Relief Canyon Continuing Towards Commercial Production
TORONTO - Americas Gold and Silver Corporation President and CEO, Darren Blasutti, said, "Although the Relief Canyon mine has taken longer to reach commercial production due to complications related to the COVID-19 pandemic, equipment challenges regarding the radial stacker and lower grade ore in the upper fringes of the deposit, as we access, have placed and leached the first of the higher grade ore, we continue to remain confident that these issues will be solved in the near term. These are typical start up challenges when commissioning a new operation. We are pleased to have resolved the illegal blockade at the Cosala Operations and are eager to restart the operations. With the restart, we will benefit from the recent increase in silver price and plan to accelerate development of the Upper Zone at San Rafael and the EC120 deposit which both contain higher grade silver mineralization. The Galena Complex Recapitalization Plan is proceeding well and the initial deep drilling of the 72 Vein has provided encouraging results. Additional drilling is planned for the 72 Vein as well as the Triple Point and 360 Complex during the remainder of 2020 and into 2021. The Company is excited that these targets will prove up as several high-grade silver zones."
Following the acquisition of Pershing Gold, the Company set an ambitious target of constructing the Relief Canyon mine in under 9 months. While the Company was successful in meeting several important targets including initial construction capital and planned mining rates, ore leaching has taken slightly longer than planned due to the characteristics of the initial ore stacked on the leach pad. This situation was exacerbated by the impact of the COVID-19 pandemic and the failure of the radial stacker used to stack ore. These are common issues faced during a heap leach start up and the Company is confident these initial challenges have been mitigated with the operation in greater position to benefit from the continued strong gold price.
Waste stripping has progressed ahead of plan and has now exposed higher grade portions of the deposit which are more reflective of the overall reserve grade. This ore has been placed on a new section of the leach pad and initial leach solution grades are encouraging given the higher grade gold as well as minor improvements to stacking practices that have been gained as part of the initial phases of the operation. The Company expects to recover the initial low-grade ore stacked on the leach pad over the course of the operation.
The Company's radial ore stacker suffered a structural failure in Q2-2020. A temporary stacker was mobilized to site but can only support a throughput of approximately 8,000 tonnes per day versus 16,000 tonnes per day for the larger radial stacker. The Company anticipates that the radial stacker will be repaired in time to coincide with increased stacking requirements in Q4-2020. With the challenges to date, the Company anticipates commercial production will be reached in Q4-2020, setting the operation up for a strong 2021.
The Company also reported that the illegal blockade that has been in place at the Cosala Operations since the end of January 2020 has been resolved favorably without negotiation or compromise with those responsible for the illegal action. Senior staff are currently on site and are assessing the status of the site with the Company being confident that the operation can be restarted in September 2020. The Company has worked with government authorities to secure a democratic election to ratify a legitimate union to represent its workers which is now set for September 9, 2020.
Due to the illegal blockade, the Cosala Operations did not operate during Q2-2020 and operated for only the first 26 days of calendar 2020. As a result, quarterly and year-to-date operating results are not generally comparable with previous periods.
Spot silver prices have increased significantly from a low of almost $12.00 per ounce in March 2020 to over $26.00 per ounce in August 2020. In 2019, the Company spent approximately $1.5 million on developing into the Upper Zone of the San Rafael mine which contains significantly higher silver grades than the Main Zone. With the development into the Upper Zone, the Company anticipates that it will be able to increase silver production, allowing it to benefit from the significant increase in the silver price.
With sustained higher silver prices, the Company is planning to advance development into the EC120 Zone. The Company published a pre-feasibility study in April 2019 outlining a mine plan that would produce an average of 2.5 million ounces of silver and 2.6 million pounds of copper over a 5-year mine life. The Company is currently updating the assumptions of this study in order to optimize production considering the recent increase in silver prices. By combining the increased production from the Upper Zone at San Rafael and the production expected from EC120, the Company estimates that silver production from the Cosala Operations can increase to 2.5-3.0 million ounces per year starting in 2022.
The Recapitalization plan at the Galena Complex continues to benefit the overall operation. All equipment purchases are now fully functioning and operating underground which has resulted in increased productivity. Drift refurbishment on the 4300 level and 5500 level has provided necessary drill stations to begin testing deeper targets below historical working.
The Company finalized the earn-in agreement for the San Felipe project with Minera Hochschild Mexico S.A. de C.V. (Hochschild) by providing notice and agreeing to pay the remaining the $3.75 million plus VAT obligation in common shares of the Company. Subject to certain customary closing conditions, the Company will own 100% of the San Felipe project, which is located 130 km northeast of Hermosillo, Sonora, Mexico. Based on independent technical report by Mine Development Associates in May 2018, the San Felipe project has an indicated resource containing 4.7 million tonnes grading 5.42% zinc, 60.6 g/t silver and 2.48% lead. In addition, the inferred resource is estimated to contain 2.0 million tonnes grading 3.57% zinc, 48.2 g/t silver and 1.43% lead.