Bilbao Project, Zacatecas, Mexico (100% owned by Xtierra)
Buchans Resources holds, indirectly, approximately 30 million shares in Xtierra Inc., a company listed on the TSX Venture Exchange under the symbol “XAG”, representing an approximate 26% interest.
Xtierra holds mineral properties located in the in the State of Zacatecas in the Central Mineral Belt of Mexico. The Central Mexican Mineral Belt is a prolific mineralized belt that has historically generated the bulk of Mexico’s silver production from the early colonial period to the present day and hosts many world class precious and base metal deposits.
The Bilbao Project (“Bilbao”) is a polymetallic, replacement-style, silver-lead-zinc-copper, skarn-type replacement sulphide deposit with a deeply weathered oxide cap. This mineralization is located approximately 500km northwest of Mexico City in the southeastern part of the State of Zacatecas.
Runge Pincock Minarco (Canada) Limited (RPM) delivered an independent Technical Report in accordance with NI 43-101 containing an updated resource estimate and PEA on the Bilbao Project in April of 2014.
Note: The total resources estimated by RPM and reported in April 2014.
Economic results of the Project cash flow model indicate an Internal Rate of Return (IRR) of 13.2% and a pre-tax Net Present Value (NPV) of USD $11.0M at a 10% discount rate and a pre-tax NPV of $18.7 million at an 8% discount rate.
Project capital costs, as of April 2014, are estimated by RPM to be USD$99.5M including an allowance for contingencies of USD$8.7M, equivalent to 8.8% of total capital expenditure.
RPM have made numerous recommendations throughout the PEA identifying various opportunities to increase the mineable resource and reduce operating costs through additional exploration and engineering, improving the overall economics of the Bilbao project.
The mine plan incorporated in the PEA targeted the extraction of only the lower, unoxidized, sulphide zone based on a production rate of 2,000 tonnes per day, or 720,000 tonnes per year with an average grade of 2.1%, 1.4% and 63.96 g/t of zinc, lead and silver, respectively, over a mine life of approximately 8 years.
The mineral processing plant described in the PEA proposes the treatment of the silver-lead-zinc sulphide ore at a design throughput rate of 2,000 tonnes per day, which would thereby project on average, 16,913 dry tonnes per year of silver-rich lead concentrate, and 26,966 dry tonnes per year of zinc concentrate, constituting an average combined total of approximately 20 million pounds of zinc, 17 million pounds of lead, and one million ounces of silver, per year.
In late 2014, the Company conducted a desktop analysis of an alternative development scenario of extracting only the high grade portion of the Bilbao resources and milling of the ore mined from Bilbao at an existing mill within a reasonable trucking distance. By focusing only on the higher grade portion of the resource, this alternative development scenario would necessarily reduce the projected mining and processing rate, as well as subsequent metal concentrate production but maintain an eight year mine life. This scenario would reduce the projected capital costs by reducing the amount of mine development required and eliminating the proposed mill at Bilbao.
Also in 2014, the Xtierra initiated a strategic review to consider alternatives for the development of the Bilbao project, including the sale of either all or a portion of the Company’s interest in the Bilbao Project, or a corporate transaction. The Company retained Jennings Capital Inc. (now Mackie Research) to assist in the strategic review process. The strategic review did not identify any acceptable development or financing proposals.
In 2016, the Company restricted its field exploration expenditures to the identification of additional resource potential at ten (10) favorable target sites on the property. Activities carried out included ground magnetometer and associated topographic surveys aimed at further identification and location of potential drill targets outside the immediate limits of the existing Bilbao deposit. Although results will require further ground confirmation, there is potential for additional vein and skarn-type potential mineralization on the property.
In addition, petrographic, structural, lithological, and lithogeochemical studies were carried out on both sulphide, and oxide zone mineralization to further enhance certain information presented in the 2014 PEA.
In the first half of 2017 emphasis was given to interpretation of magnetometer survey results, in addition to examination of previous metallurgical studies and the identification of potential solutions to increase both metal recovery and economically viable ore tonnage at the deposit.In order to maintain the Company’s mineral concessions and titles for the property in good standing, the Company is required to commit to a prescribed minimum of annual exploration expenditure and pay fees semi-annually to the Secretaria de Economia in Mexico. Minimum expenditure commitments and concession payments totaling approximately $60,000 are required annually. Failure to make either the annual concession payments and incur the minimum annual exploration expenditures or to satisfy the Mexican authorities that the expenditures incurred are qualifying expenditures, may result in either the cancellation or forfeiture of the mineral concession(s)The Company has taken all necessary steps to minimize administrative and property holding costs in order to maintain its Bilbao property in good standing, while at the same time examining strategic alternatives for raising additional financing to secure its continuation as a going concern.
Cautionary Note: No Pre-Feasibility Study or Feasibility Study has been completed on the Bilbao Project. Project economics are not proven as the Project has not to date declared a reserve. All analyses are based on Indicated and Inferred Resources. Mineral Resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them.