In February 2017, Solitario & Milpo significantly increased joint venture property holdings in northern Peru by acquiring 6,500 hectares (16,055 acres) of new mineral concessions in early January 2017. The acquired property fills an ownership gap in our consolidated claim position held by the Bongará and Chambara joint ventures, both of which are mutually owned by Solitario and Milpo (click here).
In January 2017, Solitario engaged SRK Consulting to complete a Preliminary Economic Assessment ("PEA") on its Bongará high-grade zinc deposit which is expected to be completed in the second-quarter 2017.
SRK Consulting (U.S.), Inc. ("SRK") is an independent and internationally recognized mining engineering firm with offices in both Peru and the United States, among other international locations. A total of 486 core holes (117,280 meters) have been drilled on the project. Work to date has demonstrated that Bongará is a high-grade zinc deposit with an average resource grade in excess of 12% zinc equivalent, has a relatively large resource base with excellent expansion potential, and produces a clean high-grade zinc sulfide concentrate. SRK previously prepared a NI 43-101 Technical Report on Resources for the Bongará Project in 2014.
Bongará is currently our core asset. It is an advanced exploration stage high-grade zinc project located in northern Peru. We are fully carried to production by our joint venture partner Milpo Mining. We are not required to contribute any funds prior to the completion of a feasibility study and our share of mine construction costs will be funded by a loan from Milpo and repaid from 50% of the net proceeds from production attributable to our 30% interest. Based on the high-grade zinc content of the defined resources, and the fact that the deposit remains open to expansion, we believe it is one of the best undeveloped zinc projects in the world.
Although the price of zinc fell significantly during 2015, our partner, Milpo Mining still elected to advance the project. Thus far in 2015, six more kilometers of access road have been completed, and an additional four kilometers is expected by the end of the year. This will complete the 35 kilometer access road from the main highway to the project site and represents a major milestone for the project. Significant progress was also made to further refine the resource estimate as well as additional engineering studies. Milpo is planning on constructing 10 to 12 kilometers of drill access roads. These roads will be used for testing the extension of San Jorge zone to the south and the Karen-Milagros zone to the northeast.
On November 19, 2014, Solitario announced that Compania Minera Milpo S.A.A. (“Milpo”; Lima Stock Exchange: MILPOCI) has announced its intent to acquire from its parent Votorantim Metais (“Votorantim”) an interest in Solitario’s Bongará Zinc Project in Peru. Milpo’s Board of Directors approved the purchase of an interest in Bongará and another significant zinc project in Brazil from Votorantim. A combined valuation of US$60 million was placed on the two projects. Milpo will assume operatorship in the project from Votorantim under its joint venture agreement with Solitario. Votorantim owns slightly more than 50% of Milpo’s publically traded shares.
Milpo is the second largest zinc producer in Peru operating three of the largest underground zinc mines in Peru. In Milpo’s initial filing, the percentage interest it intends to purchase from Votorantim in each of the two projects is undisclosed at this time. Additional information will be provided to the market by Milpo when the transaction is concluded. From the second half of 2006 to the end of 2013, Votorantim reported that it has expended approximately US$42.4 million on exploration and development at Bongará.
Terms of the Bongará Joint Venture with Milpo
Currently, Solitario owns 100% of the Bongará project. Since inception of the joint venture in 2006, Votorantim/Milpo has funded 100% of project expenditures. Milpo can earn up to a 70% interest in the project by continuing to fund all project expenditures and committing to place the project into production based upon a positive feasibility study. After earning 70%, Milpo has further agreed to finance Solitario's 30% participating interest for construction. Solitario will repay the loan facility through 50% of its net cash flow distributions.
On June 23, 2014, Solitario announced the initial NI 43-101 compliant resource estimate for its high-grade Bongará zin project in northern Peru. The Mineral Resource Statement and Technical Report was prepared on behalf of Solitario by SRK Consulting (U.S.) Inc., an independent and internationally recognized mining engineering firm. SRK verified and validated a comprehensive resource model previously developed by Solitario’s joint venture partner, Votorantim Metais. The full Technical Report has been filed on SEDAR and can be accessed by clicking here.
Highlights of the Bongará Resource Estimate:
The resource was reported using Net Smelter Return (NSR) cutoff grades by material type determined by current metals prices (zinc and lead - $0.95/lb. and silver $20/oz.) and projected mining, processing, transport and smelting costs. The resource reported in this statement is contained within a footprint of drilling of approximately one by three kilometers, with opportunities for expansion through infill and step-out exploration both laterally and vertically.
Zinc mineralization occurs as a Mississippi Valley Type (“MVT”) deposit and is contained in carbonate rocks of the Pucara rock formation, the host-rock for the many of Peru’s zinc mines. Peru is the third largest zinc producing country in the world. The Bongará resource estimate was based on a database that includes drilling campaigns of two different companies. A total of 82 drill holes were completed by Cominco totaling 24,781 meters drilled from 1997 to 2000, and 404 drill holes completed by Votorantim including 92,499 meters drilled from 2006 to 2013. The drill data were verified and validated by SRK in compliance with NI 43-101 guidelines. The Mineral Resource Statement for the Bongará Zinc project is presented in Table 1. Cutoff grades and their derivation are provided in the resource table notes.
An important component of SRK’s Technical Report was to differentiate three types of mineralization present within the Bongará deposit defined to date. These are sulfide, mixed and oxide zinc mineralization. Sulfide mineralization dominates the currently estimated resources totaling approximately 63% of the resource, with oxide accounting for 28% and mixed resources making up the remaining 9%. In addition, SRK has acknowledged a significant amount of technical work completed by Votorantim, which has advanced the Project well into prefeasibility-level of study in some areas of development.
The Bongará Technical Report and Resource Statement was prepared by SRK Consulting (U.S.), Inc. and provides a classification of resources in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and Mineral Reserves: Definitions and Guidelines, November 27, 2010.
2013 Drilling Results
On August 20, 2013, Solitario reported further outstanding drilling results on its high-grade Bongará zinc project in Peru. Included in these results are core holes V-465, that intersected 10.7 meters grading 45.60% zinc, 5.25% lead and 106.71 gpt silver and hole V-433 that intersected 5.0 meters grading 38.22% zinc, 3.89% lead and 60.76 gpt silver.
Exceptional Drilling Results
The San Jorge mineralized area, and the Florida Canyon deposit in general, remain open to expansion in all directions. Of particular importance is the discovery that zinc grades at San Jorge increase to the south. In fact, the southernmost area tested by the underground drilling program contains some of the highest zinc grades ever encountered on the property. Based on these results, Votorantim has proposed extending the San Jorge exploration tunnel a further 300 meters to the south where high-grade mineralization remains wide open.
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Solitario Exploration & Royalty Corp.
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