to ALS duplicates, although other metals appeared to be relatively consistent. For this reason, the mine abandoned the use of the Chumpe lab for the new exploration drilling, with all samples being sent to ALS Minerals in Lima prior to 2018.

 

Several improvements were implemented since 2018 at the Chumpe laboratory to improve the historical poor performance and to increase its sample throughput and there is a noticeable improvement in the Chumpe laboratory performance since 2018. Samples were last sent to ALS in late 2019 and no samples were analyzed by ALS in 2020. Yauricocha has not completed any umpire laboratory QA/QC checks of the Chumpe laboratory samples for 2020.

 

Currently, Minera Corona uses a very aggressive program of QA/QC for new exploration areas to mitigate uncertainty in analytical results. The QA/QC applied to new exploration efforts focused on underground Esperanza and Cuye areas, as well as Doña Leona and Kilcaska surface exploration target areas is discussed in Sections 11.4.1 through 11.4.3.

 

11.4.1Standards

 

Minera Corona currently inserts standards or certified reference materials (CRM) into the sample stream at a rate of about 1:20 samples, although the insertion rate is adjusted locally to account for particular mineralogical observations in the core. Five standards have been generated by Minera Corona and certified via round robin analysis for the current exploration programs. These standards have been procured from Yauricocha material, and homogenized and analyzed by Target Rocks Peru S.A., a commercial laboratory specializing in provision of CRM to clients in the mining industry.

 

Each CRM undergoes 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. The six laboratories participating in the round robin for the Yauricocha CRM are:

 

·ALS Minerals, Lima;

 

·Inspectorate, Lima;

 

·Acme, Santiago;

 

·Certimin, Lima;

 

·SGS, Lima; and

 

·LAS, Peru.

 

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The mean and between-lab standard deviations (SD) are calculated from the received results of the round robin analysis, and the certified means and tolerances are provided in certificates from Target Rocks. The certified means and expected tolerances are shown in Table 11-3.

 

Table 11-3: CRM Certified Means and Expected Tolerances

 

CRMCertified MeanTwo Standard Deviations
(between lab)
ElementAg
(g/t)
Pb
(%)
Cu
(%)
Zn
(%)
Ag
(g/t)
Pb
(%)
Cu
(%)
Zn
(%)
MAT-0429.10.700.160.282.10.030.010.01
MAT-05128.22.370.582.507.70.060.020.12
MAT-06469.07.752.537.9813.00.200.120.23
MCL-0240.80.651.582.493.40.050.080.09
PLSUL-03192.03.091.033.154.00.080.040.13
PLSUL-046.70.090.240.230.50.010.010.01
PLSUL-0513.6NA0.490.471.0NA0.030.02
PLSUL-0630.31.940.211.602.90.040.010.11
PLSUL-0779.25.940.454.674.50.270.020.20
PLSUL-08248.012.460.9812.5414.00.390.040.55

Source: Sierra Metals, 2020

 

During the 2017, 2018 and 2019 drilling campaigns an additional 11 CRMs were inserted into the sample stream at the Chumpe laboratory, one of which was designed specifically for Au inspection (MRISi81). The additional CRMs and their expected tolerances are shown in Table 11-4. No additional CRMs were added during the 2020 drilling campaign.

 

SRK notes that the CRMs are adequate for QA/QC monitoring and that in 2018 a rigorous QA/QC program was set in place and maintained, including a recently included CRM for Au. Minera Corona has submitted 177 CRMs to ALS Minerals in 2015-2017 for new drilling with an average insertion rate of about 5%. Between 2018 and 2019, a total of 435 CRMs was sent to ALS for independent checking and the Chumpe laboratory analyzed a total of 6,319 during that same timeframe. These two sets of CRMs were reviewed independently by SRK in 2019.

 

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Table 11-4: 2017-2019 CRM Means and Tolerances

 

CRMCertified MeanTwo Standard Deviations (between lab)
ElementAu
(g/t)
Ag
(g/t)
Pb
(%)
Cu
(%)
Zn
(%)
Ag
(g/t)
Pb
(%)
Cu
(%)
Zn
(%)
Au
(g/t)
MRISi811.79        0.048
PLSUL-10 855.70.6085.3960.130.0320.22 
PLSUL-14 25.50.8570.0325.170.90.060.00030.16 
PLSUL-15 22.70.60.0410.971.70.020.0020.04 
PLSUL-22 831.220.1473.134.80.080.010.16 
PLSUL-24 1143.690.2727.7240.190.0160.26 
PLSUL-32 42.50.530.4291.043.60.040.020.03 
PLSUL-33 51.10.650.7382.353.70.030.0380.1 
PLSUL-34 1091.61.4545.195.30.060.070.3 
ST1700013 (Oz/Tc) 0.7990.1670.2260.4670.0520.0080.0120.028 
ST1700014 (Ox/Tc) 3.4782.6640.8035.1780.0740.0420.0240.206 

Source: SRK, 2020

 

Performance: ALS Minerals

 

SRK generally uses a nominal +/-3 SD criteria for evaluating failures of the CRMs. The SD used is the between lab SD, as provided in the certificates from Target Rocks. SRK notes that failure rates for the CRMs as provided are very high for Cu, which are due to rounding differences between lab certificates and CRM values. All other elements have minimal failure results, although CRM PLSUL-10 reports low results for Pb, which will need to be monitored in future.

 

The tabulated QA/QC results for the 2018 drilling campaign using ALS as the testing laboratory are shown in Table 11-5. In 2018, Minera Corona submitted a total of 435 samples to ALS for independent checking. As is evident in Figure 11-1, PLSUL-32 (8 samples) shows an increasing positive bias for Ag, Pb and Cu over time. Zn generally is positively biased throughout with four samples lying above the upper 3rd standard deviation limit. Additional CRMs utilized during the specified period include; PLSUL-33 (7 samples) and PLSUL-34 (6 samples). Limited samples were sent to ALS in 2019, with the bulk of samples analyzed and tested at the Chumpe laboratory. No samples were sent to ALS in 2020.

 

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Table 11-5: 2018 CRM Performance Summary – ALS Minerals

 

STDTotalLow 3SDHigh 3SDFailure % LowFailure % High
Ag     
PLSUL-2299000.00%0.00%
PLSUL-24109201.83%0.00%
PLSUL-1013000.00%0.00%
PLSUL-14360340.00%94.44%
PLSUL-1512000.00%0.00%
All Ag2692340.74%12.64%
Pb     
PLSUL-2299000.00%0.00%
PLSUL-24109200.00%0.00%
PLSUL-10139169.23%7.69%
PLSUL-1436000.00%0.00%
PLSUL-1512108.33%0.00%
All Pb2691213.72%5.77%
Cu     
PLSUL-2299060.00%6.06%
PLSUL-241091190.00%17.43%
PLSUL-1013010.00%7.69%
PLSUL-1436360100.00%0.00%
PLSUL-1512010.00%8.33%
All Cu269372713.38%10.04%
Zn     
PLSUL-2299121.01%2.02%
PLSUL-24109413.67%0.92%
PLSUL-1013107.69%0.00%
PLSUL-1436215.56%2.78%
PLSUL-15122016.67%0.00%
All Zn2691043.72%1.49%

Source: SRK, 2020

 

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Source: SRK, 2020

 

Figure 11-1: ALS Minerals Laboratory CRM (PLSUL-32) Performance

 

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Performance: Chumpe Laboratory

 

In 2018, Minera Corona instigated a rigorous QA/QC program whereby Standards, Duplicates (Core and Pulp) and Blanks were routinely inserted into the assay sample stream. Monthly QA/QC reports were generated on-site and the results confirm the improved performance of the Chumpe laboratory in more recent years, whereby CRM failure rates have been significantly reduced. The performance of the 2019 and 2020 CRMs at the Chumpe laboratory are summarized in Table 11-6. Significant under-reporting of Pb, Cu and Zn were, however, still a problem for certain CRMs in 2018. CRM results in 2019 - 2020 appear to be significantly improved. However, Ag continues to return negative bias results for three of the four CRMs in use at Yauricocha. Laboratory reporting limits account for most of the Cu discrepancies, whereas CRM sample mix-ups also accounted for several of the failures.

 

Figure 11-2 tracks the performance of PLSUL-24 (42 samples), a polymetallic CRM, which was a CRM utilized during the 2019 and 2020 underground definition and exploration drilling campaigns. Silver results indicate a slight negative bias, with the negative bias increasing over time. This indicates that the instrumentation may require additional calibration for the determination of the Ag analyte. The remaining sample batches are unbiased and distributed evenly about the Expected value. Two Pb and three Zn values lie slightly above the upper 3rd standard deviation limit. However, this is not deemed to be material. Additional CRMs utilized during the specified period include; PLSUL-22 (39 samples), PLSUL-32 (10 samples), PLSUL-33 (8 samples) and PLSUL-34 (3 samples). These CRMs performed in a similar manner to PLSUL-24. CRM samples that repeatedly occur above or below the 3 standard deviations limit (+/-3SD) should be repeated along with +/- five samples above and below the erroneous CRM interval.

 

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Table 11-6: 2018 and 2019 CRM Performance Summary – Chumpe Lab

 

2018
STDTotalLow 3SDHigh 3SD% Low% High
Ag     
PLSUL-1097101.03%0.00%
PLSUL-14770580.00%75.32%
PLSUL-1594030.00%3.19%
All Ag2681610.37%22.76%
Pb     
PLSUL-109787089.69%0.00%
PLSUL-1477000.00%0.00%
PLSUL-1594010.00%1.06%
All Pb26887132.46%0.37%
Cu     
PLSUL-109730030.93%0.00%
PLSUL-147776198.70%1.30%
PLSUL-15943483.19%51.06%
All Cu2681094940.67%18.28%
Zn     
PLSUL-1097111.03%1.03%
PLSUL-1477020.00%2.60%
PLSUL-159485490.43%4.26%
All Zn26886732.09%2.61%
2019 - 2020
Ag     
PLSUL-22394010.26%0.00%
PLSUL-244116237.50%5.00%
PLSUL-3210000.00%0.00%
PLSUL-3381033.33%0.00%
PLSUL-34540100.00%0.00%
All Ag10325225.00%2.27%
Pb     
PLSUL-2239000.00%0.00%
PLSUL-2441235.00%7.50%
PLSUL-3210000.00%0.00%
PLSUL-338000.00%0.00%
PLSUL-345000.00%0.00%
All Pb103232.27%3.41%
Cu     
PLSUL-2239030.00%7.69%
PLSUL-2441020.00%5.00%
PLSUL-3210010.00%0.00%
PLSUL-3381033.33%0.00%
PLSUL-345010.00%50.00%
All Cu103171.14%6.82%
Zn     
PLSUL-2239070.00%17.95%
PLSUL-2441337.50%7.50%
PLSUL-3210150.00%50.00%
PLSUL-338100.00%0.00%
PLSUL-345000.00%0.00%
All Zn1035153.41%13.64

Source: SRK, 2020

 

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Source: SRK, 2020

 

Figure 11-2: Yauricocha Mine Chumpe Laboratory CRM (PLSUL-24) Performance

 

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11.4.2Blanks

 

Minera Corona currently inserts unmineralized quartz sand blanks into the sample stream at a rate of 1:20 samples, or adjusted as necessary, to ensure smearing of grade is not occurring immediately after higher grade intervals. Blanks are generally about 0.5 kg of silica sand, bagged and submitted in the sample stream along with the normal core samples. The results of the Blank analysis in 2019 and 2020, show that based on a failure criterion of 5 times the LLOD, there are only two gold systematic failures for the Chumpe diamond drilling samples (Table 11-7). LLOD data for the Chumpe laboratory are presented in Table 11-1.

 

Between 2017 and 2020, a total of 6,897 Blanks were inserted into the sample stream at the Chumpe laboratory. Figure 11-3 tracks the performance of 93 blank samples utilized during exploration and definition drilling completed within lead, zinc and copper dominant mineralization, all of which are well below the five times LLOD failure criteria, except Au which has two failures, indicating possible contamination. This contamination is not evident in the primary metals.

 

Table 11-7: 2019 - 2020 Chumpe Blank Failures

 

LabCountFailures
AgPbCuZnAu
Chumpe9300002

Source: SRK, 2020

 

Failures assessed on a 5X LLOD basis.

 

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Source: SRK, 2020

 

Figure 11-3: Yauricocha Mine Chumpe Laboratory Blank (TR-18137) Performance

 

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11.4.3Duplicates (Check Samples)

 

SRK was provided duplicate sample data for 2019 and 2020.

 

True duplicate samples such as the other half of split core or a crushed/pulverized sample resubmitted to the same laboratory are common practice for normal QA/QC programs but become less critical once development and mining continues. These samples are designed to check the primary assay laboratory’s ability to repeat sample values or to check the nugget effect of the deposit very early on, but the inherent variability of the deposit is typically known at the production stage.

 

While Minera Corona did not submit true duplicate samples for the years preceding 2017, these intra-lab repeatability checks were instigated for the 2018 and 2019 drilling campaigns, for a combined total of 2,652 samples.

 

Minera Corona uses three types of check samples in the QA/QC program. These include twin (core) duplicates, coarse duplicates (crushed), and pulp duplicates (pulverized) to assess repeatability at the different phases of preparation between the site lab and third-party ALS lab.

 

In 2018 and 2019, pulp and core duplicate samples were routinely performed on all assay batches submitted to both ALS and Chumpe laboratory. Agreement between original samples and duplicate samples was found to be within acceptable limits for Ag, Pb and Zn. For the period November 2019 to June 2020, 278 pulp (Figure 11-4) and 125 core duplicates were processed. Agreement between original samples and duplicate samples was found to be within acceptable limits for Ag, Pb, Zn and Au for both types of duplicates.

 

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Source: SRK, 2020

 

Figure 11-4: Yauricocha Mine Chumpe Duplicate Analyses’ Performances

 

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11.4.4Actions

 

SRK notes that the actions taken by the exploration team at Yauricocha are documented in the QA/QC procedures for the mine. In the event that a failure is noted, the laboratory is contacted, and the source of the failure is investigated. There is no formal documentation for procedures involving re-runs of batches at this time, but SRK understands that this is the process being used. SRK notes that the QA/QC reports are not amended to reflect the new passing QA/QC and batch, and only reflect the initial failure and batch to track laboratory performance rather than the performance of reruns.

 

SRK is of the opinion that these actions are not consistent with industry best practice, which generally features a program of reanalysis upon failure of a CRM in a batch of samples. Subsequent to this are the incorporation of the revised samples into both the database and QA/QC analysis. SRK notes that this program is implemented at other Sierra Metals sites but is not well documented at Yauricocha.

 

11.4.5Results

 

The results of the recent QA/QC program described above show relatively high incidence of failures for CRM samples. SRK notes that the CRM failures are potentially due to ongoing sample mix-ups, but that this inherently represents a failure in the process that must be reviewed.

 

SRK evaluated the CRM performance using more lenient tolerances than the CRMs themselves recommend (+/-3SD vs +/-2SD) as the recommended certified performance ranges result in extreme failure rates.

 

If the SD and performance criteria for the CRMs as calculated by Target Rocks are considered to be reasonable, and it is determined that the laboratories should be able to meet the performance criteria, then this is a more serious matter. The laboratories are not capable of analyzing to the precision needed for these CRMs, and the laboratory practices should be reviewed. Uncertainty in the accuracy and precision of the analyses would be introduced through this process, requiring some action in terms of the classification of the Mineral Resources.

 

SRK is aware that the bias of the Chumpe laboratory compared to ALS has been noted and that changes in procedures and hardware are still being implemented at Chumpe to better approximate the preparation and analysis methodology employed by ALS. QA/QC methods have been adjusted in recent years and the results from 2018 to 2020 reflect the positive change.

 

11.5Opinion on Adequacy

 

SRK is of the opinion that the database is supported by adequate QA/QC to have reasonable confidence to estimate Mineral Resources. The Chumpe laboratory results have had a consistent negative bias relative to ALS. However, SRK notes that these biases are conservative given that Chumpe is the source for the historical drilling database and current channel samples, and that the nature of the bias is not such that the entire resource would be under or over-stated.

 

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SRK did not observe any consistent performance issues over time (2015-2020) at either lab, but rather noted isolated and apparently random failures for the CRMs and blanks. As noted, many of these can be attributed to sample mix-ups during QA/QC submittal or potential issues with the CRMs, both problems in and of themselves. Any sample mix-ups where corrected before the QA/QC analysis reporting and the Resource estimation process. Actual QA/QC sample failures initiate a re-assay protocol of the affected sample batch and those samples are not included in the estimation process. SRK continues to recommend that more attention is given to sampling and QA/QC in the future to continue to mitigate potential uncertainty in the analyses supporting the Mineral Resource. SRK also notes that any bias from the Chumpe analyses will likely be conservative due to the significant under-reporting of Ag for Chumpe compared to ALS.

 

Although the performance and monitoring of the QA/QC samples is not consistent with industry best practices, SRK notes that the lack of precision in certain analyses (Ag, Zn, Pb, Cu) is less critical due to the nature of the mineralization and mining criteria at Yauricocha. Precision issues between 0.1% to 0.2% in the base metals is likely not enough to cause material issues in deciding whether material is mined or not, and these decisions are generally made with ongoing development samples and grade control entirely unsupported by detailed QA/QC. Thus, much of the risk associated with the analyses has already be borne by the active mining of multiple areas at Yauricocha and mitigated by ongoing profitable production. SRK is of the opinion that while these issues should be addressed going forward; they represent little risk to the statement of Mineral Resources at this time.

 

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12Data Verification

 

Independent consultants such as Gustavson and Associates, and SRK have verified the data supporting Mineral Resource estimation at Yauricocha since 2012. SRK verified the data supporting the 2019 Mineral Resource estimation on site by observing and verifying geologically related procedures and data chain of custody, comparing several physical drillhole cores in the core yard to logged values recorded in the mine Excel spreadsheet, inspecting drillhole collar sites and comparing locations to recorded locations, cut-off values and assumptions, comparing laboratory result spreadsheets to the values utilized for the Mineral Resource estimation process. The drillholes, channel samples, mine development and the respective geological models were visually inspected in Studio RM™ version 1.6.87 (Datamine) by SRK to determine whether there were any material issues with respect to interpretation, data location or grade values. SRK found no material differences, except as outlined in Section 12.1 and corrected for the 2019 Resource estimation.

 

In 2020, SRK completed a desktop verification of the data utilized to support the Mineral Resource estimate as reported in this Report. This included the verification of the interpretation, data location and grade values related to drillholes, channel samples, cut-off values and assumptions, mine development and the respective geological models in Datamine.

 

SRK notes that the data verification process is made difficult due to the lack of a compiled and well-ordered database for the overall mine area.

 

12.1Procedures

 

For data prior to 2016, Gustavson reviewed the drillhole and underground channel sample databases for the Yauricocha project and compared the assay database with a separately maintained database of assay data which is described as ‘laboratory data’. Chumpe lab does not provide a separately maintained database, nor are there assay certificates with which to compare the database.

 

For the 2019 drillhole and channel sample database, SRK compared approximately 5% of the Chumpe laboratory results for the period 2018 to 2019 back to the Chumpe laboratory supplied Excel spreadsheets. No errors were noted between the two sources of results for silver, gold, lead, zinc and copper analytes. However, there were instances where arsenic and iron analytes where not available in the geological drillhole database. The entire analytical database was checked for further such instances and this information was sourced and updated where it was analyzed and available. For the period November 2019 to June 2020 SRK compared approximately 4% of the Chumpe laboratory results back to the Chumpe laboratory supplied Excel spreadsheets and no errors or omittances were noted.

