Santa Ana Silver Mine, Peru

The Santa Ana silver mine project is located in southern Peru, approximately 140km south of the Puno city. The 5,400ha silver mine is wholly owned by Bear Creek Mining. A feasibility study on the development of the mine was completed in October 2011. The study estimates the mine will produce 47.4 million ounces of silver over an 11-year life.

Construction on the mine is expected to begin by the end of 2011, with production scheduled towards the end of 2012. The mine will develop Bear Creek into a 20 million ounces a year silver producer combined with the production of the Corani deposit that will begin operations in 2014.

Santa Ana reserves

The mine contains approximately 37Mt of proven and probable reserves graded at 53g/t silver, 0.34% lead and 0.58% zinc. The combined resources in the measured and indicated category have been estimated at 64.72Mt grading at 35g/t silver, 0.30% lead and 0.50% zinc. Inferred resources amount to 21.63Mt grading at 40.6g/t silver, 0.32% lead and 0.49% zinc.

Geology

The deposit lies within a broad volcanic upland hosted between extensive exposures of thin-bedded grey coloured lithic sandstones and red beds of the cretaceous to lower-tertiary in age Puno group that lay beneath volcanics towards the north and south.

A complex of fine-grained andesite flows and autobreccias of the Tertiary Tacaza group occupies the central and western section of the upland. The north striking andesite flows plunge to the west at angles varying from 150 to 450. The flows are capped to the west by coarse-grained dacitic porphyry that is unconformably overlain by a thick complex of Miocene to Pliocene aged dacitic volcanoclastic rocks.

Mineralisation

Mineralisation is hosted within the andesite flows, autobreccias and dacitic porphyry. A northern Anomaly A and a south-hosted Anomaly B have been described in early descriptions of mineralisation. These zones have been connected by the recent drilling activities to represent major structural orientations that host continuous mineralisation.

The mineralisation occurs both laterally and vertically. Vein-styled mineralisation and bulk tonnage material is hosted in the andesite volcanic unit within two major structural trends. Higher grade mineralisation is found within veins, vein swarms, widespread crackle breccias and open space fillings.

Minor mineralisation is hosted within quartz-feldspar porphyry intrusives in the northern Anomaly B and the canyon south of Huacullani.

Mining and processing

Due to the proximity of large quantities of primary silver near surface, the proposed mining method for the project will involve conventional open pit mining techniques including blasting. The open pit will be dug on 5m high benches. Mining will be conducted using 63t trucks and 8.6m³ wheel loaders. A minimum pre-production waste stripping of 2.97Mt will be required and the overall strip ratio will be 2:1 during the life of the project.

In the initial 9.5 years, ore will be transported directly from the pit and dumped into the crushing system by trucks. The entire process will involve two stages of crushing, one classification stage, heap leaching and recovery by Merrill-Crowe extraction.

The crushed ore will be sent to the coarse ore stockpile. Using an automated conveyor loading system, the ore will be loaded and transported to the heap leach where it will be stored in cells. To dissolve silver minerals, the heap will be irrigated with a sodium cyanide solution. The pregnant solution will be delivered to the 571m³/hr Merrill-Crowe plant.

The silver-zinc precipitate produced at the Merrill-Crowe plant will be smelted to produce a silver containing Dore bar. The leaching process will result in a 70% recovery of silver.

A low-grade stockpile will also be constructed in the first five years of mining. The stockpile will store 2,964kt of ore with an average grade of 29.9g/t. The low-grade stockpile will feed the crusher on completion of the main mining activity. The waste will be transported to a waste storage plant constructed about 1km southwest of the pit.

Contractors

The engineering, procurement and construction management (EPCM) contract for the project was awarded to Grupo Graña Montero (GMI) on 28 February 2011.

Financing

The project will be financed using net proceeds from a $130m bought deal offering. The offering was closed on 5 November 2010 and involved a syndicate of underwriters including BMO Capital Markets, Canaccord Genuity, Paradigm Capital, Haywood Securities, Raymond James, Cormark Securities and Scotia Capital.

Infrastructure

The mine is located close to favourable infrastructure. Access will be through an 8km gravel road, including newly constructed and upgraded sections. A new section of the road will be constructed to connect to the existing paved highway that links the Bolivian border to the port of Ilo.

An electrical substation, located 42km from the mine, at Pomata will be connected to the mine via a proposed transmission line.