![\"\"](\"https:\/\/capital10x.com\/old\/wp-content\/uploads\/2020\/10\/sierra-metals-doubling-output-2020-10-23.png\")
<\/p>\nOn October 20th Sierra Metals (NYSE:SMTS, TSX:SMT) announced preliminary economic assessment (PEA) results for the proposed doubling of output at the Bolivar Mine in Mexico to 10,000 tonnes per day (TPD).<\/p>\n
The PEA highlighted the Net Present Value (NPV) of the Bolivar Mine operating at 10,000 TPD would be US$283 million using a discount rate of 8%. This is substantially higher than the mine’s 2018 PEA of US$214 million at the 5,000 TPD operating rate.<\/p>\n
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The PEA analysis found the incremental after-tax NPV benefit of increasing the production at Bolivar from 5,000 TPD to 10,000 TPD to be estimated at US$57.4 million with an internal rate of return (IRR) of 27.9%.<\/p>\n
This is a very value accretive use of capital, given the high IRR and the high absolute value of NPV. To put it in perspective the value of the expansion (US$57.4M) represents 20% of the current market cap of Sierra Metals (US$293M).<\/p>\n
The total operating cost over the life of the mine (14 years) is US$827 million, which equates to $1.16\/lb of copper equivalent.\u00a0 This low cost of operation provides the company with a significant margin capture at the current copper price of $3.14\/lb.<\/p>\n
During the last 10 years, the average copper price was $3.00\/lb and in the last 20 years the average copper price was $2.50\/lb; there’s inherently a high operating margin of safety in at the Bolivar mine relative to historic copper prices.<\/p>\n Sierra Metals (NYSE:SMTS, TSX:SMT) preliminary economic assessment (PEA) of doubling output at the Bolivar Mine highlighted strong value accretion metrics.<\/p>\n","protected":false},"author":7,"featured_media":20912,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1754,59],"tags":[1731,76,846,847,1617,1267],"class_list":{"0":"post-22417","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-10x_focus","8":"category-metals","9":"tag-bolivar-mine","10":"tag-copper","11":"tag-sierra-metals","12":"tag-smt","13":"tag-smt-to","14":"tag-smts"},"acf":[],"yoast_head":"\n![\"\"](\"https:\/\/capital10x.com\/old\/wp-content\/uploads\/2020\/10\/Copper-Price.png\")