 

12.2Limitations

 

SRK has not reviewed 100% of the analyses at Yauricocha against certified, independent assay certificates.

 

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12.3Opinion on Data Adequacy

 

SRK has relied upon the verification conducted by others previously and has conducted independent verification of assays to analytical certificates from ALS Minerals for the recent project history. SRK also notes that much of the risk associated with potential version control issues, database contamination or transposition, is borne-out through daily production in the currently operating underground mine.

 

SRK recommends the installation of a dedicated database management platform that will compile and validate the database used in Mineral Resource estimation against the actual certificates received from Chumpe, as well as make QA/QC management and database export more flexible and reliable. The ability to process QA/QC in real time will allow the identification of laboratory or sampling issues long before the Mineral Resource estimation process.

 

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13Mineral Processing and Metallurgical Testing

 

13.1Testing and Procedures

 

Yauricocha’s facilities include a metallurgical laboratory at site. Sampling and testing of samples are executed on an as needed basis. Information available from site shows that Yauricocha has been testing various samples from the mineralized zones as follows:

 

·Samples from Mina Central – Cuerpo Esperanza: a polymetallic Ag-Cu-Pb-Zn material that at laboratory scale achieved comparable results to those achieved in the industrial scale plant. Three products resulted from the tests: copper concentrate, lead concentrate, and zinc concentrate. Silver is preferably deported to copper and lead concentrates. No deleterious elements were reported in the flotation concentrates.

 

·Samples from a polymetallic material: test results are comparable to those of the industrial scale plant. Three products resulted from the tests: copper concentrate, lead concentrate, and zinc concentrate. Silver is preferably deported to copper and lead concentrates. Yauricocha continues testing alternative flotation conditions and reagents to reduce arsenic and antimony presence in copper concentrate and lead concentrate.

 

·Samples from Mina Mario (Pb-Zn): successfully produced a good quality lead sulfide concentrate and found difficulties in achieving commercial quality zinc grades.

 

·Samples from Cuerpo Contacto Occidental: correspond to an oxide Ag-Pb material that successfully achieved good quality lead sulfide concentrate and lead oxide concentrate. Approximately 70% of the silver was deported to concentrates, with approximately 47% of the total being deported to lead oxide concentrate.

 

·Additionally, samples identified as sourced from: Angelita, Antacaca, Catas, Celia, Cuye Cobre, Cuye Polimetalico, Gallito, Karlita have been subject to mineralogy analysis and flotation testing.

 

·Samples from an oxide copper material: this sample achieved poor metallurgical performance that laboratory personnel attributed to high presence of copper carbonates. Additional tests are planned for these samples.

 

·Samples from Esperanza Norte: a copper bearing material that achieved reasonable copper recovery and concentrate grade but with high presence of arsenic. The laboratory personnel’s recommendation is to blend this material in the mill feed.

 

·Samples from copper sulfide materials: achieved high recovery and concentrate grade but with significant arsenic presence in the copper concentrate. The laboratory personnel’s recommendation is to batch process this material in the plant.

 

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13.2Metallurgical Performance

 

Yauricocha’s metallurgical performance is presented in Table 13-1, Table 13-2, Figure 13-1 and Figure 13-2 for the period of January 2019 to June 2020. There was no oxide concentrate produced during this period. All concentrate products reached typical commercial grades.

 

In the polymetallic circuit, the fresh feed assaying 1.58% Pb, 1.11% Cu, 3.71% Zn, 0.62 g/t Au, and 64.64 g/t Ag produced three final concentrates with the following specifications:

 

·Copper recovery of 76.9% to produce a copper concentrate assaying 29.7% Cu, including grades of 6.3% Zn, and 1.9% Pb; because of their grades, both metals may trigger penalties from buyers. Silver recovery to copper concentrate reached 27.2%, equivalent to 606.52 g/t Ag in concentrate. Arsenic reached a likely penalty grade level of 2.1% in the copper concentrate after a recovery of 45.3%. Gold deportment was minor at 10.9% which translated to 2.32 g/t Au.

 

·Lead concentrate assaying 57.7% Pb after 88.4% Pb recovery. Zinc and copper may trigger penalties at 5.3% Zn and 2.5% Cu. Gold recovery of 8.8% translated to 2.23 g/t Au in concentrate which is unlikely to add value to the lead concentrate. Silver recovery reached 43.5% to produce a 1,152.70 g/t Ag grade well within payable levels. Arsenic was marginally deported to the lead concentrate reflecting a 0.1% As grade, well below penalty levels.

 

·Zinc concentrate that recovered 87.9% Zn and assayed 50.7% Zn which is within typical commercial values. Pb, Cu, and As are unlikely to trigger penalties when grading 0.7%, 1.8%, and 0.1% respectively. Gold recovery reached 5.0% translating to 0.48 g/t Au which is below payable levels. Silver recovery reached 9.2% translating to 92.07 g/t Ag and therefore within payable levels.

 

Table 13-1: Yauricocha Metallurgical Performance, January 2019 to June 2020

 

StreamTonnes

Au

(g/t)

Ag

(g/t)

Pb

(%)

Cu

(%)

Zn

(%)

As

(%)

Fresh Mineralized Material1,575,9190.6264.641.61.13.70.1
Cu Concentrate45,2852.32606.521.929.76.32.1
Pb Concentrate38,1692.231,152.7057.72.55.30.1
Zn Concentrate101,2300.4892.070.71.850.70.1

Source: Sierra Metals, 2020

 

Table 13-2: Concentrate Metal Recoveries, January 2019 to June 2020

 

Concentrate

Au

(%)

Ag

(%)

Pb

(%)

Cu

(%)

Zn

(%)

As

(%)

Cu10.927.23.776.95.145.3
Pb8.843.588.45.53.51.7
Zn5.09.22.810.487.90.0

Source: Sierra Metals, 2020

 

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Source: Sierra Metals, 2020

 

Figure 13-1: Mineralized Material Tonnes Processed and Metal Grades (Excluding Silver)

 

Source: Sierra Metals, 2020

 

Figure 13-2: Mineralized Material Tonnes Processed and Silver Grade (g/t)

 

Current gold deportment results suggest that gold is not associated with any of the major metals (silver, lead, copper, zinc), therefore suggesting that it could be present as free gold. Additionally, the overall recovery of gold is very low at 24.7% (across the Cu, Pb and Zn concentrate streams), and opportunities for improving gold recovery should be evaluated. Potential ways to improve gold recovery that should be evaluated include:

 

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(a)Gravity concentration at the grinding stage;

 

(b)Promoting gold deportment to a concentrate using gold-specific collectors; and

 

(c)Gravity concentrating final flotation tails.

 

Gravity concentration technologies are numerous and cover a wide range of capital and operating costs. Yauricocha should evaluate these options and determine the economic viability of each.

 

CK November 2020

 

 

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14Mineral Resource Estimates

 

Mineral Resource estimations have been conducted by the following Qualified Person using various industry-standard mining software:

 

·Andre Deiss, Principal Resource Geologist of SRK Consulting (Canada) Inc., Datamine Studio RM™ version 1.6.87.

 

SRK completed Mineral Resource estimations for the following mineralized areas (Figure 14-1):

 

·Mina Central;

 

·Esperanza;

 

·Mascota;

 

·Cuye;

 

·Cuerpos Pequeños; and

 

·Cachi-Cachi.

 

Source: Sierra Metals, 2020

 

Figure 14-1: Modeled Mineralized Areas Estimated at Yauricocha Mine

 

CK November 2020

 

 

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14.1Drillhole/Channel Database

 

SRK received a drillhole database in digital Microsoft ExcelTM (Excel) format. SRK notes that Minera Corona maintains their own database in an individual unprotected spreadsheet, without a clear chain of custody record. However, the use of a single repository Excel sheet is an improvement on the historical practice of utilizing individual Excel files for each mineralized zone respectively. No record is kept of the original source information as edits are made directly in the current spreadsheet tabs.

 

SRK is of the opinion that one of the largest and most critical deficiencies at Yauricocha is the lack of a well-maintained and protected geological relational database, which has the capability to track changes. This type of database would facilitate multi-faceted interrogations of the original and interpreted drillhole information available. Furthermore, it would permit flexibility and speed in manipulation and extraction of data for use in any Mineral Resource estimation. QA/QC results would be seamlessly available to allow for timeous interrogation and intervention on assay result failures.

 

14.2Geological Model

 

The geological model was developed by Minera Corona geologists, primarily using Seequent Leapfrog® Geo software (Leapfrog). Three dimensional (3D) models were derived from both drilling and channel samples, as well as incorporating mapping from mine levels and structural observations. Significant expansion and infill drilling between the end of 2017 and the effective date of the resource statement (June 30, 2020), has resulted in net changes in many areas of the Yauricocha deposit, improving the definition of the mineralized zones. Minera Corona geologists are responsible for the generation of the mineralized solids, allowing for the incorporation of detailed local geological information and hence producing more accurate representations of the mineralized zones as they are exposed in the mine. SRK has reviewed the geological model wireframes collaboratively with Minera Corona personnel and noted that they appear to be reasonable representations of the polymetallic oxide and sulfide mineralization as logged and sampled in each of the respective areas detailed in Sections 14.2.1 to 14.2.6.

 

SRK notes that the mineralized zones at depth have a closer morphology to the actual mined areas, which was not the case prior to 2018. Historically, the less informed areas of the models tended to be extremely optimistic for the respective mineralization style. This issue has been addressed since 2018 with additional infill drilling and the modification of the implicit modelling parameters utilized in Leapfrog. This has reduced the volumes of the respective mineralized bodies significantly in areas with a lower density of drilling intercepts.

 

There is currently no detailed structural or litho-stratigraphic model available for the mine. A regional structural model was commissioned by the mine. However, the results were not readily available for SRK to evaluate or comment on the validity thereof. A litho-stratigraphic model would facilitate the mine planning process with regards to the ability to apply a litho-stratigraphic waste density for dilution purposes.

 

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Mineralization at Yauricocha encompasses two main styles, differentiated by scale, continuity, and exploration and development style, namely:

 

·Cuerpos Massivos (large bodies) are bodies formed along major structures of significant (several hundreds of meters) vertical extent, consistent geometry, and significant strike length. The majority of the tonnage mined at Yauricocha is from these bodies, as they are easily intersected by targeted drilling and are mined by bulk mining methods; and

 

·Cuerpos Chicos (small bodies) are smaller mineralized bodies of high grades. They are often skarn bodies, are less continuous and less regular in form than the Cuerpos Massivos and are difficult to intersect except with carefully targeted drilling. They are typically mined by overhand cut and fill or similar high-selectivity mining methods. The mine has historically drifted into these zones and delineated them using localized channel sample data.

 

14.2.1Mina Central

 

The geological model for Mina Central has been constructed by Minera Corona site geologists. This model is based on implicit modeling of drilling and channel sampling, and encompasses the Antacaca, Catas, Rosaura, and Antacaca Sur areas, which are broken on geographic and infrastructure boundaries, rather than any mineralogic or geologic boundaries. The model is effectively continuous through all areas. The mineralization is domained using a steeply dipping, NW-trending, tabular wireframe constructed in Leapfrog. Both channel sampling and drilling have been used to develop this model. SRK reviewed the wireframes collaboratively with Minera Corona personnel and noted that it appears to be a reasonable representation of the polymetallic sulfide mineralization as logged and sampled in this area. SRK noted overlaps between the Antacaca Sur Oxidos Cuye mineralized zones with the Mina Central mineralized zones. These were corrected for the 2020 estimation. The mineralized zone has been adapted at depth from the previous 2019 model, based on revised interpretation and expanded drilling. An example of this model in the context of the previous model is shown in Figure 14-2.

 

In addition to the expanded extents of the Mina Central area, Minera Corona geologists have modeled selected oxide zones in the Antacaca Sur area based on drilling and development data. This is considered a separate domain from the main Mina Central area for the purposes of data analysis and estimation.

 

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Source: SRK, 2020

 

Figure 14-2: Mina Central Mineralized Model

 

14.2.2Esperanza

 

The geological model for Esperanza has been constructed by Minera Corona site geologists. SRK has reviewed the geological model wireframes collaboratively with Minera Corona personnel and has noted that they appear to be reasonable representations of the polymetallic sulfide mineralization as logged and sampled in this area. This model is based on a very detailed drilling program as well as cross-sectional and level mapping in order to capture the inherent complexity of this area. The model is implicitly modeled from a series of eight different areas identified within Esperanza based on mineralogy or textures. These include three breccia zones, one copper zone, Esperanza North, Esperanza Distal, Esperanza main and a lower grade pyrite-rich Esperanza main outer shell. Four of the zones were not estimated namely:

 

·Esperanza Breccia 1 (mined-out);

 

·Esperanza Breccia 2 (mined-out);

 

·Esperanza Cobre (mined-out); and

 

·Esperanza Pirita (not economic).

 

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Esperanza ii is a newly discovered mineralized zone and was not estimated for the 2020 Mineral Resources. In 2020, a pyritic lower grade envelope was modelled and estimated as part of the main Esperanza mineralized body. This pyritic-rich material is more friable and tends to cave with the planned mined material causing added mining dilution. The Esperanza model represents what appears to be a single primary feeder structure at depth, which splits into many “finger-like” smaller structures in the upper levels. With recent drilling this mineralization morphology has been proven to some degree. Although general continuity along strike and down-dip is quite good, SRK notes that the mineralization varies dramatically in orientation and thickness, locally over short distances.

 

 

Source: SRK, 2020

 

Figure 14-3: Esperanza Mineralized Model

 

Examples of the Esperanza model in the context of the previous model are shown in Figure 14-3 and Figure 14-4.

 

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Source: SRK, 2020

 

Figure 14-4: Cross-section of Esperanza Geological Model Showing Composite Ag Grades

 

14.2.3Mascota

 

The geological model for Mascota has been constructed by Minera Corona site geologists using implicit modeling in Leapfrog. The model is based on the grouped lithologies from drilling and sampling in the Mascota Mine area. The mineralization style is complex and many faceted. The geological model includes copper-rich areas as well as the massive sulfide zones being explored at depth. These areas have been identified as Ag/Pb oxides, low-grade Ag/Pb oxides, Cu oxides, and polymetallic sulfides. They are considered as discrete by the Minera Corona geologists and have been domained separately for the purposes of estimation. The following mineralized areas were estimated independently in the Mascota area:

 

·Mascota Oxide Cu Pb-Ag;

 

·Mascota Polymetallic North;

 

·Mascota Polymetallic East;

 

·Mascota Polymetallic (South) East;

 

·Mascota Polymetallic South; and

 

·Mascota Sur Oxide Cu.

 

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An example of this model in the context of the previous model is shown in Figure 14-5. SRK has reviewed the wireframes collaboratively with Minera Corona personnel and noted that they appear to be reasonable representations of the polymetallic oxide and sulfide mineralization as logged and sampled in this area.

 

 

 

Source: SRK, 2020

 

Figure 14-5: Mascota Mineralized Model

 

14.2.4Cuye

 

The geological model for Cuye has been constructed by Minera Corona site geologists. SRK has reviewed the geological model wireframes collaboratively with Minera Corona personnel and noted that they appear to be reasonable representations of the polymetallic sulfide mineralization as logged and sampled in this area. The Cuye zone has previously been reported as a series of smaller bodies situated between the Mina Central and Mascota areas. Unlike the smaller bodies, the new intersections are thicker and more continuous, if lower grade. Also, they potentially allude to an extension of the Mina Central mineralization to the north. The size and morphology of the Cuye area has completely changed from previous reports and fits more closely with a tabular, steeply dipping zone along the trend of the Mina Central and Esperanza areas. At present, Cuye has only been sampled by relatively widely spaced drilling. It, like Esperanza, also features some pyrite-rich zones which have been modeled separately within the greater Cuye zone. These areas have been excluded from the estimation as they are considered as waste rock for the mine.

 

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The Cuye iii mineralized body, previously included in the 2019 Mineral Resources, has not been included in the 2020 Mineral Resources as exploration development was unable to intersect the zone, previously identified by three sparsely spaced drillholes. Furthermore, the recent 2019 and 2020 drilling has shown areas that were previously considered as mineralized to be poorly or non-mineralized. The geological model and estimates have been updated to reflect these significant changes. Exploration drilling has identified a new mineralized zone south of the main Cuye mineralized zone. It has been designated as Cuye Sur and it has not been included in the 2020 estimates as additional drilling is required to define the shape of the mineralization. An example of the Cuye mineralized zone, compared with the previous model, is shown in Figure 14-6.

 

 

Source: SRK, 2020

 

Figure 14-6: Cuye Mineralized Model

 

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14.2.5Cachi-Cachi

 

The geological model for Cachi-Cachi has been constructed by Minera Corona site geologists. SRK has reviewed the wireframes collaboratively with Minera Corona personnel and noted that they appear to be reasonable representations of the polymetallic sulfide mineralization as logged and sampled in this area. This model is based on cross-sectional and level mapping, and encompasses the following massive mineralized zones:

 

·Angelita;

 

·Carmencita;

 

·Karlita;

 

·Elissa;

 

·Escondida;

 

·Privatizadora;

 

·Vanessa; and

 

·Yoselim.

 

These are discrete mineralized bodies with unique morphologies and mineralization. Carmencita, Vanessa and Yoselim mineralized zones were discovered in late 2018 and early 2019. The Cachi Cachi mineralization has been domained using a variety of geometries and orientations, which are generally steeply dipping. Models are wireframes implicitly modeled in Leapfrog. Both channel sampling and drilling have been used to develop these models. SRK reviewed the wireframes collaboratively with Minera Corona personnel and noted that they appear to be a reasonable representation of the polymetallic sulfide mineralization as logged and sampled in this area. An example of these models is shown in Figure 14-7.

 

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Source: SRK, 2020

 

Figure 14-7: Example of Cachi-Cachi Models

 

14.2.6Cuerpos Pequeños

 

The geological models for Cuerpos Pequeños have been constructed by Minera Corona site geologists. These models are based on cross-sectional and level mapping as well as the drilling and channel sampling. Models generally encompass small chimney-shaped massive sulfide mineralization, considered to occur as discrete mineralized bodies with unique morphologies and mineralization. The models encompass the following zones (Figure 14-8):

 

·Contacto Oriental;

 

·Contacto Occidental;

 

·Contacto Occidental Oxide (not estimated or mined);

 

·Contacto Sur Medio (TJ6060);

 

·Contacto Sur Medio I (TJ8167);

 

·Contacto Sur Medio II (TJ1590); and

 

·Gallito.

 

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Source: SRK, 2020

 

Figure 14-8: Cuerpos Pequeños Mineralized Model

 

The mineralization has been domained using a variety of geometries and orientations, which are generally steeply-dipping. Models are wireframes implicitly modeled in Leapfrog. Both channel sampling and drilling have been used to develop these models. SRK reviewed the wireframes collaboratively with Minera Corona personnel and noted that they appear to be a reasonable representation of the polymetallic sulfide mineralization as logged and sampled in this area.

 

The unpredictable nature of the mineralized zones and the exploration methodology used to delineate them makes for some uncertainty in the interpretation of the bodies, as they have been demonstrated to pinch and swell dramatically over short distances. Although an important source of Mineral Resources and production, these zones are not relied upon to the same degree as more massive bodies, such as Mina Central and Esperanza. SRK notes that there are several of the Cuerpos Pequeños-type mineralized zones that have not been modeled or estimated as part of this PEA, but which may have been included in previous reports and which may include mineralization that is currently being (or has previously been) selectively mined. This has historically made modeling and estimation of the smaller mineralized zones a distinct challenge, as the mineralization is often significantly or completely depleted through mining between the bi-annual modeling process.

