TSX: SVL     NYSE MKT: SVLC       FSE: CW5       LOW: 1.60       HIGH: 1.71       VOLUME: 93821       LAST TRADE: 1.62       DATE: 2014-11-21
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Santa Elena Mine

Property Size: 3,160 ha (7,808.5 Acres)
Location: 150 kilometers northeast of Hermosillo, Sonora, Mexico.
Status: Commercial Production (since July 2011) - Anticipated production of approximately 3.3 million to 3.6 million silver equivalent ounces in 2014

History

Earliest records of work on the property are from the late 19th to early 20th century when an English company by the name of Consolidated Fields operated a mining operation at Santa Elena until the onset of the Mexican Revolution in 1910.

During the 1960’s, Industrias Peñoles S.A de C.V. drilled two or three holes on the property. During the early 1980’s, Tungsteno de Baviacora (Tungsteno) mined 45,000 tonnes grading 3.5 g/t gold and 60 g/t silver from an open cut at Santa Elena. Since 2003, Tungsteno has periodically surface mined high silica/low fluorine material from Santa Elena and shipped it to the Grupo Mexico smelter in El Tajo near Nacozari, approximately 60 km to the northeast.

In early 2004, Fronteer Development Group of Vancouver, B.C., completed an extensive surface and underground mapping and sampling program. A total of 145 channel samples (89 underground and 56 surfaces) were collected and analyzed. The property remained under control of Tungsteno. On December 8, 2005, SilverCrest, using its 100% owned subsidiary Nusantara, entered into an option agreement with Tungsteno to acquire a 100% interest in the Santa Elena property through staged option payments over 5 years. SilverCrest completed payments as per the terms of the agreement in August of 2009. SilverCrest has been extensively evaluating the property since 2005.

Geology & Mineralization

Santa Elena is located in the Basin and Range Province, which is part of the Sonora Desert subprovince. The region is near the Proterozoic rifted continental margin of the North American plate, which was the site of deposition of a thick sequence of shallow marine shelf carbonate and siliclastic rocks. Subduction of the Farallon Plate beneath the North American Plate during Jurassic time resulted in continental volcanism. In late Jurassic time, a northwest-trending rift basin formed which was the site of sedimentation and felsic and intermediate volcanism.

Locally, the primary rock types are early Tertiary andesite and rhyolite flows which exhibit propylitic to silicic alteration. The main mineralized zone is a cross-cutting structure trending approximately east-west and dipping about 45° to the south. Alteration is widespread and pervasive with significant silicification, kaolinization and chloritization. Gangue minerals consist of quartz, calcite, chlorite and fluorite.

The Santa Elena deposit is considered to be high calcium, low-sulfidation type with replacements, stockworks and hydrothermal breccias similar to other high level low-sulfidation deposits found in Mexico, Chile and Nevada and Arizona in the United States.

Reserves and Resources (April 2013)

Classification1 Tonnes Au gpt Ag gpt Au oz Ag oz
SANTA ELENA UNDERGROUND DILUTED AND RECOVERABLE RESERVES2
PROBABLE 3,920,510 1.57 108.1 198,170 13,624,640
SANTA ELENA OPEN PIT RESERVES3
PROBABLE 1,426,710 1.52 66.8 69,830 3,062,200
SANTA ELENA LEACH PAD RESERVES4
PROBABLE 2,844,530 0.65 33.3 59,420 3,048,200
TOTAL RESERVES 8,191,760 1.24 74.9 327,430 19,735,050
SANTA ELENA UNDERGROUND RESOURCES5
INDICATED 2,142,820 1.69 114.9 116,000 7,919,000
INFERRED 1,489,750 1.50 155.6 72,000 7,453,000

Note: All numbers are rounded. Underground and Leach Pad Reserves and Resources are based on 3 year historic metal price trends of US$28/oz silver, US$1450/oz gold and metallurgical recoveries of 92% Au and 67.5% Ag with a metal ratio of Ag:Au at 70:1 used for grade cutoff determination . All Mineral Resources and Reserves conform to NI 43-101, 43-101CP, and CIM definitions for Resources and Reserves. Inferred Resources have been estimated from geological evidence and limited sampling and must be treated with a lower level of confidence than Indicated Resources.
1 Open Pit and Leach Pad Probable Reserves were classified by SilverCrest.  Underground Reserves and Resources were classified by EBA, a Tetra Tech Company. 
2 Underground Probable Reserve is based on a cutoff grade of 1.47 gpt AuEq with an average 10% dilution and 90% mine recovery.  Average true thickness of the designed stopes is 13.4 metres.
3 Open Pit Reserve is based on a cutoff grade of 0.20 gpt AuEq in a constrained pit shell with applied capping of 8 gpt Au and 300 gpt Ag.
4 Leach Pad Reserve based on production and drill hole data for volumetrics and grade model using a cutoff grade of 0.5 gpt AuEq. No capping was applied.
5 Underground Resources are exclusive of Probable Reserves and based on 1 gpt AuEq grade shell, a cutoff grade of 1.4 gpt AuEq, and applied capping of 12 gpt Au and 600 gpt Ag.

