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Santa Elena Mine

Property Size: 51,172.5 hectares
Location: 150 kilometers northeast of Hermosillo, Sonora, Mexico.
Status: Commercial Underground Production

  • Anticipated production of approximately 4.0 million to 4.4 million ounces silver equivalent in 2015
  • On March 31, 2015, filed Update to Santa Elena Pre-Feasibility Study (“UPFS”), dated effective December 31, 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 (December 31, 2014)

SANTA ELENA RESERVES (DECEMBER 31, 2014)

CLASSIFICATION TONNES AU GPT AG GPT CONTAINED
AU OZ
CONTAINED
AG OZ

SANTA ELENA UNDERGROUND DILUTED AND RECOVERABLE RESERVES*

PROBABLE 3,981,557 1.67 115.0 214,000 14,724,000

SANTA ELENA OPEN PIT RESERVES**

PROBABLE 121,706 2.75 117.0 11,000 458,000

SANTA ELENA LEACH PAD RESERVES (PAD ORE)***

PROBABLE 3,344,652 0.65 33.3 70,000 3,582,000

TOTAL SANTA ELENA RESERVES

PROBABLE 7,447,915 1.23         78.4 295,000 18,764,000

SANTA ELENA RESOURCES (DECEMBER 31, 2014) ****

INDICATED 1,117,033 1.39 89.7 50,000 3,220,000
INFERRED 564,074 1.69 106.53 31,000 1,932,000

Note: All numbers are rounded. Underground and Leach Pad Reserves and Resources are based on LOMP metal price trends of $19.50/oz silver, $1,300/oz gold and metallurgical recoveries of 92% Au and 67.5% Ag. All Mineral Resources and Reserves conform to NI 43-101 and Canadian Institute of Mining, Metallurgy and Petroleum 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.
* Underground Probable Reserve is based on a cutoff grade of 2.49 gpt AuEq with an estimated average 10% dilution and 90% mine recovery. Average true thickness of the designed stopes is 10 metres.
** 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.
*** Leach Pad Reserve is 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.
****Mineral Resources exclude Mineral Reserves and are based on a 1.5 gpt AuEq cut off grade using assumptions for prices and recoveries as stated in note above. Capping was applied at 12 gpt Au and 700 gpt Ag.

Life of Mine Plan

The Santa Elena mine life with update to Reserves is scheduled to continue for 8 years at nominal milling rate of 3,000 tonnes per day with reduced throughput in the last two years upon depletion of leach pad reserves. The mine schedule is based on mining long hole stopes (89% by reserve volume) early in the mine life at attractive lower costs with small reserve being mined using cut and fill stopes (11% by reserve volume) being mined towards the end of the mine schedule. The 2013 PFS showed long hole and cut and fill stopes were 69% and 31% by volume, respectively. The average width of proposed optimized stopes is 10 metres, which is advantageous for lower cost bulk mining methods. SilverCrest envisions a continued blending strategy during operations at variable rates for mill feed to achieve optimum throughput. A summary of the mine and production schedule is presented below with proposed initial blending strategy.

Aspect of operations 2015 2016 2017 2018 2019 2020 2021 2022 Total
Life of Mine
Total Tonnes Underground 462,200 543,000 521,100 535,400 493,700 497,600 434,300 494,300 3,981,600
Total Tonnes Leach Pad 502,300 543,200 565,100 550,800 592,500 588,600 2,200 - 3,344,700
Total Tonnes Open Pit 121,700 - - - - - - - 121,700
Total Tonnes Processed 1,086,200 1,086,200 1,086,200 1,086,200 1,086,200 1,086,200 436,500 494,300 7,448,000
Total Gold Ounces Sold* 45,000 45,500 37,200 35,800 29,400 38,300 23,500 16,000 270,700
Total Silver Ounces Sold* 2,048,400 2,111,400 1,750,000 1,888,800 1,487,200 1,492,100 953,500 914,800 12,646,200

Note: All numbers rounded.
*Ounces based on sold, not insitu Reserve.

Reserve Criteria

The updated Santa Elena Mineral Reserves 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 $1,300.00      
Silver $19.50      
Mining Method Open Pit Underground Long Hole Underground Cut and Fill Leach Pad
Process Method CCD Mill CCD Mill CCD Mill CCD Mill
Mining Cost/T ore $9.90 $28.72 $50.02 $0.03
Processing Cost/T3 $24.5 $24.5 $24.5 $24.5
General & Administration4 $5.3 $5.3 $5.3 $5.3
Overall Metal Recoveries (Life of Pad)5        
Gold 92% 92% 92% 92%
Silver 67.5% 67.5% 67.5% 67.5%
Ramp Width (metres) 10 to 15 4.5 4.5 NA
Average Dilution 5% 10%2 10%2 NA
Ave. Mining Recovery 95% 90%2 90%2 100%

1 Based on LOMP metal price trends
2  Underground mining costs, dilution and mine recovery are based on stope type, either long hole (89% of design stopes) or cut and fill (11% 
of designed stopes) mining method.
3  Processing includes leach pad costs, 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 material are based on recent Company production leach cycles of 300 days for life of pad to assess together with 
data the available reserves. During the period from 2010 through 2014, an average recovery of 60% Au and 30% Ag was achieved. Recoveries reflect partial 300 day leach cycle with pad leaching discontinued prematurely in Q2 2014. Leach pad CCD mill recoveries are based on in-situ remaining ounces on the pad.
* For economic analyses, the gold prices range is defined as $1250 (2015), $1275(2016) and $1300 for remaining years for LOMP. For silver prices, the range is defined as $18 (2015), $19(2016), $20 (2017) and $21 for remaining years for LOMP.