 

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14.2.7Geological Models as Resource Domains

 

SRK considered the geological models to be hard boundaries, with respect to the resource estimation methods. However, for the purposes of exploratory data analysis, SRK grouped selected areas based on their geography or mineralogical relationships to ensure that the populations of data were sufficient to make informed decisions regarding compositing, capping, and variography.

 

For exploratory data analysis, SRK began with reviewing the sample distributions and mean grades for data within each local mineralization area. Based on the review of each local area, SRK elected to use each geologic domain (or subdomain) as a hard boundary to prevent estimation bias between adjacent smaller mineralized envelopes, which was evident from interim resource models produced by Minera Corona resource geologists in 2018. The individual domains were grouped based on a combination of factors including proximity, relative data populations, and mineralization style. The length weighted raw sample means (excluding absent values) for the respective domain, as well as the nomenclature and coding for the respective main domain groups are shown in Table 14-1.

 

In 2020, estimates for eight domains were not re-estimated as no additional drilling or sampling was available for the respective mineralized bodies; for details see Table 14-2. The 2020 physical depletions were applied where applicable and 2020 Net Smelter Return (NSR) cut-off values were applied for the 2020 Mineral Resource declaration. Celia was declared in 2019; however, in 2020, this area has been depleted entirely by mining.

 

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Table 14-1: Raw Sample Mean Grades per Mineralized Zone

 

AREAModel PrefixNumber of Samples

Ag

(ppm)

Pb

(%)

Cu

(%)

Zn

(%)

Au

(ppm)

As

(%)

Fe

(%)

Length (m)*
Mina CentralASO95188.541.091.221.490.580.2824.421.20
Mina CentralMINAC17,62327.480.370.461.470.350.1728.951.07
MascotaMAPE480112.071.750.9910.790.700.1225.891.59
MascotaMAPN591126.097.230.2013.610.350.0811.031.22
MascotaMAPS39474.560.420.375.900.450.1126.261.42
MascotaMAS1433.620.062.608.510.020.1619.730.69
MascotaMOX3,869127.784.132.021.630.670.3417.221.25
EsperanzaESP11,28148.310.691.251.550.370.2531.740.86
EsperanzaESPBX66116.242.860.598.720.200.0811.510.96
EsperanzaESPD45846.244.150.198.700.170.1216.041.00
EsperanzaESPN973168.193.591.678.900.540.7322.690.98
CuyeCUYE1,18443.780.321.602.480.830.1629.680.95
Cuerpos PequeñosCOC362100.932.870.127.430.290.0817.971.44
Cuerpos PequeñosCOR69469.391.560.336.580.340.4119.390.82
Cuerpos PequeñosCSM274228.068.450.138.880.340.0711.592.30
Cuerpos PequeñosCSMI371169.3710.170.0812.720.090.057.711.58
Cuerpos PequeñosCSMII420311.049.900.2111.670.250.2812.431.57
Cuerpos PequeñosGAL32448.882.030.866.730.210.3324.361.59
Cachi-CachiANG2,56510.140.200.252.710.160.1130.491.00
Cachi-CachiCAR25272.201.220.254.000.750.1621.061.58
Cachi-CachiELI1,00456.791.200.105.030.190.3020.532.00
Cachi-CachiESC67474.533.090.225.770.590.1928.391.42
Cachi-CachiKAR1,80877.541.230.714.870.690.2131.901.31
Cachi-CachiPVT34956.862.310.117.000.620.1327.461.13
Cachi-CachiVAN21744.491.660.316.110.350.1222.350.98
Cachi-CachiYOS19589.212.270.095.570.560.4823.602.08

 

* Length weighting not applied

Source: SRK, 2020

 

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Table 14-2: Summary of Main Resource Domain Groups in Geological Models

 

AreaModel PrefixDomain DescriptionEstimation
Date
Mina CentralMINACMina Central2020
ASOAntacaca Sur Oxidos2019**
EsperanzaESPEsperanza2020
ESPBXEsperanza Breccia 32020
ESPDEsperanza Distal2020
ESPNEsperanza Norte2020
MascotaMASMascota Sur Oxide Cu2019**
MAPNMascota Polymetallic North2020
MAPEMascota Polymetallic East2020
MAPSMascota Polymetallic South / South (East)2020
MOXMascota Oxide Pb-Ag / Cu2019**
CuyeCUYECuye2020
Cuerpos PequeñosCORContacto Oriental2020
COCContacto Occidental2020
CSMContacto Sur Medio (TJ6060)2019*
CSMIContacto Sur Medio I (TJ8167)2019*
CSMIIContacto Sur Medio II (TJ1590)2020
GALGallito2019*
Cachi-CachiANGAngelica2020
CARCarmencita2020
ELIElissa2019*
ESCEscondida2020
KARKarlita2020
PVTPrivatizadora2020
VANVanessa2020
YOSYoselim2019*

* Not re-estimated in 2020 only 2020 physical depletion applied and 2020 NSR cut-off’s applied for Mineral Resources

** Not re-estimated in 2020 only 2020 NSR cut-off’s applied for Mineral Resources

Source: Sierra Metals, 2020

 

14.3Assay Capping and Compositing

 

SRK conducted compositing and then capping for the drillhole and channel sampling databases supporting all the estimation domains.

 

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14.3.1Outliers

 

SRK reviewed the outliers for the original sample data in each area or domain using a combination of histograms, log probability plots, and descriptive statistics. Outliers are evaluated from the original, un-composited data, flagged by the 3D geological model. An example of the log probability plot reviewed for Ag, Pb, Cu and Zn at Esperanza is shown in Figure 14-9. The capping value in this case lies between the 98-99th percentile range. This capping analysis reviewed the impact of the cap on several factors in the database, including total reduction in contained metal, percentage of samples capped, and reduction to the Coefficient of Variation (CV). All capping was completed after compositing. Capping limits assigned for each dominant volume per resource area estimated by SRK are shown in Table 14-3. Minor volumes may have different capping limits to prevent conditional bias in the resource estimate.

 

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Source: SRK, 2020

 

Figure 14-9: Log Cumulative Probability Plots for Capping Analysis – Esperanza

 

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Table 14-3: Capping Limits for Dominant Volumes in Mineral Resource Areas

 

AreaModel PrefixAgC
(ppm)

PbC

(%)

CuC

(%)

ZnC

(%)

AuC
(ppm)

AsC

(%)

FeC

(%)

Mina CentralASO6875.081.808.547.401.04-
Mina CentralMINAC85018.2014.3037.5015.902.4058.00
MascotaMAPE34413.206.9029.003.700.40-
MascotaMAPN62331.501.6039.003.950.1825.00
MascotaMAPS1420.880.8012.300.800.1932.50
MascotaMAS60.2012.73-0.050.4129.20
MascotaMOX1,99159.705.0414.5022.902.48-
EsperanzaESP79516.1026.3030.0011.005.5047.50
EsperanzaESPBX2417.001.9616.500.420.2521.04
EsperanzaESPD27723.902.3035.001.160.6134.00
EsperanzaESPN45514.5010.5025.206.603.00-
CuyeCUYE1992.206.3022.703.401.20-
Cuerpos PequeñosCOR51221.004.2038.006.852.10-
Cuerpos PequeñosCSM94832.400.87-1.700.22-
Cuerpos PequeñosCSMI607-0.3542.950.68-22.30
Cuerpos PequeñosCSMII76024.700.7031.300.931.90-
Cuerpos PequeñosGAL41017.2310.63-1.571.9141.56
Cachi-CachiANG2907.803.5023.002.000.60-
Cachi-CachiCAR2555.301.2512.853.600.40-
Cachi-CachiELI79013.033.36-2.721.59-
Cachi-CachiKAR59516.805.8031.905.701.50-
Cachi-CachiPVT33510.750.7322.902.050.40-
Cachi-CachiVAN21615.100.3631.502.130.35-
Cachi-CachiYOS43811.620.6723.853.032.37-
Mina CentralASO6875.081.808.547.401.04-
Mina CentralMINAC85018.2014.3037.5015.902.4058.00

Source: SRK, 2020

 

14.3.2Compositing

 

SRK composited the raw sample data within the geologic wireframes using standard run lengths. These composite lengths vary between various areas, but the analysis is the same to ensure that the composites are representative of the Selective Mining Unit (SMU) and minimize variance at the scale of the estimation. The compositing analysis generally features a review of the variable sample lengths in a histogram as well as review of the sample lengths vs. grade scatter plots (Figure 14-10 and Figure 14-11) to ensure that there are not material populations of high grade samples above the nominal composite length. Composite lengths for each area are summarized in Table 14-4.

 

All intervals without values were populated with trace values as only mineralized material is sampled by the mine geological staff. However, one exception to this was the arsenic and iron values, which were left blank. Arsenic is regarded as a deleterious element and iron is an integral part of the density relationship and is generally higher in mineralized zones. Initially, a mean value was considered rather than allowing the estimate to establish a value. However, estimation artifacts resulted, hence the missing value route was taken for these arsenic and iron values. Minor composite lengths were restricted in the compositing process by selecting MODE=1 in Datamine’s COMPDH process.

 

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Source: SRK, 2020

 

Figure 14-10: Raw Sample Length Histogram for Mina Central and Esperanza

 

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Source: SRK, 2020

 

Figure 14-11: Sample Length vs. Ag, Pb, Cu and Zn Grade Plot for Mina Central

 

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Table 14-4: Composite Statistics

 

AreaModel Prefix

Composite Length

(m)

Minimum
(m)

Mean

(m)

Maximum
(m)
Mina CentralASO10.500.991.20
Mina CentralMINAC10.401.001.40
MascotaMAPE10.750.981.50
MascotaMAPN20.201.723.00
MascotaMAPS10.650.981.50
MascotaMAS10.800.991.30
MascotaMOX10.501.001.40
EsperanzaESP10.401.001.45
EsperanzaESPBX10.450.991.30
EsperanzaESPD10.831.001.25
EsperanzaESPN10.301.001.30
CuyeCUYE10.851.001.40
Cuerpos PequeñosCOC10.200.941.50
Cuerpos PequeñosCOR20.801.952.90
Cuerpos PequeñosCSM20.501.892.90
Cuerpos PequeñosCSMI20.401.883.00
Cuerpos PequeñosCSMII20.201.763.00
Cuerpos PequeñosGAL20.301.832.90
Cachi-CachiANG10.401.001.40
Cachi-CachiCAR10.750.981.40
Cachi-CachiELI20.361.913.00
Cachi-CachiESC10.750.981.40
Cachi-CachiKAR10.140.991.45
Cachi-CachiPVT10.500.981.35
Cachi-CachiVAN20.451.833.00
Cachi-CachiYOS20.301.972.95

Source: SRK, 2020

 

14.4Density

 

Density determinations are based on bulk density measurements taken from representative core samples or grab samples in each area. The volume displacement method is utilized to establish the density of a sample. Historically, mine personnel assigned a single bulk density to each mineralized area. However, this is an invalid assumption for Mineral Resources in polymetallic mineralization styles, as the density varies substantially from lower to higher grade metal content areas. The effect of applying a single density per mineralization zone based on current mining results, is to bias the overall tonnage to that respective metal content. Whereas, the grades vary significantly throughout the mineralized zones, as substantiated by measurements taken on the mine site, as requested by SRK.

 

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SRK produced regression analyses of density versus total accumulated content, i.e., silver, lead, copper, zinc, gold, arsenic and iron for specific mineralization styles and areas (Figure 14-12). A generalized polymetallic regression was utilized for polymetallic mineralization that did not have a statistical representative density population of samples. Unfortunately, the relationship was not representative with respect to the oxide mineralization. All regressions were limited to a maximum content of 55% as the predicted value deviates substantially after this point. Global values as supplied by Minera Corona personnel were applied to MAS (3.555), MOX (3.162) and ASO (3.162) respectively.

 

 

Source: SRK, 2020

 

Figure 14-12: Total Metal Content vs. Density Regressions

 

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14.5Variogram Analysis and Modeling

 

SRK conducted detailed variogram analysis to assess orientations and ranges of continuity within the mineralized zones. Directional variograms were calculated for the primary mineralization areas of Mina Central and Mascota, as the quantities of data and orientations of the mineralized zones are well-understood. Directional variograms defining an ellipsoid resulted in 3D continuity models for each element. In all cases, appropriate nugget effects were determined from downhole variograms, then utilized in the directional variograms. A linear model of coregionalization was maintained for each continuity model, and the three variograms were plotted on a single graph to define the shape of the ellipsoid. The ellipsoids were reviewed against the data distribution to ensure reasonableness and consistency. The continuity parameters derived from the directional variography in each area and for each metal are used in the Ordinary Kriging estimation process.

 

A total of 182 variograms were modeled between Minera Corona staff. SRK verified orientations and checked variograms. In SRK’s opinion the variogram models were reasonable fits to the experimental variograms. However, SRK noted in some instances that more anisotropic definition could be achieved by gaussian or log transforming the composites for variogram modelling purposes and then back transforming the variogram models for estimation purposes. Figure 14-13 shows examples of Minera Corona modelled variograms for Mina Central and Esperanza. Table 14-5 details a subset of modelled variogram models as examples from Esperanza, Cuye and Mina Central mineralized domains, representing the dominant proportion of the Mineral Resources. All variograms were normalized for estimation purposes.

 

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Source: SRK, 2020

 

Figure 14-13: Examples of Modelled Variograms for Mina Central and Esperanza

 

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Table 14-5: Datamine Normalized Modelled Semi-Variogram Models

 

Model
Prefix
VDESCVREFNUMVANGLE1VANGLE2VANGLE3VAXIS1VAXIS2VAXIS3NUGGETST1ST1PAR1ST1PAR2ST1PAR3ST1PAR4ST2ST2PAR1ST2PAR2ST2PAR3ST2PAR4
CUYEAG NORM1132-9003210.04419.39.330.486136.426.960.469
CUYEPB NORM2132-9003210.13817.77.530.487136.525.65.50.375
CUYECU NORM3132-9003210.11717.5730.577137.326.45.60.306
CUYEZN NORM4132-9003210.08315.4530.444136.525.75.60.473
CUYEAU NORM5132-9003210.0641333.20.601136.624.45.40.335
CUYEAS NORM6132-9003210.14316.87.330.524136.223.35.50.333
CUYEFE NORM7132-9003210.1215.25.930.275139.427.25.60.604
ESPAG NORM1155-7503210.19316.75.73.70.487145.549.49.30.32
ESPPB NORM2155-7503210.183111.716.230.378144.948.69.10.439
ESPCU NORM3155-7503210.1531106.74.30.548148.247.290.299
ESPZN NORM4155-7503210.123111.213.630.35414846.29.20.523
ESPAU NORM5155-7503210.10317.310.44.70.675147.750.390.222
ESPAS NORM6155-7503210.10115.56.33.10.635148.348.99.80.264
ESPFE NORM7155-7503210.10919.410.64.10.58148.447.49.20.311
ESPAG NORM1155-7503210.14914.74.53.60.486149.550.48.10.365
ESPPB NORM2155-7503210.162110.710.230.601148.548.38.60.237
ESPCU NORM3155-7503210.08516.76.34.60.677145.644.99.90.238
ESPZN NORM4155-7503210.20217.66.750.404146.2479.40.395
ESPAU NORM5155-7503210.08916.59.74.80.684147.14510.30.227
ESPAS NORM6155-7503210.14518.910.83.50.702149.844.79.50.153
ESPFE NORM7155-7503210.12619.5104.90.562148.445.610.40.311
MINACAGC NORM11588503210.337114.56.340.411149.448.790.252
MINACPBC NORM21588503210.168112.613.130.6131505110.40.219
MINACCUC NORM31588503210.11916.78.230.587148.949110.294
MINACZNC NORM41588503210.128114.77.240.66514949110.207
MINACAUC NORM51588503210.185111.85.130.619150.749.310.60.196
MINACASC NORM61588503210.1515.311.130.55150.549.5100.3
MINACFEC NORM71588503210.20418.89.64.10.613149.249.6110.183

Source: SRK, 2020

 

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14.6Block Model

 

Block models were generated by SRK in Datamine Studio RM™. Sub-blocking was utilized to approximate geologic contacts. Rotated block models were generated to assist in the mine planning process where mineralization solids crossed the orthogonal grid obliquely, facilitating less dilution in the stope optimization studies.

 

Blocks were flagged by mineralization area and domain. Details of the parameters used for the block models are summarized in Table 14-6.

 

Table 14-6: Block Model Parameters

 

 

Model
Prefix

ParentRange

Origin

(minimum value block corner)

Rotation (Datamine)

X

(m)

Y

(m)

Z

(m)

X (m)

Y

(m)

Z

(m)

X

Local

(m)

Y

Local

(m)

Z

Local

(m)

Angle (°)Axis
ANG4448816418024,05616,5464,02639Z
ASO4447220429224,22714,6403,827-30Z
COC2221066637823,78615,1373,683-Z
CSM222847449623,75014,9273,81934Z
CSMI222564817223,78914,9673,773-21Z
CSMII222769231223,76614,8223,642-45Z
CUYE44428825241623,66015,2883,366-Z
ELI2224013630223,83816,5043,85050Z
ESC222828222223,75616,3803,849-Z
ESP44419246053223,74015,4343,602-25Z
ESPBX222644826823,65615,6663,8840Z
ESPD444568814823,65615,6443,824-28Z
ESPN4441529634023,64415,7583,770-30Z
GAL222347226023,61715,6503,752-Z
KAR2228612419824,00216,5893,96434Z
MAPE222769635623,75515,3193,524-40Z
MAPN222569631623,69015,3703,596-30Z
MAPS222929622823,83815,2863,618-70Z
MAS22240527823,72115,2973,69728Z
MINAC44420076084824,18014,6203,308-30Z
MOX4449215252023,75015,2983,645-50Z
PVT2228016631423,66416,3343,69055Z
VAN222629219223,94316,6033,95570Z
YOS2224610617423,68316,3493,84145Z
ANG4448816418024,05616,5464,02639Z
ASO4447220429224,22714,6403,827-30Z

 

Source: SRK, 2020

 

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14.7Estimation Methodology

 

SRK utilized either Ordinary Kriging (OK) or Inverse Distance to the Power 2 weighting to interpolate grade in all resource areas. The decision on the estimation type to use was based on the confidence of the geologist in the ability of the variography to reflect the continuity of grade within the mineralized body, as well as the need for some measure of declustering based on data spacing. In some cases where mineralized bodies could not be related to those with reasonable variograms, an Inverse Distance method was utilized.

 

The estimation type and sample selection criteria were chosen to target a reasonably reliable local estimation of grade that does not bias the global resource estimation. SRK generally utilized the geological models as hard boundaries in the estimation and estimated blocks within these boundaries using the capped composites in the same boundaries. Ranges for interpolation were derived from omni-directional variogram analysis or continuity assumptions from site geologists based on underground mining observations. All estimations utilized both channel and drillhole samples. SRK utilized three nested estimation passes for each domain. Local Varying Anisotropy (LVA) was utilized for several estimates as a static search orientation did not produce representative estimates.

 

The search parameters were optimized in the larger mineralized areas by completing a Qualitative Kriging Neighborhood Analysis (QKNA). The search parameters were focused on the major NSR contributing element for any mineralized zone. Samples where limited per channel/drillhole source (MAXKEY). Additional estimates were completed for cross validation purposes. These included, Nearest Neighbor (NN), Arithmetic Mean (AV) and Inverse Distance to the Power 2. The kriging efficiency and the geostatistical RSlope values were calculated per OK estimate. The complete estimation parameters are summarized in Table 14-7.