SANTA ELENA RESERVE CRITERIA

The Santa Elena Reserve estimates as stated above were completed using GEMS resource models for defining open pit, underground and leach pad Reserves along with criteria as presented in the following table.

Base Case Metal Prices1 All US$      
Gold $1,450.00      
Silver $28.00      
Mining Method Open Pit Open Pit Underground Leach Pad
Process Method Heap Leach CCD Mill CCD Mill CCD Mill
Mining Cost/T ore $2.42 $2.50 $21 to 482 $0.25 to 0.75
Mining Cost/T waste $1.52 $2.00 NA NA
Processing Cost/T3 $6.65 $20.50 $20.50 $18.50
General & Administration4 $3.30 $3.00 $3.00 $3.00
Metal Recoveries5        
Gold 63% 92% 92% 92%
Silver 40% 67.5% 67.5% 67.5%
Pit walls – North Wall overall angle 55.0 55.0 NA NA
Pit walls – South Wall overall angle 45.0 45.0 NA NA
Ramp Width (metres) 10 to 15 10 to 15 4.5 NA
Average Dilution 5% 5% 10%2 NA
Ave. Mining Recovery 95% 95% 90%2 100%

1 Based on 3 year historic metal price trends
2 Underground mining costs, dilution and mine recovery are based on stope type, either long hole (68% of design stopes) or cut and fill (32% of designed stopes) mining method.
3 Processing includes crushing, milling, site refining and dry stack tailings disposal.
4 Estimated based on current operations and may vary on an annual basis.
5 Recoveries for leach pad based on 2009 Metcon test work and recent Company production leach cycles for life of pad. During the period from 2010 through 2012 (solution ramp up), an average recovery of 57% Au and 30% Ag was achieved. Refer to Technical Report dated May 11, 2011 on SEDAR. Leach pad CCD mill recoveries are based on in-situ remaining ounces on the pad.

The Santa Elena Mine has good potential for additional Resources with the deposit open in most directions. Further infill and expansion drilling is recommended to potentially increase Resources and convert to Reserves.

Current Work Program and Expansion

  • The new mill and CCD/Merrill Crowe processing plant is currently running at an average throughput of 2,500 tonnes per day. Grind size testing for optimization is ongoing which impacts throughput, recoveries and efficient operation of the dry tailings belt filters. Optimized milling rate of 3,000 tonnes per day is targeted for Q4 2014.
  • Current underground ore development grades are averaging 1.72 gpt Au and 115.4 gpt Ag which is consistent with reserve estimates. Average pad ore grades in September 2014 are 0.68 gpt Au and 50.0 gpt Ag or 8% and 38% higher, respectively than budget.
  • The plant is currently processing a blended mix of 30% underground development ore and 70% pad ore with an average blended grade of 1.0 gpt Au and 71.2 gpt Ag.
  • Approximate mill recovery rates of 90% for gold and 68% for silver are consistent with budget target rates. It is anticipated that recoveries will increase as the mill grind size is optimized.
  • For Q4 2014, monthly metal production is projected to range from 3,000 to 3,750 ounces of gold and 140,000 to 180,000 ounces of silver to achieve guidance of 3.0 to 3.3 million.
  • Although behind schedule, mining the first production stope has commenced which is being developed between the 600m and 575m levels. Underground ramp access continues to be driven ahead of mine development with the bottom of the ramp currently at the 564m elevation. Completion of a ventilation raise in Q4 2014 is expected to increase operating efficiencies and improve advancement rates for both underground development and mine production.
  • Total underground development to date, including ramping, lateral ore and waste development, and raise development, is approximately 6,000 metres. Six levels currently have ore and partial waste development completed in anticipation of stope production.
  • With major capital expenditures completed for the 3 year long Expansion Plan, the Company anticipates generating free cash flow in Q4 2014 at current precious metal prices.

The Company is assessing the possibility of re-opening the Santa Elena open pit over the next 2 months which would increase projected metal production for Q4 2014 and H1 2015, providing safety and permitting requirements are met. Approximately 100,000 tonnes grading 1.4 gpt Au and 88.0 gpt Ag remain in the pit for possible low cost excavation and mill processing.

2014 Exploration Program

Sonora, Mexico
As part of the Santa Elena organic growth plan, exploration drilling has started at the Durazno Target (Ermitano Concession) located approximately 7 kilometres southeast of the mine site. Current plan is to drill 6 to 7 core holes (est. 2,000 metres) to test outcropping, widespread epithermal mineralization in several identified areas. Results from this initial program will be reported as information becomes available.