LOMP OPERATING COSTS

The operating cost estimates stated below were compiled using Santa Elena mine site operating experience, SilverCrest financial and operational reports, recent contractor quotes, other local producing mines and industry estimations in Mexico to a Pre-Feasibility level.

Mining Method Open Pit Underground
Long Hole
Average
Underground
Cut & Fill
Average
Leach Pad
Reprocess
Process Method CCD Mill CCD Mill CCD Mill CCD Mill
Mining Cost/T ore1     $ 9.90     $ 28.71     $ 50.00     $ 0.002
Processing Cost/T3     $ 24.49     $ 24.49     $ 24.49     $ 24.49
General & Administration/T4     $ 5.29     $ 5.29     $ 5.29     $ 5.29

1 Long hole stopes are 89% of designed stopes by volume and cut & fill stopes are 11% of designed stopes by reserve volume. Includes adjustment for exchange ratio impact in the mining costs and excludes ore development costs.
2 Mining cost of spent ore on leach pad is covered under processing costs.
3 Processing cost includes crushing, milling, site refining and dry stack tailings disposal.
 4 Estimated based on current operations and may vary on an annual basis. A 4% annual inflation rate has been applied to general and administrative costs.

Ore development costs are estimated at $36/T ore and represent approximately 6% of total underground ore planned to be mined during LOMP.

LOMP SUSTAINING CAPITAL COSTS

The sustaining capital cost estimates stated below are based on internal estimates for remaining capital expenses over life of mine. 

Sustaining Capital Cost Table Including Exploration Drilling Expense

Site infrastructure $2,066,200
Mill sustaining capital $1,785,000
Underground waste development expenses $16,086,600
Underground equipment and infrastructure $6,236,300
Underground and 2015 surface drilling $4,783,300
Total capital costs $30,957,400

Note: All numbers rounded.

UPFS ECONOMIC ANALYSES

UPFS economic analyses were completed for both pre-tax and post-tax. Base Case pre-tax and post-tax results are stated as follows:

Aspects of Santa Elena UPFS Economic Analyses
(Base Case)

Production

    Gold Ounces Sold - post refiner credit1 $270,700
    Silver Ounces Sold - post refiner credit $12,646,200
   
Revenue $(000)
    Gross Sales2 $554,530
Operating Expenses3
    Total Operating Costs4 $348,900
    Freight & Refining $5,750
    Closure Costs $6,000
Sustaining Capital Expenses
    Underground & Surface Drilling5 $4,780
    Sustaining Capital Costs6 $26,170
Pre-Tax Undiscounted Cash Flow
    Total Cash Flow $162,930
Pre-Tax Financial Results
    Pre-Tax NPV, DCF @ 5% $143,840
Post-Tax Financial Results
    Post-Tax NPV, DCF @ 5% $119,170

Note: All numbers rounded.
1 Sandstorm to be delivered an estimated 54,000 ounce of gold over remaining LOMP.
2 The financial model adopted a range of realized spot prices from 2015 to 2022. Gold prices ranged from $1,250 to $1,300 per ounce and silver prices ranged from $18 to $21 per ounce.
3 Excludes 0.5% governmental environmental fee of an estimated $3 million.
4 Approximate operating cost per AgEq ounce sold varies between $9 and $16 over the life of mine.
5 All LOMP underground drilling costs and only 2015 surface program costs included.
6Excludes sunk costs, up to December 31, 2014.

The economic analyses considers SilverCrest delivering 54,133 ounces of gold to Sandstorm Gold Ltd. (“Sandstorm”) at an average price of $412 per ounce ($350 to $450 per ounce with annual 1% inflationary increases) under the Sandstorm Purchase Agreement (the “Purchase Agreement”) executed on May 14, 2009. The Purchase Agreement included an option for Sandstorm to participate in the Santa Elena underground mine, which Sandstorm had elected to exercise in February 2014. The Purchase Agreement only applies to the original Santa Elena concessions and excludes recent regional acquisitions.

UPFS RECOMMENDATIONS

Further optimization of the mine schedule is warranted to investigate continued grade optimization versus stoping costs (long hole or cut and fill), potential to expand and accelerate increased underground production with a second ramp and expand resources with subsequent reserves.  Mineralization at Santa Elena is open in most directions with excellent potential to further increase resources and reserves for increased production and mine life. Further infill and expansion drilling is recommended. El Cholugo zone located immediately adjacent to the Main Mineralized Zone is a priority target in 2015 for potential resource and reserve expansion. Silver recoveries in the new plant facility need further metallurgical work to potentially increase recovery rates. Recommended budget for further work is estimated at $5 million to be spent over several years.