 

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Table 14-7: Estimation Parameters

 

Model
Prefix
ClassifierSDESCSREFNUMMETHODXYZANGLE1ANGLE2ANGLE3AXIS1AXIS2AXIS3PASS 1PASS 2PASS 3MAXKEY
SDIST1SDIST2SDIST3MINMAXFACTORMINMAXFACTORMINMAX
ANGZNOKZN4LVA20206219-850321515231533102
ASOAGOKAG1STATIC20208-30-800321515231533102
CARZNIDZN4LVA12.512.55104-900321515231533102
COCZNOKZN4LVA2525670-900321515231533102
CORZNOKZN4STATIC15158167760321515231533102
CSMZNOKZN4STATIC1515550-800321515231533102
CSMIZNOKZN4STATIC15155-35-750321515231533102
CSMIIZNOKZN4STATIC20206115760321515231533102
CUYECUOKCU3LVA25255132-900321515231543102
ELIZNOKZN4LVA202060-90126321515231533102
ESCZNOKZN4LVA15155210-900321515231533102
ESPCUOKCU3STATIC252510155-750321515231543102
ESPDZNOKZN4STATIC12.512.55152740321510231043102
ESPBXZNIDZN4LVA12.512.57.5-6090032131023105250
ESPNZNOKZN4STATIC12.512.55130-740321510231043102
GALZNOKZN4STATIC151550-90200321515231533102
KARZNOKZN4STATIC15156224-900321515231533102
MAPEZNOKZN4STATIC15155137-900321515231533102
MAPNZNOKZN4STATIC20205140-830321515231533102
MAPSZNOKZN4STATIC12.512.56110800321515231533102
MASCUIDCU3STATIC2020828-900321510231033102
MINACZNOKZN4LVA252510158850321515231543102
MOXPBOKPB2STATIC202060-90210321515231533102
PVTZNOKZN4LVA202010230-850321515231533102
VANZNOKZN4STATIC15155250800321515231533102
YOSZNOKZN4STATIC202060-90-40321515231533102
ANGZNOKZN4LVA20206219-850321515231533102
ASOAGOKAG1STATIC20208-30-800321515231533102
CARZNIDZN4LVA12.512.55104-900321515231533102

 

Source: SRK, 2020

 

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14.8Model Variation

 

All models have been validated utilizing visual and statistical measures to assess the probability of conditional bias in the estimation. Swath plots were also generated to validate the estimation. SRK is of the opinion that the validation of the models is sufficient for relying upon them as Mineral Resources. However, SRK notes that the ultimate validation of the models is in the fact that the mine continuously produces material from the areas modeled and projected by the Mineral Resource estimations. SRK notes that reconciliation of the production to the resource models is not a consistent part of the current validation methods but is under consideration by Sierra Metals for future models.

 

14.8.1Visual Comparison

 

Both SRK and Minera Corona have conducted visual comparisons of the composite grades to the block grades in each model. In general, block grade distributions match well in level and cross-section views through the various mineralized zones. Some of these examples are shown below in Figure 14-14 through Figure 14-16.

 

Source: SRK, 2020

 

Figure 14-14: Visual Block to Composite Comparison – Mina Central

 

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Source: SRK, 2020

 

Figure 14-15: Visual Block to Composite Comparison – Esperanza

 

Source: SRK, 2020

 

Figure 14-16: Visual Block to Composite Comparison – Mascota

 

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14.8.2Comparative Statistics

 

SRK compared the estimated block grades to the composite grades utilized in the estimation, for the same zones and volumes to ensure that both are representative. SRK generally weighted the statistics by composite length or polygonal declustering with mineralized envelope constraints to weight for the composites, and by volume for the blocks. The results show that, in almost all cases, the blocks feature a lower or similar mean to the composite grades. An example of the estimate versus the composite statistics completed for Mina Central Zn (%) and Esperanza Cu (%) are shown in Figure 14-17. These analyses were completed for all estimated values in all mineralized zones, to establish whether there was any over / under estimation.

 

Where blocks locally exceed the composite grades, SRK notes that these appear to be limited occurrences, and generally the potentially over-estimated areas are in areas which have been mined previously or where very few samples occur within a respective mineralized envelope. An estimate should have a similar mean to the original composites. However, the estimates produce a smoothed result and the distribution of the estimated blocks relative to the original composites will produce a narrower range histogram. This is evident from the box and whisker plots in Figure 14-17. SRK is of the opinion that these results show that there is reasonable agreement between the models and the supporting data, with low risk for global over-estimation.

 

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Source: SRK, 2020

 

Figure 14-17: Mina Central and Esperanza Ordinary Kriging Result Comparison to Declustered Capped Composite Values

 

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14.8.3Swath Plots

 

SRK has compiled swath plots to validate the estimation. A swath plot is a graphical display of the grade distribution derived from a series of meter thickness bands (12.5, 25 and 8 m width in this case), or swaths, generated in the X, Y, and Z orientations through the deposit. Grade variations from the block model are compared using the swath plot to the distribution derived from the composites or other estimation methods. An example of swath plots from Mina Central and Esperanza for all estimated grades is shown in Figure 14-18, illustrating the comparison between the OK estimation used for reporting to the original polygonal declustered composite grades. SRK notes that in general the estimated grades represent a smoothed approximation of the composite grades.

 

SRK did not produce these plots for every mineralized body, as narrow and tabular orientations do not necessarily allow for the swath plots as a reasonable comparison. For those mineralized zones with broader and less tabular morphology, this comparison is more reasonable.

 

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Source: SRK, 2020

 

Figure 14-18: Mina Central and Esperanza Swath Plots

 

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14.9Resource Classification

 

In SRK’s opinion, the geological modelling honors the current geological information and knowledge. The location of the samples and the assay data are sufficiently reliable to support resource evaluation. The sampling information was acquired primarily by core drilling and limited channel sampling.

 

The estimated blocks were classified according to:

 

·Confidence in interpretation of the mineralized zones;

 

·Number of data (holes or channel samples) used to estimate a block; and

 

·Average distance to the composites used to estimate a block.

 

In order to classify mineralization as a Measured Mineral Resource the following statement must be considered: “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 detailed mine planning and evaluation of the economic viability of the deposit” (CIM Definition Standards on Mineral Resources and Mineral Reserves, May 2014). For the classification of Indicated Mineral Resources the CIM standard requires the following: “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”. SRK utilized the following general criteria for classification of the Mineral Resource at Yauricocha:

 

·Measured: Blocks estimated with a distance of 10 to 25 m and informed by at least three drillholes;

 

·Indicated: Blocks estimated with a distance of 20 to 50 m and informed by at least two drillholes; and

 

·Inferred: Blocks estimated with a distance of 30 to 100 m and informed by at least two drillholes.

 

All solid envelopes containing two or less drillholes were decategorized from Mineral Resources. These areas should be considered as exploration areas and require additional drilling to satisfy CIM Definition Standards. The resource classification was initially scripted based on the range of influence of the dominant NSR contributor, generally zinc or copper. A manual override of the isolated resource category blocks was completed in Datamine’s graphical interface by selecting the respective parent cell centroids and assigning a representative / realistic resource category.

 

Examples of this scripted classification scheme are shown in Figure 14-19, Figure 14-20 and Figure 14-21. SRK notes that this scripted method is not perfect, and locally results in some classification artifacts along the margins of wide-spaced drilling or in areas where data spacing varies significantly. SRK notes that this is likely something that can be improved upon as additional drilling (currently underway) infills some of these areas.

 

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Source: SRK, 2020

 

Figure 14-19: Example of Scripted and Re-classed Classification for Esperanza

 

 

 

Source: SRK, 2020

 

Figure 14-20: Example of Scripted and Re-classed Classification for Mina Central

 

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Source: SRK, 2020

 

Figure 14-21: Example of Scripted and Re-classed Classification for Mascota Oxide Cu Pb-Ag

 

14.10Depletion

 

SRK depleted the block models using provided wireframe solids based on digitized polygons projected on long sections and cross-sections from Minera Corona. SRK notes that this is a conservative approach, given that it effectively ignores pillars or other areas which are known to have not been completely mined. However, SRK agrees with this approach and notes that extensive surveying of previously mined areas would need to be done in order to reasonably incorporate the remaining material above these levels. All material within each solid was flagged with a mined variable (MINED or Minado) in the block model, with 1 representing completely mined, and 0 representing completely available. Depletion was applied to the resource models in areas where drift and development ends intersect the resource model. In depleted areas, a mined flag of two was assigned and in non-mined areas, a mined flag of three was assigned.

 

An example of this is shown in Figure 14-22 for the Mina Central area.

 

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Source: SRK, 2020

 

Figure 14-22: Example of Mining Depletion in Block Models – Mina Central

 

14.11Mineral Resource Statement

 

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

 

“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 value (COV) considering extraction scenarios and processing recoveries. SRK is of the opinion that the costs provided by Minera Corona represent the approximate direct marginal mining and processing cost for various mining methods. To satisfy the criteria of reasonable prospects for economic extraction, SRK has calculated unit values for the blocks in the models based on the grades estimated, metal price assumptions, and metallurgical recovery factors in the form of an NSR value. The NSR value also takes into consideration arsenic, as it is considered a deleterious element in the current smelter contracts. For the mineralized zones that are designated to be exploited utilizing a sub-level caving method, the block models were regularized to their respective parent cell and diluted at zero grade. This allowed for isolated sub-cells to fall below the COV and hence be removed from the Mineral Resource, as these particular blocks do not satisfy the “reasonable prospects for eventual economic extraction” as stated in the CIM definitions.

 

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The metal price assumptions have been derived from 2020 Consensus Commodity prices and are reasonable for the statement of Mineral Resources. These prices are generally higher than those used in the previous Technical Report filed in 2017 and reflect the relative increase in commodity prices since that report. These prices are summarized in Table 14-8.

 

Table 14-8: Unit Value Price Assumptions

 

Consensus Pricing

Gold

(US$/oz)

Silver

(US$/oz)

Copper

(US$/lb)

Lead

(US$/lb)

Zinc

(US$/lb)

Long Term 20201,50218.243.050.911.06

 

Source: CIBC Global Mining Group, August 2020

 

The metallurgical recovery factors are based on actual to-date 2019 metallurgical recoveries for the various processes and concentrates produced by the Yauricocha Mine. SRK has considered that the mineralized bodies stated in Mineral Resources fall into one of three general categories in terms of process route: polymetallic sulfide, lead oxide, and copper sulfide. The copper sulfide process route was abandoned in 2017. The overwhelming majority of the mineralized zones are considered as polymetallic sulfide, with very limited production from Pb Oxide areas, and effectively no consistent production from Cu-Oxide areas. Oxide material constitutes 2.2% of the total declared Measured and Indicated Mineral Resources for 2020 and 0.3% of the Inferred Mineral Resources are regarded as oxide material. The summary of the recovery discounts applied during the unit value calculation are shown in Table 14-9. SRK notes that the recoveries stated for the unit value calculations do not consider payability or penalties in the concentrates, as these are variable and may depend on contracts to be negotiated.

 

Table 14-9: Metallurgical Recovery Assumptions

 

DateProcess Recovery

Ag

(%)

Au

(%)

Cu

(%)

Pb

(%)

Zn

(%)

2020Polymetallic7622758989
Pb Oxide51530650
2019Polymetallic7617808989
Pb Oxide51530650
2017Polymetallic6716658589
Pb Oxide51540660
Cu Oxide2803900

 

Source: Sierra Metals, 2020

 

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The general unit value calculation can then be summarized as the estimated grade of each metal, multiplied by the price (US$/g or US$/%), multiplied by the process recovery. This yields a dollar value of the block per tonne, which can be utilized to report resources above the break-even variable costs for mining, processing, and G&A. Sierra provided these costs to SRK, noting that they are generalized given the flexibility of the mining methods within each area or individual mineralized body. For example, several mineralized bodies feature a majority of a specific mining method, but will locally utilize others on necessity, or require adjusted pumping capacity or ground conditions, which may locally move this cost up or down. SRK considers the application of a single unit value cut-off to each mineralized body as reasonable. The unit value sub-marginal costs provided by Sierra are summarized in Table 14-10.

 

Table 14-10: Unit Value Cut-off by Mining Method (US$/t)

 

DescriptionBreak-Even Cost 2019Break-Even Cost 2020
Sub-level Caving: Conventional (SLCM1)$46$25
Sub-level Caving: Mechanized, No Water (SLCM2)$47$27
Sub-level Caving: Mechanized, Low Water (SLCM3)$49$27
Cut and Fill: Overhead Conventional CRAM$55$36
Cut and fill: Overhead MechanizedNot UtilizedNot Utilized
Cut and Fill: Overhead Mechanized w/ PillarsNot UtilizedNot Utilized

 

Source: Sierra Metals, 2020

 

Sierra has provided an explanation as to why the 2020 mining costs have decreased since 2019. Through better cost controls, improved equipment and worker utilization, an improved mine management team, reduced workforce and better operating procedures and improved short-term and long-term mining plans, the mine has been able to drive down costs and successfully manage with reduced operating budgets.

 

In addition, the workforce has been dramatically reduced in size from 2,500 workers in 2019 to 1,500 in 2020, and ground support costs, power costs, maintenance costs and warehouse costs have all been reduced collectively by over $11.00/tonne. Sierra also discovered during Covid-19 work reductions that they were able to achieve better efficiencies and production rates with fewer people and therefore operating budgets have now been decreased accordingly. The mine has also switched to a new cost management system which has allowed the mine to better measure and track costs, and to drive further cost reductions.

 

The June 30, 2020, consolidated Mineral Resource statement for the Yauricocha Mine is presented in Table 14-11. The individual detailed Mineral Resource statements by mining area are presented in Table 14-12.

 

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Table 14-11: Consolidated Yauricocha Mine Mineral Resource Statement as of 30 June, 2020 – SRK Consulting (Canada), Inc. (1) (2) (3) (4) (5) (6) (7) (8) (9)

 

Classification

Volume
(m3) '000

Tonnes

(K t)

Density

(kg/m3)

Ag

(g/t)

Au

(g/t)

Cu

(%)

Pb

(%)

Zn

(%)

As

(%)

Fe

(%)

NSR

(USD/t)

Ag

(M oz)

Au

(K oz)

Cu

(M lb)

Pb

(M lb)

Zn

(M lb)

Measured1,4584,9043.3655.810.591.130.832.590.1824.471138.893.5122.289.4280.1
Indicated3,22611,0203.4238.390.501.200.522.050.1425.419813.6178.0291.1126.7498.9
Measured + Indicated4,68415,9243.4043.750.531.180.622.220.1525.1210322.4271.5413.3216.2779.0
Inferred3,34611,6333.4827.540.451.400.310.950.0726.658410.3167.4357.979.3242.5

 

Notes:

 

(1)Mineral Resources have been classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") Definition Standards on Mineral Resources and Mineral Reserves, whose definitions are incorporated by reference into NI 43-101.

(2)Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimates. Silver, gold, copper, lead, zinc, arsenic (deleterious) and iron assays were capped / cut where appropriate.

(3)The consolidated Yauricocha Mineral Resource estimate is comprised of Measured, Indicated and Inferred Resources in the Mina Central, Cuerpos Pequeños, Cuye, Mascota, Esperanza and Cachi-Cachi mining areas.

(4)Polymetallic Mineral Resources are reported at Cut-Off Values (COVs) based on 2020 actual metallurgical recoveries and 2020 smelter contracts.

(5)Metal price assumptions used for polymetallic feed considered CIBC, August 2020 long-term consensus pricing (Gold (US$1,502/oz), Silver (US$18.24/oz), Copper (US$3.05/lb), Lead (US$0.91/lb), and Zinc (US$1.06/lb).

(6)Lead Oxide Mineral Resources are reported at COVs based on 2020 actual metallurgical recoveries and 2020 smelter contracts.

(7)Metal price assumptions used for lead oxide feed considered CIBC, August 2020 long-term consensus pricing (Gold (US$1,502/oz), Silver (US$18.24/oz) and Lead (US$0.91/lb).

(8)The mining costs are based on 2020 actual costs and are variable by mining method.

(9)The unit value COVs are variable by mining area and proposed mining method. The marginal COV ranges from US$25 to US$36.

 

CK November 2020

 

 

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Table 14-12: Individual Mineral Resource Statements for Yauricocha Mine Areas as of June 30, 2020 – SRK Consulting (Canada), Inc.(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

 

Mina Central (MINAC) - PolymetallicCOV27 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured1,2783.4623.310.540.770.122.140.1625.4074957.622.0621,829.73,480.960,383.21.991324.6
Indicated4,0213.5120.780.531.160.061.360.1127.16762,686.068.04102,956.45,743.0120,681.64.3491,092.2
Measured + Indicated5,2993.5021.390.531.070.081.550.1226.74753,643.690.10124,786.19,223.9181,064.86.3401,416.8
Inferred7,2493.4720.420.451.440.150.640.0626.56774,760.1104.03230,773.724,458.1102,053.24.1531,925.4
Includes all Catas and Antacaca
Mina Central (MINAC) - PolymetallicCOV27 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured6893.2735.310.530.580.592.040.1218.9275782.211.728,750.48,915.031,000.50.846130.4
Indicated1,1453.3024.450.390.820.090.730.1021.7354899.914.4720,733.62,177.118,315.31.092248.8
Measured + Indicated1,8343.2928.530.440.730.271.220.1120.67621,682.126.1929,483.911,092.149,315.81.938379.2
Inferred2,1373.5017.790.361.380.120.480.0427.61701,222.524.5164,918.15,640.522,428.00.911590.1
Includes all Rosaura and Antacaca Sur
Mina Central (ASO) – Pb / Ag OxideCOV27 GradesValueContained Metal
CategoryTonnes (K t)Density (kg/m3)Ag (g/t)Au (g/t)Cu (%)Pb (%)Zn (%)As (%)Fe (%)NSR (USD/t)Ag (K oz)Au (K oz)Cu (K lb)Pb (K lb)Zn (K lb)As (K t)Fe (K t)
Measured2423.10127.601.260.231.560.540.3028.9867992.89.831,239.08,298.42,865.60.71770.1
Indicated2173.1479.681.060.360.960.760.2730.4447555.97.411,713.04,572.63,641.60.57966.1
Measured + Indicated4593.12104.951.170.291.270.640.2829.67571,548.717.242,952.012,871.06,507.21.297136.2
Inferred323.20126.261.590.270.630.650.2529.4563129.91.63191.1443.8460.10.0809.4
Includes all Antacaca Sur Oxidos
Cuerpos Pequeños (CSM, CSMI and CSMII) - PolymetallicCOV36 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured483.20177.940.110.126.378.770.125.42291274.60.18130.36,745.99,279.00.0582.6
Indicated1223.13156.950.120.145.018.690.106.36262615.60.46389.813,466.923,365.90.1277.8
Measured + Indicated1703.15162.870.120.145.398.710.116.10270890.20.64520.120,212.832,644.90.18510.4
Inferred663.14181.720.120.116.488.520.085.14289385.60.26158.79,434.912,395.50.0503.4
Includes all Contacto Sur Medio: TJ6060, TJ8167 (I) and TJ1590 (II)

 

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Cuerpos Pequeños (GAL) - PolymetallicCOV36 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured93.3769.120.261.671.206.100.3619.2419720.00.07330.9238.51,209.90.0331.7
Indicated53.2427.370.120.072.569.400.0910.581924.400.027.7282.41,035.70.0050.5
Measured + Indicated143.3254.210.211.101.697.280.2716.1519524.40.09338.65212,245.60.0372.3
Inferred343.1331.560.110.093.219.830.077.7821134.50.1264.62,409.47,367.40.0242.6
Includes all Gallito
Cuerpos Pequeños (COR) - PolymetallicCOV36 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured703.5055.590.120.380.598.020.1824.86161125.10.27593904.312,377.80.12617.4
Indicated1393.4846.120.120.300.468.010.1724.83153206.10.52926.21,414.724,559.90.23434.5
Measured + Indicated2093.4849.290.120.330.508.020.1724.84156331.20.791,519.22,319.036,937.70.36051.9
Inferred793.2965.400.180.161.596.240.0619.77145166.10.46286.82,767.010,862.40.04415.6
Includes all Oriental
Cuerpos Pequeños (COC) - PolymetallicCOV36 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured333.0053.910.300.170.755.650.0512.2412157.20.32127.0547.84,114.00.0184.0
Indicated623.1047.160.280.150.625.860.0511.0111994.00.56209.9851.28,009.20.0326.8
Measured + Indicated953.0649.500.290.160.675.790.0511.44120151.20.87336.91,399.112,123.20.04910.9
Inferred22.8524.880.120.090.073.080.026.77591.60.014.02.9135.60.0000.1
Includes all Occidental
Cuye (CUYE) - PolymetallicCOV25 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured0---------0000000
Indicated2,1973.6019.720.541.350.101.130.1228.44801,392.738.1765,182.94,886.354,908.02.597624.8
Measured + Indicated2,1973.6019.720.541.350.101.130.1228.44801,392.738.1765,182.94,886.354,908.02.597624.8
Inferred1,2733.6532.440.521.650.090.340.1330.68831,327.721.1546,366.22,386.99,582.61.595390.6
Includes all Cuye

 

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Mascota (MAPE, MAPN, MAPS, MAS and MOX) – Polymetallic and Cu / Pb / Ag OxidesCOV25 + 36 (10) GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured1543.14139.520.960.954.044.910.1616.31172690.84.773,213.913,720.216,660.80.25325.1
Indicated5453.24122.340.640.972.796.050.1317.401842,143.711.1511,698.433,572.072,735.50.71094.8
Measured + Indicated6993.22126.130.710.973.075.800.1417.161812,834.515.9214,912.347,292.289,396.20.962119.9
Inferred2783.43142.421.040.552.395.540.0923.411851,272.99.283,377.714,619.133,940.60.25365.1
Includes all Mascota Oxidos Cu Pb-Ag, Mascota Polymetallic North, Mascota Polymetallic East, Mascota Polymetallic (South) East, Mascota Polymetallic South and Mascota Sur Oxidos Cu
Esperanza (ESP, ESPD, ESPN and ESPBX) - PolymetallicCOV25 + 27 (10) GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured1,9983.3766.350.591.880.842.330.2328.761444,261.938.1182,743.836,943.0102,467.04.499574.6
Indicated2,2263.2761.280.461.731.032.870.2225.521474,385.832.8084,711.050,706.7140,700.84.799568.0
Measured + Indicated4,2243.3263.680.521.800.942.610.2227.051468,647.770.90167,454.887,649.7243,167.89.2981,142.70
Inferred3603.2470.120.341.431.704.110.2722.50167811.63.9611,310.613,524.232,596.00.97381
Includes all Esperanza, Esperanza Norte, Esperanza Distal, Esperanza Breccia 3
Cachi-Cachi (ANG) - PolymetallicCOV27 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured413.4210.010.300.580.162.190.0824.266313.20.39527.3148.61,981.30.0329.9
Indicated253.1330.360.510.640.502.180.1023.307724.40.41354.3274.01,204.20.0255.8
Measured + Indicated663.3017.720.380.610.292.190.0923.906837.60.80881.6422.63,185.50.05715.8
Inferred0---------0000000
Includes all Angelita
Cachi-Cachi (CAR) - PolymetallicCOV36 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured313.4468.630.990.210.894.150.1221.57109.7468.40.99142.4609.62,837.10.0376.7
Indicated53.3249.140.790.131.014.020.1416.321007.90.1314.8111.3443.30.0070.8
Measured + Indicated363.4365.920.960.200.914.130.1220.8410876.31.11157.2720.93,280.50.0447.5
Inferred43.1873.091.660.062.485.700.228.271579.40.215.1218.9502.40.0090.3
Includes all Carmencita

 

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Cachi-Cachi (ELI) – PolymetallicCOV36 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured353.1898.110.410.361.477.210.1512.49177110.40.47276.71,135.45,560.30.0534.4
Indicated423.00124.710.520.671.533.90.159.09149168.40.70616.91,418.03,607.60.0613.8
Measured + Indicated773.08112.620.470.531.505.400.1510.64161278.81.17893.52,553.49,167.90.1148.2
Inferred142.8077.540.250.540.841.680.066.068434.90.11165.8260.1518.70.0090.8
Includes all Elissa
Cachi-Cachi (ESC) - PolymetallicCOV36 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured203.3347.590.300.142.175.770.0923.0914130.60.1961.5955.72,542.80.0184.6
Indicated463.2930.090.260.071.334.500.1218.5010144.50.3967.91,353.44,561.60.0578.5
Measured + Indicated663.3035.390.270.091.594.880.1119.8911375.10.58129.42,309.17,104.40.07413.1
Inferred373.0830.770.280.071.064.050.1415.159136.60.3356.9863.83,307.40.0515.6
Includes all Escondida
Cachi-Cachi (KAR) - PolymetallicCOV36 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured1333.9147.220.530.690.393.090.1132.6496201.92.292,029.61,151.09,061.90.14443.4
Indicated523.7130.270.420.690.323.230.1029.919150.60.70788.2364.43,707.50.05315.6
Measured + Indicated1853.8542.450.500.690.373.130.1131.8895252.52.992,817.71,515.512,769.40.19759.0
Inferred13.9412.440.440.560.110.990.1027.69450.40.0112.32.421.80.0010.3
Includes all Karlita
Cachi-Cachi (PVT) - PolymetallicCOV36 GradesValueContained Metal
CategoryTonnes
(K t)
Density
(kg/m3)
Ag
(g/t)
Au
(g/t)
Cu
(%)
Pb
(%)
Zn
(%)
As
(%)
Fe
(%)
NSR
(USD/t)
Ag
(K oz)
Au
(K oz)
Cu
(K lb)
Pb
(K lb)
Zn
(K lb)
As
(K t)
Fe
(K t)
Measured833.3239.980.450.061.945.710.0822.12132106.71.2113.53,558.010,447.50.07018.4
Indicated1133.3246.600.340.101.353.910.0821.1199169.31.22252.93,354.59,749.90.08923.9
Measured + Indicated1963.3243.800.380.081.604.670.0821.54113276.02.42366.46,912.620,197.40.16042.2
Inferred363.0032.920.370.100.581.850.0917.805238.10.4278.9461.21,470.30.0346.4
Includes all Privatizadora

 

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Cachi-Cachi (VAN) - PolymetallicCOV36 GradesValueContained Metal
CategoryTonnesDensityAgAuCuPbZnAsFeNSRAgAuCuPbZnAsFe
(K t)(kg/m3)(g/t)(g/t)(%)(%)(%)(%)(%)(USD/t)(K oz)(K oz)(K lb)(K lb)(K lb)(K t)(K t)
Measured143.5067.980.490.113.0011.880.0912.9125230.60.2234.0924.43,665.40.0121.8
Indicated293.2245.900.550.660.995.840.0721.4114542.80.52421.7633.83,734.20.0216.2
Measured + Indicated433.3153.090.530.481.647.810.0818.6418073.40.74455.71,558.27,399.60.0338.0
Inferred103.3355.990.740.301.4910.120.0819.1720718.00.2466.63282,231.70.0081.9
Includes all Vanessa
Cachi-Cachi (YOS) - PolymetallicCOV36 GradesValueContained Metal
CategoryTonnesDensityAgAuCuPbZnAsFeNSRAgAuCuPbZnAsFe
(K t)(kg/m3)(g/t)(g/t)(%)(%)(%)(%)(%)(USD/t)(K oz)(K oz)(K lb)(K lb)(K lb)(K t)(K t)
Measured263.25121.30.530.112.026.440.3119.36172101.40.4561.51,158.53,688.80.0805.0
Indicated293.22108.110.370.122.446.090.2319.01169100.80.3574.31,561.83,894.70.0665.5
Measured + Indicated553.24114.350.450.112.246.250.2719.17170202.20.79135.82,720.37,583.50.14710.5
Inferred213.50100.120.970.213.105.710.2015.1617767.60.6596.61,433.02,642.50.0433.2
Includes all Yoselim

 

Source: SRK, 2020

 

Notes:

 

(1)Mineral Resources have been classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") Definition Standards on Mineral Resources and Mineral Reserves, whose definitions are incorporated by reference into NI 43-101.
(2)Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimates. Silver, gold, copper, lead, zinc, arsenic (deleterious) and iron assays were capped / cut where appropriate.
(3)The consolidated Yauricocha Resource Estimate is comprised of Measured, Indicated and Inferred Resources in the Mina Central, Cuerpos Pequeños, Cuye, Mascota, Esperanza and Cachi-Cachi mining areas.
(4)Polymetallic Mineral Resources are reported at Cut-Off Values (COVs) based on 2020 actual metallurgical recoveries and 2020 smelter contracts.
(5)Metal price assumptions used for polymetallic feed considered CIBC, August 2020 long term consensus pricing (Gold (US$1,502/oz), Silver (US$18.24/oz), Copper (US$3.05/lb), Lead (US$0.91/lb), and Zinc (US$1.06/lb).
(6)Lead Oxide Mineral Resources are reported at COVs based on 2020 actual metallurgical recoveries and 2020 smelter contracts.
(7)Metal price assumptions used for lead oxide feed considered CIBC, August 2020 long term consensus pricing (Gold (US$1,502/oz), Silver (US$18.24/oz) and Lead (US$0.91/lb).
(8)The mining costs are based on 2020 actual costs and are variable by mining method.
(9)The unit value COVs are variable by mining area and proposed mining method. The marginal COV ranges from US$25 to US$36.
(10)Two or more mining methods employed, hence multiple cut-off applied to the respective regions.

 

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14.12Mineral Resource Sensitivity

 

To demonstrate the sensitivity of the Mineral Resource estimations to factors such as changes in commodity prices or mining / processing costs, SRK has produced value vs. tonnage charts at various unit value cut-offs for each mining area, for all Measured and Indicated (M&I) Resources (Figure 14-23 through Figure 14-28). Figure 14-29 shows the total Mineral Resources for the Yauricocha Mine. This shows that the majority of the Mineral Resources defined in Mina Central, Esperanza, Mascota, Cuye, Cuerpos Pequeños and Cachi-Cachi have some sensitivity to the unit value cut-off (varying in degree between mineralized bodies), and that this should be considered in the context of the impact of changing cost assumptions with respect to the contained Mineral Resources.

 

 

 

Source: SRK, 2020

 

Figure 14-23: Mina Central Value vs. Tonnage Chart for M&I Resource Categories

 

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Source: SRK, 2020

 

Figure 14-24: Esperanza Value vs. Tonnage Chart for M&I Resource Categories

 

 

 

Source: SRK, 2020

 

Figure 14-25: Cuye Value vs. Tonnage Chart for M&I Resource Categories

 

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Source: SRK, 2020

 

Figure 14-26: Mascota Value vs. Tonnage Chart for M&I Resource Categories

 

 

 

Source: SRK, 2020

 

Figure 14-27: Cachi-Cachi Value vs. Tonnage Chart for M&I Resource Categories

 

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Source: SRK, 2020

 

Figure 14-28: Cuerpos Pequeños Value vs. Tonnage Chart for M&I Resource Categories

 

 

Source: SRK, 2020

 

Figure 14-29: Yauricocha Value vs. Tonnage Chart for all Resource Categories

 

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14.13Relevant Factors

 

There are no other relevant factors that SRK is aware of that would affect the Mineral Resource estimates.

 

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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 Prefeasibility 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 plans 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

 

Sub-level caving (SLC) and overhand cut and fill (OCF) mining methods are currently used in the main areas of the mine to achieve production. The mining method used varies depending on geotechnical constraints, mineralization trends, dimensions, and mine production targets.

 

Using the most recent Mineral Resource estimate, Sierra Metals analysed how the Yauricocha Mine could achieve higher, sustainable production rates. The analysis determined that higher production rates are achievable through expansion of the use of the SLC mining method in the new production areas. Additionally, a new configuration of the SLC mining method will allow for a greater recovery of mining resources and increased productivity.

 

The mine is grouped into six primary mining areas on geographic location:

 

1.Mina Central;

 

2.Esperanza;

 

3.Mascota;

 

4.Cuye;

 

5.Cachi-Cachi; and

 

6.Cuerpos Pequeños.

 

The mining areas are shown in plan view in Figure 16-1.

 

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Source: Sierra Metals, Redco, 2020

 

Figure 16-1: Yauricocha Mine Showing Mining Areas (Plan View)

 

16.2Mine Access and Materials Handling

 

Access to the mine is through the Mascota shaft, Central shaft, or Klepetko tunnel at 720 level. Ramps connect levels and sub-levels in the primary mining areas as shown in Figure 16-2. Previously mined out areas are shown in pink, existing development openings are black, and designed development is shown in blue. The life of mine (LOM) planning blocks are shown for reference and are coloured by production year.

 

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Source: Sierra Metals, 2020

 

Figure 16-2: Yauricocha Long Section Showing Mining Areas and Mineralized Zones (Looking Northeast)

 

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Main levels are 50 m apart, increasing to 100 m below the 1070 level. Mineralized material and waste generated in Mina Central is handled through a series of level passes into rail cars and then dumped into loading pockets in the Mascota shaft to be hoisted to the 720 main haulage level. A winze at Cachi-Cachi hoists production from lower levels in that area to the 720 main haulage level.

 

For mining at depths between 1170 level to 1370 levels, the Yauricocha shaft is under construction and expected to be commissioned in 2021. Mineralized material is transported by rail to the mill through the Klepetko and Yauricocha tunnels. The Yauricocha tunnel was recently built, and this new infrastructure provides additional haulage capacity to the mill.

 

16.3Current Mining Methods

 

The mining method applied to the various mineralized zones at Yauricocha is generally chosen based on the mineralization style. Mineralization at Yauricocha encompasses two main styles, differentiated by scale, continuity, and development style.

 

1.Cuerpos masivos (larges bodies) are bodies formed along major structures of significant vertical extent (several hundreds of meters), consistent geometry, and significant strike length, and are mined by bulk mining methods (SLC).

 

2.Cuerpos chicos (small bodies) are smaller mineralized bodies of high grades and are often less continuous and less regular in form than the Cuerpos masivos. They are typically mined by OCF or similar high-selectivity mining methods. Cuerpos chicos in the Cachi-Cachi area are referred to by the area designation “Cachi-Cachi” and Cuerpos chicos occurring in the vicinity of Mina Central are collectively referred to as “Cuerpos Pequeños”.

 

Two main mining methods are used, namely:

 

1.Mechanized SLC for Cuerpos masivos, and

 

2.Mechanized OCF for Cuerpos chicos.

 

Table 16-1 shows the mining method used by mineralization area and zone and Figure 16-3 shows an isometric view of the mining areas and mineralized zones.

 

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Source: Sierra Metals, 2020

 

Figure 16-3: Yauricocha Isometric Showing Mining Areas and Mineralized Zones

 

Table 16-1: Mining Method by Mineralization Area and Zone

 

AreaZoneMining MethodMining Method Description
Mina CentralCatasSLCM2Mechanized Sub Level Caving – Some Water Present
AntacacaSLCM2Mechanized Sub Level Caving – Some Water Present
RosauraSLCM3Mechanized Sub Level Caving – Water Present
Antacaca SurSLCM3Mechanized Sub Level Caving – Water Present
EsperanzaEsperanzaSLCM1Mechanized Sub Level Caving – No Water Present
NorteSLCM2Mechanized Sub Level Caving – Some Water Present
DistalSLCM1Mechanized Sub Level Caving – No Water Present
MascotaOxide Ag-PbSLCM1Mechanized Sub Level Caving – No Water Present
Polymetallic (All)CRAMMechanized Overhand Cut and Fill
CuyeAllSLCM1Mechanized Sub Level Caving – No Water Present
Cachi – CachiAngelitaSLCM2Mechanized Sub Level Caving – Some Water Present
KarlitaCRAMMechanized Overhand Cut and Fill
ElissaCRAMMechanized Overhand Cut and Fill
CeliaSLCM2Mechanized Sub Level Caving – Some Water Present
EscondidaCRAMMechanized Overhand Cut and Fill
PrivatizadoraCRAMMechanized Overhand Cut and Fill
VanessaCRAMMechanized Overhand Cut and Fill
YoselimCRAMMechanized Overhand Cut and Fill
CarmencitaCRAMMechanized Overhand Cut and Fill
Cuerpos PequeñosGallitoCRAMMechanized Overhand Cut and Fill
OrientalCRAMMechanized Overhand Cut and Fill
OccidentalCRAMMechanized Overhand Cut and Fill
Contacto Sur Medio (TJ 6060)CRAMMechanized Overhand Cut and Fill
Contacto Sur Medio I (TJ 8167)CRAMMechanized Overhand Cut and Fill
Contacto Sur Medio II (TJ 1590)CRAMMechanized Overhand Cut and Fill

Source: Redco, 2020

 

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16.4Mining Method

 

16.4.1Sub-level Caving (SLC)

 

SLC is comprised of three sub-levels that are established for each 50 m level resulting in a planned 16.7 m between sub-levels labeled as pisos (floors). Material is caved from the sub-levels and recovered in a drawpoint. Drawpoints from the footwall into the mineralized material are typically 3.5 m wide x 3.5 m high and are spaced 8.0 m apart. Steel sets, shotcrete and bolting are used as ground support in the drawpoints and the length of each drawpoint varies with the thickness of the mineralized zones.

 

As the drawpoint is developed, samples of mineralized material are collected for grade control analysis from the left and right ribs. Upholes are drilled in stopes to initiate caving. Effective draw control is important to successful extraction for this mining method. Figure 16-4 shows a typical SLC layout, 870 Level - Piso 12 in Antacaca Sur. Figure 16-5 shows an isometric view of drawpoint as-builts in Mina Central illustrating the typical drawpoint layout and offset.

 

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Source: Sierra Metals, 2020

 

Figure 16-4: Typical Sub-level Cave Layout, 870 Level - Piso 12 in Antacaca Sur (Plan View)

 

Source: Sierra Metals, 2020

 

Figure 16-5: Isometric View of Drawpoints in Mina Central (Looking West)

 

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16.4.2Overhand Cut and Fill (OCF)

  

OCF mining is employed in the smaller mineralized zones. Typically, the cuts are mined 2.0 m wide x 3.0 m high in an overhand (ascending) technique where the lower levels are filled as mining progresses to the next sub-level above. Sill pillars are left between levels as mining comes up underneath the previously mined level. Based on geotechnical constraints the sill pillars are typically a minimum of 3.0 m in thickness. The long section of the mineralized zone is shown in Figure 16-6 to show the method of OCF.

 

Source: Sierra Metals, 2020

 

Figure 16-6: Schematic Showing Overhand Cut and Fill Mining (Long Section)

 

16.5Mining Method Parameters

 

SLC is the primary mining method at Yauricocha representing 84% of the production. This method is in use Mina Central, Esperanza, Mascota, and Cuye. SLC and OCF are used for Cachi-Cachi, and only OCF is used for Cuerpos Pequeños.

 

Currently, the mine uses horizontal distances of 8 m between the production windows, which translates into having effective pillars of 5 m.

 

Following previous studies by REDCO (PEA Analysis Yauricocha Mine 2018) and based on the Laubscher abacus (Figure 16-7), it was decided that in order to increase the production rate, the recommended horizontal distance between the production windows should be 10 m and the vertical distance between levels should be 25 m (Figure 16-8). These values were based on a design trade-off study considering dilution, recovery and an economic analysis using gravitational flow modelling.

 

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Source: Redco, 2020

 

Figure 16-7: Laubscher Estimating for Drawpoints Design

 

Source: Redco, 2020

 

Figure 16-8: Final Stope Design for Yauricocha

 

Sub-Level Caving (SLC)

 

Principal levels, each 50 m apart, are divided in two sub-levels of 25 m. The rock support of the drawpoint can be a mix of ribs, shotcrete and/or bolts. The length of each drawpoint varies with the width of the mined body.

 

Design parameters for SLC and OCF are shown in Table 16-2 and Table 16-3 respectively.

 

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Table 16-2: Parameters for SLC

 

ParameterValue (m)
Level spacing25.0 m
Drawpoint spacing10.0 m
Labor width3.5 m

Source: Sierra Metals, Redco, 2020

 

Table 16-3: Parameters for Mechanized OCF

 

ParameterValue (m)
Cut width2.0 m – 5.0 m
Cut high3.0 m
Cut length100 m – 120 m

Source: Sierra Metals, Redco, 2020

 

16.6Parameters Relevant to Mine Designs

 

16.6.1Geotechnical Data

 

This section presents details of the geotechnical data from previous studies, and additional data collected since, for this PEA study.

 

Field Investigations

 

Previous geotechnical field investigations focused primarily on the Antacaca Sur deposit (high mud-rush-risk area) and then extended to Antacaca, Catas, Rosaura and Mascota mining areas. As of 2015, the geotechnical investigations comprised 500 m of core logging and 6 km of mapping of the underground workings. In 2020, over 2,000 minor structures and discontinuities were mapped.

 

The geotechnical core logging was conducted to help delineate structural domains. SRK logged in accordance with the rock mass rating classification systems developed by Bieniawski (1976 and 1989). These classification systems are widely-used empirical methods for classifying the rock mass quality and internationally accepted practice. Data were collected on the following rock mass characteristics:

 

·lithology;

 

·faulting and shearing;

 

·orientation of structure for delineating joint sets;

 

·estimating intact rock strength;

 

·Rock Quality Designation (RQD);

 

·orientation of structure for delineating joint sets;

 

·number of discontinuities (joints);

 

·average fracture frequency; and

 

·joint spacing.

 

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Data were also collected on the following discontinuity characteristics:

 

·openness/aperture;

 

·planarity;

 

·roughness;

 

·infilling/coating; and

 

·evidence of groundwater staining.

 

In the rock mass rating system, several of these characteristics have rating values which when summed together give a rock mass rating out of 100 points and an indication of the rock mass quality.

 

Summary rock mass rating results from the 6 km of underground mapping are presented in Table 16-4.

 

For the units encountered in the 6 km of workings mapped, Table 16-4 shows the statistics of the RMRB89 data and Table 16-5 shows the statistics of the Geological Strength Index (GSI) data.

 

Table 16-4: Summary Statistics of RMRB(89) from the Tunnel Mapping

 

RMRB(89)

Crystallized

Limestone

Marble

Limestone

Grey

Limestone

Skarn

Limestone

Granodiorite

Monzonitic

Intrusive

Mean605960595663
Standard Error0.30.610.52.20.9
Standard Deviation101010101010
Sample Variance2.91110.91.224.88.3
Minimum565156584860
Maximum626464606267

Source: Sierra Metals, Redco, 2020

 

Table 16-5: Summary Statistics of Geological Strength Index (GSI) from the Tunnel Mapping

 

GSI

Crystallized

Limestone

Marble

Limestone

Grey

Limestone

Skarn

Limestone

Granodiorite

Monzonitic

Intrusive

Mean555455545158
Standard Error0.30.610.52.20.9
Median615957585663
Standard Deviation101010101010
Sample Variance2.91110.91.224.88.3
Minimum514651494555
Maximum575946555762

Source: Sierra Metals, Redco, 2020

 

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Although SRK was not provided with the geotechnical database for this PEA, Sierra stated that diamond cored drillholes (DDH) collared underground were geotechnically logged in accordance with RMRB(89) and GSI rock mass rating systems. Although rating systems can be converted, the correlations are sometimes variable and area specific. As such, best practice is to collect data for two different systems. SRK understands, based on discussion with Sierra, that logging for the Q’ (Barton, 1974) rock mass rating system is now also being conducted. The Q-system is most commonly used for underground applications and there are numerous industry-standard empirical design charts (e.g., ground support) established for this system.

  

For this PEA, Sierra provided SRK with project geological models for the mining areas. The databases in each model contained details on each drillhole: collars, downhole survey and lithology, but did not contain geotechnical data. Although it is unclear which drillholes had geotechnical data collected, Table 16-6 provides a summary of the DDH in the models that are dated after 2015.

 

Table 16-6: Summary of Diamond Cored Drillholes Since 2015

 

Mining AreaDiamond Cored Drillholes
NumberTotal Meters
Cuerpos Chicos218 12.630,00 
Esperanza322 22.387,90 
Mascota17 1.510,00 
Mina Central131 13.169,40 
Mina Cachi Cachi133 11.277,30 

Source: Sierra Metals, Redco and validated by SRK, 2020

 

Three broad geotechnical units; i) Hangingwall, ii) Footwall, and iii) Mineralized zone (Figure 16-9) were identified. Each geotechnical domain was subdivided into different geotechnical sub-domains based on rock mass quality and rock mass strength.

 

Source: Sierra Metals, Redco, 2020

 

Figure 16-9: Conceptual Geotechnical Model (Plan View)

 

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i)The hangingwall domain also has two sub-domains, i) Intrusive, and ii) Weathered Intrusive. The intrusive is fresh and characterized as good to very good quality rock. The information collected from drainage drillholes indicates that the RMRB(89) ranges between IIIB to IIB.

  

The weathered intrusive sub-domain is an altered intrusive with low rock quality and low intact rock strength. This material is located on the immediate hangingwall of the mineralized material on the contact with the Yauricocha fault. This sub-domain is characterized by cubic blocks of intrusive material with clay infilling, which significantly reduces its rock mass strength. Closer to the fault there is more clay infill between blocks. Field observations and core logging indicate that the highly weathered intrusive hangingwall extends up to about 20 m from the Yauricocha fault.

 

ii)The footwall limestone domain is massive and covers most of the underground workings. Even though geologically there are different types of limestones, the RMRB(89) and the laboratory test results suggest that various limestones have similar mechanical behavior and can be grouped into a single geotechnical unit, referred to as “fresh limestone”. The altered breccia sub-domain is located along the immediate footwall contact with the mineralized zone. This sub-domain comprises weak altered material. Field observations indicate the footwall breccia is discontinuous and with variable thickness.

 

iii)The mineralized material has been defined as a separate geotechnical domain because of its distinctly weaker characteristics. The data (i.e. field observations, core logging and laboratory tests) indicate that this unit behaves as granular material. To understand the effect of the strength parameters under different moisture levels, five remolded multi-stage undrained triaxial tests were conducted at different moisture levels (2%, 3%, 4.8%, 6%, and 8%). The test results indicate reduction in strength with increasing moisture. The mineralized material has significantly lower cohesion at higher moisture contents, but the internal friction angle is only reduced slightly.

 

Mapping and Logging

 

For the 2015 technical study, the geotechnical field investigations focused primarily on the Antacaca Sur deposit (high mud-rush-risk area) and then extended to Antacaca, Catas, Rosaura and Mascota mining areas. As of 2015, the geotechnical investigations comprised 500 m of core logging, and 6 km of mapping of the underground workings. Then in 2020, over 2,000 minor structures and discontinuities were mapped.

 

For this PEA, the main source of information for rock characterization comes from the underground characterization by DCR Ingenieros. DCR Ingenieros mapped in accordance with the rock mass rating classification systems developed by Bieniawski (1976 and 1989). These classification systems are widely-used empirical methods for classifying the rock mass quality and internationally accepted practice. Data were collected on the following rock mass characteristics:

 

·lithology;

 

·type of joint set;

 

·orientation of structure for delineating joint sets;

 

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·joint spacing;

 

·persistence;

 

·openness / aperture;

 

·roughness;

 

·infilling / coating;

 

·weathering; and

 

·evidence of groundwater staining.

 

For interpretation of structural data, the joint sets registered in geological plans developed by the Geology Department of the Yauricocha Mine and data registered by DCR Ingenieros were used. To establish the joint sets distribution, data were processed in the software DIPS. The results indicate the existence of two main systems of joint sets and three secondary systems of joint sets (Figure 16-10):

 

·System 1, azimuth EW and high dip to S;

 

·System 2, azimuth NS and high dip to E;

 

·System 3, azimuth NWW and high dip to SW;

 

·System 4, azimuth NWW and high dip to SE; and

 

·System 5, azimuth NNW and high dip to SW.

 

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Source: DCR Ingenieros, 2019

 

Figure 16-10: Stereogram of Main Joint Families

 

Faults have a spacing of 20 m and a persistence between tens and hundreds of meters generally. These faults are located generally parallel to the Yauricocha fault. In the case of faults with infilling materials like clays and oxides, the aperture is between 10 to 50 cm. These faults are the conduit for the transport of underground water. Based on historical mapping and logging historical information, SRK developed a 3D Model of 13 main faults shown in Figure 16-11.

 

Source: SRK, 2015

 

Figure 16-11: Major Fault (Isometric View)

 

The source of information to classify the rock mass was the underground mapping in different levels of the mine. Also, it considered past information obtained from the upper levels of the mine developed by the Geomechanics Department of the Yauricocha Mine.

 

Results are shown in Table 16-7 as ranges of RMR for the domains mentioned above.

 

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Table 16-7: Rock Mass Characterization for Domain

  

DomainRMR RangeRock Mass Characterization
Limestone43 – 54IIIB & IIIA
Mineralized Material<21 – 22V & IVB
Intrusive47 – 53IIIB & IIIA

Source: Sierra Metals, Redco, 2020

 

An example ground control management level plan showing the footwall development and mining access is shown in Figure 16-12. Consistent with the conceptual rock mass model, openings in the mineralized zones are shaded pink representing poor quality rock, development openings in the fresh limestone sub-domain are shaded green representing medium quality rock, and the limestone/mineralized zone contact is an intermediate (i.e., between pink and green) rock quality zone shaded orange.

  

 

Source: Sierra Metals, 2020

 

Figure 16-12: Example Ground Control Management Level Plan

 

Laboratory

 

Between 2012 and 2019 SRK, Minera Corona and DCR Ingenieros collected rock samples for laboratory strength testing. SRK defined the laboratory specifications according to international testing standards and prepared several memorandums specifying testing requirements. The intact rock tests were conducted for intrusive and limestone domains, and the Soil mechanics test were conducted for the mineralized material due to its granular behavior.

 

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The intact rock tests were for physical properties, point load test, uniaxial compression strength, triaxial compression strength, Brazilian indirect tensile, direct shear and elastic modulus. Soil tests measured physical properties, uniaxial compression strength and triaxial compression strength.

 

The laboratory testing timeline is shown in Figure 16-13 and the specific number of tests by domain is shown in Figure 16-14 and Figure 16-15. The spatial locations of samples collected for laboratory tests are shown in Figure 16-16.

 

 

Source: Sierra Metals, Redco, 2020

 

Figure 16-13: Timeline for Laboratory Test

 

 

Source: Sierra Metals, Redco, 2020

 

Figure 16-14: Rock Mechanics Laboratory Tests (Intrusive and Limestone) Between 2012 to 2019

 

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Source: Sierra Metals, Redco, 2020

 

Figure 16-15: Soil Mechanics Laboratory Tests (Mineralized Material) Between 2012 to 2019

 

 

Source: Sierra Metals, Redco, 2020

 

Figure 16-16: Laboratory Tests Spatially Georeferenced (Northeast View)

 

Table 16-8, Table 16-9 and Table 16-10 show the Uniaxial Compressive Strength (UCS), Elastic Modulus (E), and Poisson Ratio (PR) by rock domain.

 

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Table 16-8: Summary of Uniaxial Compressive Strength (UCS) by Domain

 

Uniaxial Compressive Strength (UCS)
DomainMinimumMaximumMeanStd. Dev.Var. Coef.
Limestone2274521222%
Intrusive1071931553422%

Source: Sierra Metals, Redco, 2020

 

Table 16-9: Summary of Elastic Modulus (E) by Domain

 

Elastic Module (E)
DomainMinimumMaximumMeanStd. Dev.Var. Coef.
Limestone62115425%
Intrusive202622211%

Source: Sierra Metals, Redco, 2020

 

Table 16-10: Summary of Poisson Ratio (PR) by Domain

 

Poisson Ratio (PR)
DomainMinimumMaximumMeanStd. Dev.Var. Coef.
Limestone0.20.30.309%
Intrusive0.20.20.205%

Source: Sierra Metals, Redco, 2020

 

16.6.2Rock Mass Characterization

 

Rock Mass Strength

 

For the definition of the resistance parameters that characterize the rock mass, the Generalized Hoek and Brown (2002) failure criterion has been used; for the scaling of properties (resistance envelope of the rock mass), the uniaxial compressive resistance parameters ( UCS) of the intact rock, the intact rock parameter “mi” (which is estimated from the triaxial compression laboratory tests), the GSI of the rock mass and the disturbance factor “D” (as a measure of grade of disturbance product of the blasting) have been used.

 

The UCS defined for each geomechanical domain of the Yauricocha Mine has been obtained as a result of UGC laboratory tests to estimate the UCS of the intact rock. The representative samples considered for each domain were contrasted with the predominant lithologies and the spatial location of the samples within each established geomechanical domain.

 

The parameter "mi" is related to the slope of the resistance curve of the intact rock; this curve is generated by graphing the confinement and the breaking load of the intact rock cores as results of the triaxial compression tests.

 

The GSI value describes the quality of the rock mass and this is obtained using the results of the three-dimensional model of rock mass qualities RMR described in the previous section for each domain. Since the mapping log results indicate wet conditions, the correction formula (Hoek and Brown 1997) described below is used to estimate the GSI based on the RMR.

 

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This correction is made due to the fact that the RMR calculated for the boreholes uses the criterion of Bieniaswki 89 (whose assessment of the presence of water for dry conditions is 15) and the GSI must be estimated from the RMR Bieniaswki 76 (whose weighting of water for dry conditions has a maximum score of 10).

 

The disturbance factor “D” is related to the degree of disturbance on the excavations caused by the blasting. This factor is measured by field observations; it should be noted that since it is a simplified model and considering that the rocky environment on which it is will carry out the excavations has not been disturbed, therefore, a “D” value equal to zero (0) is considered.

 

The equations that describe the Generalized Hoek and Brown 2002 failure criterion are detailed below.

 

 

Where:

 

and are the major and minor effective principal stresses.

 

is the uniaxial compressive strength of the intact rock.

 

is the reduced value of the rock constant m_i and is given by:

 

 

 

"s" and "a" are constants for the rock mass given by the following relationships:

 

 

 

To estimate the modulus of elasticity (E), the equations proposed by Hoek and Diederichs are used, in which the factor "MR" (Modulus Ratio proposed by Deere) is used to estimate the E of the intact rock to subsequently scale to rocky massif according to the following equations:

 

 

 

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The “MR” parameter is calculated using the empirical table proposed by Deere, defining value ranges according to the type of rock.

 

The Poisson's Ratio (PR) is part of the elastic constants that measures the relationship between lateral strain and axial strain, and considers a value between 0.2 and 0.3.

 

Figure 16-17 and Figure 16-18 show the envelopes of limestone and intrusive as a result of laboratory tests.

 

 

Source: Sierra Metals, Redco, 2020

 

Figure 16-17: Intact Rock Strength Envelope Hoek – Brown (Limestone)

 

 

Source: Sierra Metals, Redco, 2020

 

Figure 16-18: Intact Rock Strength Envelope Hoek – Brown (Intrusive)

 

Based on the failure envelopes for each lithology, the following parameters are defined at the intact rock level for limestone (Table 16-11) and intrusive (Table 16-12).

 

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Table 16-11: Intact Rock Strength Parameters – Limestone

 

Limestone

UCS

(MPa)

mi
Fresh Limestone5811
Breccia3811

Source: Sierra Metals, Redco, 2020

 

Table 16-12: Intact Rock Strength Parameters – Intrusive

 

Limestone

UCS

(MPa)

mi
Intrusive16432
Weathered Intrusive8832

Source: Sierra Metals, Redco, 2020

 

Mineralized Material Strength

 

Given that the mineralized material has soil-like behavior, parameters were calculated with laboratory soil tests of triaxial compression strength, uniaxial compressive strength, humidity content, the results of which are shown in the figures below.

 

Based on the moisture content tests, it is determined that the mineralized areas of Mina Central have an average moisture content of 10% while the Cachi Cachi and Mascota areas have an average natural moisture content of 18% (Figure 16-19).

 

 

Source: Sierra Metals, Redco, 2020

 

Figure 16-19: Humidity Content Test

 

A regression was performed based on the results of the triaxial compression tests, which allows the cohesion and internal friction angle (from the Mohr-Coulomb criterion) to be defined based on the moisture content of the material (Figure 16-20, Figure 16-21).

 

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Source: Sierra Metals, Redco, 2020

 

Figure 16-20: Cohesion vs Humidity (Mineralized Material)

 

 

Source: Sierra Metals, Redco, 2020

 

Figure 16-21: Internal Friction Angle vs Humidity (Mineralized Material)

 

In addition, unconfined uniaxial compressive tests were carried out for the mineralized material samples, according to the regression it is estimated that the UCS is 0.4 KPa for a moisture content of 10% which is a representative value for the Mina Central area (Figure 16-22).

 

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Source: Sierra Metals, Redco, 2020

 

Figure 16-22: Uniaxial Compressive Strength vs Humidity (Mineralized Material)

 

The following describes the characterization parameters of the rock mass under study according to the defined domains. This information is supported by information from laboratory tests and observations of rock mass qualities identified in the underground mapping work.

 

For the limestone and intrusive rock domains, the Hoek and Brown criterion is used and for the mineralized material, because it is granular material, the Mohr Coulomb criterion is used. Table 16-13 and Table 16-14 show the rock strength parameters.

 

Table 16-13: Rock Mass Strength Parameters

 

 FootwallHangingwall
ParametersFresh
Limestone
BrecciaIntrusiveWeathered
Intrusive
Unit Weight (MN/m3)2.72.72.62.6
UCS (MPa)583816488
RMRB(89)54435347
GSI49384842
D0000
mi11113232
mb1.81.24.94
s0.00350.0010.0030.016
a0.50.50.50.5
MR500500425425
Ei (Gpa)29197037
Erm (Gpa)83197
v0.30.30.20.2

Source: Sierra Metals, Redco, 2020

 

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Table 16-14: Rock Mass Strength Parameters

 

 Mineralized Material
Parameters

Mina Central

(10% moisture content)

Mascota and Cachi Cachi

(18% moisture content)

Cohesion (KPa)0.240.02
Friction angle (°)2.800.10

Source: Sierra Metals, Redco, 2020

 

Ground Control

 

Corresponding to the categories of rock mass quality, the ground control management plans have a table of the ground support types (Figure 16-23). The ground support requirements are defined by development type, design life; temporary (<3 years) or permanent (>3 years), and mining method. Ground support for access development ranges from spot bolting using split sets in very good ground to steel sets, blocking and lagging for very poor ground.

 

 

Source: Sierra Metals, 2020

 

Figure 16-23: Ground Support Types

 

Ground support design profiles for different ground categories and development types have been developed to accompany the ground control management plans. An example profile showing the mining cross-cut ground support is shown in Figure 16-24. Ground support installation and mining procedures also support these documents.

 

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Source: Sierra Metals, 2020

 

Figure 16-24: Example of Ground Support Design Profile

 

Hydrogeological Conditions

 

Hydrogeological and hydrological information is available from multiple sources, including mine records and many investigations or data compilations by external consultants. Mine operations have compiled significant information on flow rates and field water quality parameters (e.g., color, pH, conductivity, temperature) across much of the mine and developed maps summarizing locations and data. Numerous hydrogeological and hydrological studies have also been completed by external consultants (Geologic, 2014, 2015; Hydro-Geo Consultores, 2010, 2012, 2016; Geoservice Ingenieria 2008, 2014, 2016; Helium, 2018). Data have been collected from underground observations, pump tests, tracer tests, and surface water features.

 

Hydrogeological Conceptual Model:

 

·Annual average precipitation of 1010 mm (measured at Yauricocha station);

 

·Runoff of 268 mm (27% of the total precipitation);

 

·Depth of infiltration of 265 mm (26% of the total precipitation); and

 

·Actual depth of the evapotranspiration of 477 mm (47% of the total precipitation).

 

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Current Mine Inflow

 

Cumulative inflow into the mine was on the order of 100 L/s in 2017 (Helium, 2018). Inflow measurements have been collected at many locations (drainage drill holes and discrete inflows) and at different times, but data is somewhat inconsistent. Water enters the mine in widely distributed areas and drainage drill holes located on various levels.

 

Water comes from two sources:

 

1.Infiltration of water coming from fluvial precipitation through the subsidence zone that covers the mine; and

 

2.Discharge of underground waters from the east to the west (from the intrusive toward the cone of subsidence).

 

Infiltration related to subsidence includes flows into both the subsidence depressions themselves as well as tensional features associated with them. A diversion channel redirects a portion of runoff away from subsidence depressions but water that is not diverted can be expected to flow towards drawpoints through the subsidence zone. Lateral groundwater inflow into the subsidence zone also contributes.

 

Surface infiltration into the subsidence zone was estimated to be 11 L/s before 2015 and could increase to between 30 and 46 L/s by 2029 (Geologic, 2015).

 

Potential Future Mine Inflow

 

As mining advances, mine inflows can be expected to increase, at least in part due to increase in size of the subsidence cone.

 

·Surface inflows could increase by between 20 and 35 L/s by 2029 (Geologic, 2015; Geoservice, 2017); and

 

·Groundwater inflows were estimated to increase by up to 330 L/s when the mining reaches 3600 m elevation (Geologic, 2015).

 

Mitigation measures should continue to be considered to reduce inflow or at least control the way water enters and is controlled throughout the mine.

 

Future Mine Water Management Considerations

 

Current observations and analyses suggest that inflow to both the subsidence (caving) zone and the mine will increase as the mine expands. Mitigation and management efforts should continue to understand the distribution of water and value in efforts to control or reduce inflow. Uncontrolled water inflow can lead to a risk of mud rush events.

 

Past efforts have been made to control or reduce inflows. A large amount of data is available that could be used to understand the source of water, but it is currently not compiled in a manner to allow this to be easily done.

 

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In the past, drainage tunnels and exploratory test drill holes have been completed in efforts to control or reduce inflow to mining areas. Drain holes were completed in the 920 and 870 levels in Antacaca Sur, 920 level in Antacaca, 920 and 970 levels in Catas and 870 and 920 levels in Rosaura. All of these water management features were oriented into the granodiorite to intercept flow before reaching the subsidence zone. Some of drillholes were later cemented to reduce inflows into mining zones.

 

During drilling, inflows were observed to decrease on the 820 and 870 levels, and post drilling decreasing inflows were observed on the 920 level. Inflows in Antacaca Sur and Rosaura have been reduced over time, but inflows appear to be increasing in Catas and Esperanza.

 

In conclusion, the mine has in the past, or currently, been able to manage water sufficiently to allow mining to proceed. As the mine expands, water inflows should be expected to increase. Mitigation efforts should continue to be assessed and tested, but operational management plans should continue to assume that inflows and mud rush potential will increase until such a time that the effectiveness of mitigation efforts can be proven, or decisions are made to address water-related risks through other management plans.

 

16.7Stope Optimization

 

16.7.1Dilution and Recovery Factor

 

Measured and Indicated Mineral Resources were converted to a mineable inventory by applying the appropriate modifying factors, as described herein, to the final MSO shapes created during the mine design process. The mining recovery and external dilution factors used in this report are based on historical Yauricocha data and are the factors used in the planning processes currently implemented at the site.

 

The in-situ tonnage and grade of each potential mining block is based on the resource block models. The dilution factor represents external dilution and range between 10% to 25% and varies based on mining method, geomechanical characteristics of the mineralized zone, and the amount of water present. These factors account for material mined from outside of the MSO shapes including overdraw of cave material and is in addition to any internal dilution.

 

Internal dilution is included within the MSO shapes generated and is therefore included in the in- situ tonnes and grades. External and internal dilution are assigned a zero grade. The mining recovery factors represents how much of the diluted stope material will reach the mill and ranges between 70% to 100% based on historical data and accounting for the mining method, geomechanical characteristics of the mineralized zone, and the amount of water present as this affects the mining recovery.

 

The generalized formula for calculating the reserve tonnage in each mining block is:

 

·Mineable Tonnes = (Tonnes) mining block * Mining Recovery % * (1 + Dilution %).

 

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The generalized formula for calculating the mineable inventory grade is:

 

·Mineable Inventory Grade = (Resource Grade) mining block / (1 + Dilution %).

 

Table 16-15 lists the mining recovery and external dilution factors applied to each mineralized zone based on the mining method.

 

Table 16-15: Mining Recovery and Dilution Factors

 

AreaZoneMining
Method
Mining Method
Description
Mining
Recovery
(%)
External
Dilution
(%)
Mina CentralCatasSLCM2Mechanized Sub Level Caving – Some Water Present8020
AntacacaSLCM2Mechanized Sub Level Caving – Some Water Present8020
RosauraSLCM3Mechanized Sub Level Caving – Water present7025
Antacaca SurSLCM3Mechanized Sub Level Caving – Water present7025
EsperanzaEsperanzaSLCM1Mechanized Sub Level Caving – No Water Present9020
NorteSLCM2Mechanized Sub Level Caving – Some Water Present8020
DistalSLCM1Mechanized Sub Level Caving – No Water Present9020
MascotaOxide Ag-PbSLCM1Mechanized Sub Level Caving – No Water Present9020
Polymetallic (All)CRAMMechanized Overhand Cut and Fill10010
CuyeAllSLCM1Mechanized Sub Level Caving – No Water Present9020
Cachi- CachiAngelitaSLCM2Mechanized Sub Level Caving – Some Water Present8020
KarlitaCRAMMechanized Overhand Cut and Fill10010
ElissaCRAMMechanized Overhand Cut and Fill10010
CeliaSLCM2Mechanized Sub Level Caving – Some Water Present8020
EscondidaCRAMMechanized Overhand Cut and Fill10010
PrivatizadoraCRAMMechanized Overhand Cut and Fill10010
VanessaCRAMMechanized Overhand Cut and Fill10010
YoselimCRAMMechanized Overhand Cut and Fill10010
CarmencitaCRAMMechanized Overhand Cut and Fill10010

 

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AreaZoneMining
Method
Mining Method
Description
Mining
Recovery
(%)
External
Dilution
(%)
Cuerpos PequeñosGallitoCRAMMechanized Overhand Cut and Fill10010
OrientalCRAMMechanized Overhand Cut and Fill10010
OccidentalCRAMMechanized Overhand Cut and Fill10010
Contacto Sur Medio (TJ 6060)CRAMMechanized Overhand Cut and Fill10010
Contacto Sur Medio I (TJ 8167)CRAMMechanized Overhand Cut and Fill10010
Contacto Sur Medio II (TJ 1590)CRAMMechanized Overhand Cut and Fill10010

 

Source: Sierra Metals, Redco, 2020

 

16.7.2Net Smelter Return (NSR)

 

The mineral deposits at Yauricocha 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 taking into account the grade, metal price, metallurgical recovery and smelter terms. The smelter terms summarized for this report includes the applicable concentrate treatment charges, refining charges, deductions, price participation, and penalty element payments.

 

16.7.3Metal Prices and Exchange Rate

 

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

 

Table 16-16: Unit Value Metal Price Prices

 

Zn
(US$/lb)
Ag
(US$/oz)
Pb
(US$/lb)
Cu
(US$/lb)
Au
(US$/oz)
1.07200.913.051,541

 

Source: Sierra Metals, Redco, 2020

 

16.7.4Metallurgical Recoveries

 

Metallurgical recoveries were provided by Sierra Metals and are based on projected recoveries resulting from an ongoing mill upgrade program.

 

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Table 16-17 summarizes the metallurgical recoveries used in calculating the NSR factors.

 

Table 16-17: Metallurgical Recoveries

 

Process RecoveryZn
(%)
Ag
(%)
Pb
(%)
Cu
(%)
Au
(%)
Total Recovery (Polymetallic Feed)89.267.288.680.417.2
Copper Concentrate-26.3-74.99.2
Lead Concentrate-40.988.65.58.0
Zinc Concentrate89.2----
Total Recovery (Lead Oxide Feed)-50.564.6-52.9
Lead Sulfide Concentrate-21.59.1-27.9
Lead Oxide Concentrate-29.155.5-25.1

 

Source: Sierra Metals, Redco, 2020

 

16.7.5Net Smelter Return (NSR) Calculations

 

The parameters used in the NSR calculation are summarized in Table 16-18. An NSR value was calculated for each cell in the block models using these parameters. A second NSR field was also created where cells with a resource class of Inferred or undefined were assigned an NSR value of 0.

 

Table 16-18: NSR Calculation Parameters

 

NSR
ParameterUnitValue
Metal Prices
Zn PriceUS$/lb1.07
Ag PriceUS$/oz20.0
Pb PriceUS$/lb0.91
Cu PriceUS$/lb3.05
Au PriceUS$/oz1,541.00
Process Recoveries
Copper Concentrate  
Au Metallurgic Recovery%9.2
Ag Metallurgic Recovery%26.3
Cu Metallurgic Recovery%74.9
Lead Concentrate  
Au Metallurgic Recovery%8.0
Ag Metallurgic Recovery%40.9
Pb Metallurgic Recovery%88.6
Cu Metallurgic Recovery%5.5
Zinc Concentrate  
Zn Metallurgic Recovery%89.2
Ag Metallurgic Recovery%9.2
Total  
Cu Metallurgic Recovery%80.4
Pb Metallurgic Recovery%88.6
Zn Metallurgic Recovery%89.2
Ag Metallurgic Recovery%76.4
Au Metallurgic Recovery%17.2

 

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NSR
ParameterUnitValue
Concentrate Grades
Avg. Zn Concentrate%51.2
Avg. Pb Concentrate%57.8
Avg. Cu Concentrate%31.1
Avg. Auoz/t1.20
Avg. Au Pb Concentrateoz/t2.33
Avg. Au Cu Concentrateoz/t2.44
Avg. Agoz/t11.83
Avg. Ag Zn Concentrateoz/t3.09
Avg. Ag Pb Concentrateoz/t36.86
Avg. Ag Cu Concentrateoz/t21.64
Moisture content%10.0
Selling Expenses
Transport losses%0.5
TransportationUS$/wmt28.00
PortUS$/wmt0.00
LoadUS$/wmt0.00
MarketingUS$/dmt0.00
InsurancesUS$/wmt0.00
TotalUS$/dmt30.96
Smelter Terms
Copper Concentrate  
Minimum Deduction Aug/t0.50
Au Payability Factor%90.0
Minimum Deduction Agg/t50.00
Ag Payability Factor%90.0
Minimum Deduction Cu%1.0
Cu Payability Factor%96.5
Lead Concentrate  
Minimum Deduction Aug/t1.00
Au Payability Factor%95.0
Minimum Deduction Agg/t50.00
Ag Payability Factor%95.0
Minimum Deduction Pb%3.0
Pb Payability Factor%95.0
Zinc Concentrate  
Minimum Deduction Zn%8.0
Zn Payability Factor%85.0
Minimum Deduction Agoz/t3.00
Ag Payability Factor%70.0
Treatment Charges/Refining Charges (TC/RC)
Copper Concentrate  
Treatment CostUS$/t-conc150.00
Cu Refining CostUS$/t330.69
Ag Refining CostUS$/oz0.40
Au Refining CostUS$/oz10.00

 

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NSR
ParameterUnitValue
Lead Concentrate  
Treatment CostUS$/t-conc115.00
Ag Refining CostUS$/oz0.50
Au Refining CostUS$/oz15.00
Zinc Concentrate  
Treatment CostUS$/t-conc150.00
Ag Refining CostUS$/oz0.00
Net Smelter Return Factors
ZnUS$/t/%15.470
AgUS$/t/gpt0.393
PbUS$/t/%14.966
CuUS$/t/%45.572
AuUS$/t/gpt7.803

 

Source: Sierra Metals, Redco, 2020

 

The resulting NSR equation coded into the block model was:

 

NSR=15.470×Zn Grade+0.393×Ag Grade+14.966×Pb Grade+45.572×Cu Grade+7.803×Au Grade

 

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16.7.6Cut-off

 

The cut-off value calculation used by Sierra Metals in the proposed mine plan is based on historical information provided by Sierra Metals and considers reducing production costs associated with increased production (Table 16-19). Conceptual economic envelopes vary according to direct and indirect mining costs, processing costs, concentrate shipment and G&A costs.

 

Table 16-19: Operating Cost

 

CostValue
Mine Cost ($/t)$34.42
Plant Cost ($/t)$10.76
G & A$9.81
Economic Cut Off ($/t)$54.99

 

Source: Sierra Metals, Redco, 2020

 

The NSR value of each potential mining block was calculated and evaluated against economic cut-off values. The economic cut-off varies by mining method and mineralized zone, and includes direct and indirect mining costs, processing costs, and general and administrative (G&A) costs. Mining blocks with an average NSR value above the economic cut-off, that have defined access, and that are not isolated from mining areas, are classified as economic and included in the mineable inventory. The economic and marginal cut-offs used in this report are provided in Table 16-20.

 

Table 16-20: Economic Cut-Off Value by Mining Method (US$/t)

 

Mining MethodMining
(US$/t)
Processing
(US$/t)
G&A
(US$/t)
Total
(US$/t)
Economic COV
(US$/t)
SLCM134.4210.769.8154.9955
SLCM236.2910.769.8156.8757
SLCM337.0110.769.8157.5958
CRAM144.6310.769.8165.2165

 

Source: Sierra Metals, Redco, 2020

 

16.7.7Stope Optimization

 

Stoping block shapes were constructed for each mineralized material zone and mining method identified using the Mineable Shape Optimizer (MSO) routine provided within the suite of Datamine™ Studio UG. MSO requires the input of several key parameters and then interrogates the resource block model against permutations of simplified mining shapes to outline a potentially economic Mineral Resource at a given cut-off value. The key MSO inputs for each mining method are outlined in Table 16-21.

 

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Table 16-21: Stope Optimization Software Inputs

 

MSO InputSub-level CaveCut and Fill
Economic Cut-off valueUS$55/t to US$58/tUS$65/t
Level spacing (floor to floor)25 m3 m
Stope length4-200 m3-50 m
Minimum mining width4 m Fixed Width2.5 m
Minimum waste pillar2 m3 m

 

Source: Sierra Metals, Redco, 2020

 

The tonnes and grade for each stope shape were tabulated in spreadsheets with mining recovery and dilution factors applied (dilution having zero grade), and then NSR values were calculated for the diluted and recovered material.

 

Blocks were classified as economic or waste based on the NSR value of the mining block and cut-off value for the area. The blocks were visually inspected and isolated blocks were identified and removed from the mineable inventory.

 

16.8Mine Production

 

Yauricocha is an operating mine with a signification production history. Operations and production personnel are supported by a geology and engineering groups. The geology and engineering groups work in close collaboration and planning is conducted with care and diligence. Historical knowledge of the site is leveraged in the planning process.

 

Production targets at Yauricocha are based on historical performance and Table 16-22 shows reported mine production and mill tonnes processed between 2012 and 2020 (January to June inclusive).

 

Table 16-22: Reported Mine and Mill Production, 2012 to 2020

 

Category201220132014201520162017201820192020*
Tonnes Mined849,615858,398929,316820,04847,4671,009,6351,074,4761,127,480457,029
Tonnes Processed872,869837,496890,91829,805897,1691,023,4911,106,6491,092,410483,508

 

Source: Sierra Metals, 2020

 

16.9Mine Production Schedule

 

The base case Life of Mine (LOM) production and development schedule generated for the Yauricocha Mine based on 3,780 tpd (1.3 M tonnes per year) is shown in Table 16-24, and in Figure 16-25 and Figure 16-26. Typical mining rates of 3,780 tpd of mineralized material and 1,620 tpd of waste were applied as these are the rates the mine has been reportedly operating at in early 2020.

 

Sierra Metals prepared LOM production and development plans based on production rates ranging from the base case of 3,780 tpd to 7,500 tpd (Table 16-23) and these production schedules are financially evaluated in Section 22. Production schedules are based upon forward-looking information. This forward-looking information includes forecasts with material uncertainty which could cause actual results to differ materially from those presented herein.

 

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Table 16-23: LOM Production Rates

 

Tonnes/DayTonnes/YearComments
3,780 tpd (base case)1.3 MConstant production rate through LOM *
5,500 tpd2.0 MIncreases from 3,780 tpd to 5,500 tpd in 2024
6,500 tpd2.4 MReaches 6,500 tpd in 2024
7,500 tpd2.8 MReaches 7,500 tpd in 2024

 

Source: Sierra Metals, Redco, 2020

Note: *3780 tpd used as the base case assumes that permit will be received to reach that level, which is in the initial process.

 

For the production rates higher than the base case, LOM production and development tables and figures are provided in Table 16-25, Table 16-26 and Table 16-27, and in Figure 16-27, Figure 16-28, Figure 16-29, Figure 16-30, Figure 16-31 and Figure 16-32.

 

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Table 16-24: LOM Production Schedule for 3,780 Tonnes/Day

 

Production MineYear20212022202320242025202620272028202920302031203220332034Total
Tonnes Mineralized Materialt1,370,2671,355,4661,353,8131,347,5101,385,2341,360,4421,363,2681,360,8801,359,9621,348,2671,369,8301,346,8741,373,342784,89318,480,047
Tonnes Wastet442,885459,242458,707456,670468,863460,850461,763460,991460,694456,914463,884456,464465,019-5,972,946
Tonnes Totalt1,813,1511,814,7081,812,5201,804,1801,854,0961,821,2911,825,0311,821,8711,820,6561,805,1811,833,7141,803,3381,838,361784,89324,452,993
Zn%2.32.82.82.62.83.12.51.30.70.60.420.440.590.711.71
Pb%0.910.70.910.70.40.20.20.20.130.110.110.090.48
Agg/t51.358.94744.747.539.834.329.922.921.519.9118.2516.9918.4634.2
Cu%1.11.31.51.31.20.90.90.91.11.51.791.711.531.231.28
Aug/t0.50.40.40.40.30.40.50.40.50.40.510.470.420.380.42
NSR$/t122.51144.42140.81132.80135.13117.62103.3780.9974.7089.59101.9297.2690.3278.61108.78
TPDtpd3,8063,7653,7613,7433,8483,7793,7873,7803,7783,7453,8053,7413,8152,1803,713

Source: Sierra Metals, Redco, 2020

 

Source: Sierra Metals, Redco

Figure 16-25: LOM Production – Tonnes per Year and %Grade

Source: Sierra Metals, Redco, 2020

Figure 16-26: LOM Production – Tonnes per Year and NSR

 

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Table 16-25: LOM Production Schedule for 5,500 Tonnes/Day (5,500 tpd in 2024)

 

Production MineYear20212022202320242025202620272028202920302031203220332034Total
Tonnes Mineralized Materialt1,370,2671,355,4661,359,1981,988,4311,978,5331,971,9101,984,5301,980,8121,960,9541,991,6251,981,065294,730--20,217,519
Tonnes Wastet442,885485,731486,937642,682639,483637,342641,421640,219633,801643,714640,301   6,534,515
Tonnes Totalt1,813,1511,841,1971,846,1352,631,1122,618,0162,609,2522,625,9512,621,0322,594,7552,635,3392,621,366294,730--26,752,035
Zn%2.32.832.62.72.61.10.60.40.40.630.66--1.6
Pb%0.910.70.90.80.40.20.20.10.10.10.09--0.5
Agg/t51.358.947.742.740.134.626.319.819.817.717.2317.9--32.3
Cu%1.11.31.41.210.90.911.61.71.451.12--1.2
Aug/t0.50.40.40.40.30.40.40.40.40.50.410.35--0.4
NSR$/t122.51144.42143.33124.86118.34103.4474.3869.6791.3694.7487.1972.08--103.49
TPDtpd3,8063,7653,7765,5235,4965,4785,5135,5025,4475,5325,503819--5,084

Source: Sierra Metals, Redco, 2020

 

Source: Sierra Metals, Redco, 2020

Figure 16-27: LOM Production – 5,500 Tonnes per Year and %Grade

Source: Sierra Metals, Redco, 2020

Figure 16-28: LOM Production – 5,500 Tonnes per Year and NSR

 

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Table 16-26: LOM Production Schedule for 6,500 Tonnes/Day (6,500 tpd in 2024)

 

Production MineYear20212022202320242025202620272028202920302031203220332034Total
Tonnes Mineralized Materialt1,370,2671,355,4661,365,9582,307,8792,372,5572,336,5312,334,6492,337,6622,350,6302,328,897638,348---21,098,842
Tonnes Wastet442,885541,261544,652745,931766,835755,191754,583755,557759,748752,724 ---6,819,368
Tonnes Totalt1,813,1511,896,7281,910,6113,053,8093,139,3923,091,7223,089,2323,093,2193,110,3783,081,621638,348---27,918,210
Zn%2.32.82.82.52.62.20.80.50.40.60.64---1.6
Pb%0.910.70.80.80.30.10.20.10.10.09---0.4
Ag%51.358.946.939.84030.323.719.518.116.417.71---31.5
Cu%1.11.31.41.110.911.31.71.51.11---1.2
Aug/t0.50.40.40.40.30.40.40.40.50.40.34---0.4
NSR$/t122.51144.42140.41119.13116.1093.1470.4078.4294.6986.6571.72---101.49
TPDtpd3,8063,7653,7946,4116,5906,4906,4856,4946,5306,4691,773---5,828

Source: Sierra Metals, Redco, 2020

 

Source: Sierra Metals, Redco, 2020

Figure 16-29: LOM Production – 6,500 Tonnes per Year and %Grade

Source: Sierra Metals, Redco, 2020

Figure 16-30: LOM Production – 6,500 Tonnes per Year and NSR

 

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Table 16-27: LOM Production Schedule for 7,500 Tonnes/Day (7,500 tpd in 2024)

 

Production MineYear20212022202320242025202620272028202920302031203220332034Total
Tonnes Mineralized Materialt1,370,2671,355,4661,365,9582,700,4852,689,8352,699,4352,708,1912,703,4872,696,1691,205,102----21,494,395
Tonnes Wastet442,885632,852636,243872,825869,383872,486875,316873,796871,430 ----6,947,215
Tonnes Totalt1,813,1511,988,3182,002,2013,573,3103,559,2183,571,9213,583,5073,577,2833,567,5991,205,102----28,441,611
Zn%2.32.82.82.42.61.60.60.40.50.7----1.6
Pb%0.910.70.80.60.20.10.10.10.1----0.4
Ag%51.358.946.94136.728.419.619.116.517.3----31.2
Cu%1.11.31.41.20.90.911.61.51.2----1.2
Aug/t0.50.40.40.40.30.40.40.50.40.3----0.4
NSR$/t122.51144.42140.41122.05106.4683.6868.0691.8288.8774.97----100.48
TPDtpd3,8063,7653,7947,5017,4727,4987,5237,5107,4893,348----6,560

 

Source: Sierra Metals, Redco, 2020

 

Source: Sierra Metals, Redco, 2020

Figure 16-31: LOM Production – 7,500 Tonnes per Year and %Grade

Source: Sierra Metals, Redco, 2020

Figure 16-32: LOM Production – 7,500 Tonnes per Year and NSR

 

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16.10Mine Development

 

The mine design encompasses the main mining areas and includes two tunnels and three shafts for truck and personnel access:

 

·The Klepetko tunnel (3 m high x 3 m wide) and the Yauricocha tunnel (3.5 m x 3.5 m) are located on level 720 (haulage level). These tunnels are used for material handling directly to Chumpe plant.

 

·The three shafts in service are the Central shaft, the Mascota shaft, and the Cachi-Cachi shaft. The Yauricocha shaft is in construction currently. The shafts are typically used to move men and materials but can also move mineralized material and waste to the surface if necessary. These are also used to move mineralized material and waste from depth to the 720 level.

 

The distribution of the development in areas varies according to mining method as described in Section 16.2. However, the main tasks are:

 

·Ramps will have a typical cross-section of 4.5 m x 4.5 m (width x height), the cross-section is 4.0 m x 4.0 m in some areas;

 

·Access to mining areas such as bypasses and crosscuts will have cross-sectional dimensions of 3.0 m x 3.0 m or 3.5 m x 3.5 m (width x height);

 

·The ventilation raise bore holes have a typical cross section of 2.4 m x 2.4 m;

 

·The ventilation raise bore holes have a typical diameter of 1.8 m;

 

·Maximum ramp gradient of 12%, this is the same for access to cuts on OCF mining areas;

 

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

 

·Trolley locomotive for loading, hauling and transportation.

 

Sierra estimates that 116,751 m of combined horizontal and vertical development meters, are required to achieve the 3,780 tpd (base case) mine plan proposed in this PEA (Table 16-28).

 

Table 16-28: Development Meters in Mine Plan

 

ItemMeters
Horizontal106,261
Vertical10,490
Total116,751

Source: Sierra Metals, Redco, 2020

 

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Figure 16-33 shows the distribution of mine workings and mineralized areas, and the current and planned mine development.

 

 

Source: Sierra Metals, Redco, 2020

 

Figure 16-33: Mine Design Distribution of Mine Workings and Mineralized Areas

 

Table 16-29 to Table 16-40 show the opex development, capex development, and total development for the 3,780 tpd, 5,500 tpd, 6,500 tpd and 7,500 tpd mining plans respectively.

 

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Table 16-29: LOM Development Schedule for 3,780 Tonnes/Day

 

Task DevelopmentYear20212022202320242025202620272028202920302031203220332034Total
Horizontalm7,8798,1708,1618,1248,3418,1998,2158,2018,1968,1298,2538,1218,273 106,261
Verticalm778807806802823809811810809802815802817 10,490
Totalm8,6578,9778,9668,9269,1659,0089,0269,0119,0058,9319,0678,9229,090 116,751

Source: Sierra Metals, Redco, 2020

 

Table 16-30: LOM Preparation Schedule for 3,780 Tonnes/Day

 

Preparation (Opex)Year20212022202320242025202620272028202920302031203220332034Total
Totalm6,1486,0826,0746,0466,2156,1046,1176,1066,1026,0496,1466,0436,1623,52282,915

Source: Sierra Metals, Redco, 2020

 

Table 16-31: LOM Waste Schedule for 3,780 Tonnes/Day

 

WasteYear20212022202320242025202620272028202920302031203220332034Total
Totalt442,885459,242458,707456,670468,863460,850461,763460,991460,694456,914463,884456,464465,019 5,972,946

Source: Sierra Metals, Redco, 2020

 

Table 16-32: LOM Development Schedule for 5,500 Tonnes/Day

 

Task DevelopmentYear20212022202320242025202620272028202920302031203220332034Total
Horizontalm7,8798,6418,66311,43411,37711,33911,41111,39011,27611,45211,391   116,251
Verticalm7788538551,1291,1231,1191,1261,1241,1131,1311,125   11,476
Totalm8,6579,4949,51812,56212,50012,45812,53812,51412,38912,58212,516   127,727

Source: Sierra Metals, Redco, 2020

 

Table 16-33: LOM Preparation Schedule for 5,500 Tonnes/Day

 

Preparation (Opex)Year20212022202320242025202620272028202920302031203220332034Total
Totalm6,1486,0826,0988,9228,8778,8478,9048,8878,7988,9368,8881,322  90,710

Source: Sierra Metals, Redco. 2020

 

Table 16-34: LOM Waste Schedule for 5,500 Tonnes/Day

 

WasteYear20212022202320242025202620272028202920302031203220332034Total
Totalt442,885485,731486,937642,682639,483637,342641,421640,219633,801643,714640,301   6,534,515

Source: Sierra Metals, Redco, 2020

 

Table 16-35: LOM Development Schedule for 6,500 Tonnes/Day

 

Task DevelopmentYear20212022202320242025202620272028202920302031203220332034Total
Horizontalm7,8799,6299,69013,27013,64213,43513,42413,44213,51613,391    121,319
Verticalm7789519571,3101,3471,3261,3251,3271,3341,322    11,977
Totalm8,65710,58010,64614,58014,98914,76114,75014,76914,85014,713    133,295

Source: Sierra Metals, Redco, 2020

 

Table 16-36: LOM Preparation Schedule for 6,500 Tonnes/Day

 

Preparation (Opex)Year20212022202320242025202620272028202920302031203220332034Total
Totalm6,1486,0826,12910,35510,64510,48310,47510,48810,54710,4492,864   94,665

Source: Sierra Metals, Redco, 2020

 

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Table 16-37: LOM Waste Schedule for 6,500 Tonnes/Day

 

WasteYear20212022202320242025202620272028202920302031203220332034Total
Totalt442,885541,261544,652745,931766,835755,191754,583755,557759,748752,724    6,819,368

Source: Sierra Metals, Redco, 2020

 

Table 16-38: LOM Development Schedule for 7,500 Tonnes/Day

 

Task DevelopmentYear20212022202320242025202620272028202920302031203220332034Total
Horizontalm7,87911,25911,31915,52815,46715,52215,57215,54515,503     123,593
Verticalm7781,1111,1171,5331,5271,5321,5371,5351,530     12,201
Totalm8,65712,37012,43617,06116,99317,05417,10917,08017,033     135,794

Source: Sierra Metals, Redco, 2020

 

Table 16-39: LOM Preparation Schedule for 7,500 Tonnes/Day

 

Preparation (Opex)Year20212022202320242025202620272028202920302031203220332034Total
Totalm6,1486,0826,12912,11612,06912,11212,15112,13012,0975,407    96,439

Source: Sierra Metals, Redco, 2020

 

Table 16-40: LOM Waste Schedule for 7,500 Tonnes/Day

 

WasteYear20212022202320242025202620272028202920302031203220332034Total
Totalt442,885632,852636,243872,825869,383872,486875,316873,796871,430     6,947,215

Source: Sierra Metals, Redco, 2020

 

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16.11Waste Storage

 

Currently, development waste material is hauled by LHD and placed into mined zones, resulting in an approximately 40% to 60% 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. Furthermore, the residual waste is carried by shaft to surface and placed in a waste storage.

 

For future development in Yauricocha, waste material will be hauled to mined out areas, especially in OCF for backfill; the remaining waste will be hauled by trolley locomotives at level 720 to surface and placed into a waste storage according to the waste schedule program. Further analysis of the development waste handling and storage strategy is required to increase the backfill factor. If the current mining methods are a viable solution to increasing the backfill factor, then there will be a positive benefit due to reduced transport costs.

 

16.12Major Mining Equipment

 

A list of the major underground mining equipment currently used at Yauricocha Mine is included in Table 16-41.

 

Table 16-41: Current List of Major Underground Mining Equipment at Yauricocha

 

EQUIPMENT MINE OPERATIONNumber of Units
JUMBO MUKI FF N° 11
JUMBO MUKI FF N° 31
JUMBO HAMMER BOLT N° 41
Total Jumbo Drill and Bolt3
JUMBO LITTLE HAMMER, 11
JUMBO LITTLE HAMMER, 21
JUMBO LITTLE HAMMER, 31
JUMBO MK LHBP N° 21
JUMBO MK LHBP N° 41
JUMBO MK LHBP N° 51
JUMBO RDH1
Total Jumbo Long Drills7
SCOOP EST-2D 2,5 yd39
SCOOP LH 1,5 Yd32
SCOOP EST-2D 2,5 yd31
SCOOP TORO 151E 2,5 yd31
SCOOP JS-220 2,5 yd31
SCOOP EJC-145 3,5 yd31
SCOOP EJC-130 2,5 yd32
SCOOP ST-2D 2,5 yd31
SCOOP ST-2G 2,5 yd33
SCOOP R1300G 4,1 yd36

 

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SCOOP RDH 3,5 yd31
Total Scooptrams28
Dumper 20 Ton5
Total Dumpers5
Service Truck1
Service Truck1
Service Truck1
PBUS-201
PBUS-201
Mini Front Loader5
Front Loader1
Total Support Equipment11
Total Equipment54

Source: Sierra Metals, 2020

 

Equipment performance was estimated using operational performance data. The equipment performance was used to estimate the quantity of equipment required for the production and development plans. The maximum number of equipment required to meet the production plans is listed by year and shown in Table 16-42 to Table 16-46. The number of underground personnel required to operate the equipment is also listed for reference.

 

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Table 16-42: Main Planned Underground Mining Equipment (3,780 tpd)

 

Equipment20212022202320242025202620272028202920302031203220332034
Jumbo Drill66667666666664
Jumbo Radial55555555555553
Jumbo Hammer Bolt N° 422222222222221
Scoop 3.5, Yd367766666666663
Dumper34433333333330
Front loader11111111111111
Mixer Truck33334333333330
Shotcrete Truck33334333333330
Emulsion Loader33333333333332
Personnel452448447445457449450449449445452445454259

Source: Sierra Metals, Redco, 2020

 

Table 16-43: Main Planned Underground Mining Equipment (5,500 tpd - 2024)

 

Equipment20212022202320242025202620272028202920302031203220332034
Jumbo Drill677999999990  
Jumbo Radial555777777772  
Jumbo Hammer Bolt N° 4222333333330  
Scoop 3.5, Yd3666999999991  
Dumper344555555550  
Front loader111111111111  
Mixer Truck344555555550  
Shotcrete Truck344555555550  
Emulsion Loader333444444441  
Personnel45244844965665365165565464765765498  

Source: Sierra Metals, Redco, 2020

 

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Table 16-44: Main Planned Underground Mining Equipment (6,500 tpd - 2024)

 

Equipment20212022202320242025202620272028202920302031203220332034
Jumbo Drill677101010101010100   
Jumbo Radial55599999993   
Jumbo Hammer Bolt N° 422233333330   
Scoop 3.5, Yd3677101010101010103   
Dumper34456666660   
Front loader11111111111   
Mixer Truck34455555550   
Shotcrete Truck34455555550   
Emulsion Loader33355555552   
Personnel452448451762783771771772776769211   

Source: Sierra Metals, Redco, 2020

 

Table 16-45: Main Planned Underground Mining Equipment (7,500 tpd - 2024)

 

Equipment20212022202320242025202620272028202920302031203220332034
Jumbo Drill69912121212121200004
Jumbo Radial55510101010101050000
Jumbo Hammer Bolt N° 423344444400001
Scoop 3.5, Yd367712121212121240000
Dumper35566666600000
Front loader11111111110000
Mixer Truck35566666600000
Shotcrete Truck35566666600000
Emulsion Loader33355555530000
Personnel4524484518918888918948928903980000

Source: Sierra Metals, Redco, 2020

 

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Table 16-46: Production of Equipment and Person

 

EquipmentUnit20212022202320242025202620272028202920302031203220332034
Jumbo Drillm/d44444444444444
Jumbo Radialt/d795795795795795795795795795795795795795795
Jumbo Hammer Bolt N° 4m/d44444444444444
Scoop 3.5, Yd3t/h8686868686868686868686868686
Dumpert/h4242424242424242424242424242
Front loadert/h171171171171171171171171171171171171171171
Mixer Truckm/d88888888888888
Shotcretem/d88888888888888
Emulsion Loadert/d1,5911,5911,5911,5911,5911,5911,5911,5911,5911,5911,5911,5911,5911,591
Personnelt/person88888888888888

Source: Sierra Metals, Redco, 2020

 

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16.13Ventilation

 

The underground mine has a ventilation system that supports the Cachi-Cachi mine and a separate ventilation system that supports the Central mine (Mina Central).

 

The ventilation system at Mina Central intakes air from the main decline, the Mascota shaft, Central shaft, Raise Bore #3, and the Klepetko tunnel. The intake air is approximately 159,000 cfm. The air exhausts through Raise Bore #2 and Raise Bore #1 by two primary fans located on surface. Air is pulled through the workings and routed with ventilation doors and booster fans to maintain air quality.

 

The ventilation system at Cachi-Cachi is an intake system that pulls fresh air through the Yauricocha tunnel and the main decline (Bocamina 410) at Cachi-Cachi. The air exhausts through three boreholes at the surface, Borehole (Chimenea) 919, the Rossy borehole, and the Raquelita borehole. A primary fan is located at Borehole 919 on the 300 level. The air moves into the mine through the main decline and down to the lower levels through the Cachi-Cachi shaft. The air is exhausted through vent raises and shafts to the surface. Ventilation doors are installed, and booster fans are used throughout the mine to maintain air quality.

 

The Yauricocha ventilation system is divided into three zones: Zone II, Zone III, and Zone V. The ventilation system of Zone II covers the 820 level to the 920 level for the mineralized zones Esperanza and Gallito. The ventilation system of Zone III covers the 720 level to the 920 level of the Cachi-Cachi Mine. The ventilation system of Zone V covers the 970 level to the 1170 level for the mining areas of Mascota, Catas, Antacaca, Rosaura, Antacaca Sur, CSM II and Butz. Figure 16-34 shows an isometric view of the Cachi-Cachi ventilation network (Zone III). Figure 16-35 shows an isometric view of the Mina Central ventilation network (Zones II and V).

 

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T:\tm2037189-1\tm2037189-1_6kseq1 

 

Source: Sierra Metals, 2020

 

Figure 16-34: Zone III Ventilation Isometric View

 

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