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Sierra Metals Mexico
Sierra Metals Peru

Cusi Mine

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Commodities: Silver-Lead
Location: Chihuahua, Mexico
Ownership: 100%
Land Package: 11,319 hectares
Deposit type: Low sulphidation epithermal
Operation: Underground mine; flotation plant
By-product
cash cost1:
US$8.92/oz silver

PRODUCTION DATA

For the fourth quarter and year ending December 31, 2014, the Cusi Mine produced the following:

Cusi 3 Months Ended 12 Months Ended
Dec 31, 2014 Dec 31, 2013 Dec 31, 2014 Dec 31, 2013
Tonnes processed 43,969 24,085 155,269 106,853
Silver (oz) 187,371 99,727 630,159 423,089
Lead (000 lb) 304 0 1,289 0
Gold (oz) 464 323 2,120 902

(A detailed summary of production is presented in the Company's Jan 27, 2015 press release.)

MINERAL RESOURCES

On March 27, 2014, the Company released an updated NI 43-101 compliant resource estimate for the Cusi Mine prepared by Gustavson Associates LLC of Lakewood, Colorado.

Category Tonnes
(x1000)
Ag
(g/t)
Pb
(%)
Zn
(%)
Au
(g/t)
Resources          
Indicated 1,665 231.9 0.46 0.46 0.08
Inferred 2,737 227.5 0.31 0.30 0.08

Notes:

  1. The effective date of the mineral resource estimate is Dec 31, 2013.
  2. Resources are presented at a 90 g/t Ag cut-off grade.
  3. Details of the estimate are provided in the Company's Mar 27, 2014 press release and within a NI 43-101 compliant technical report filed on SEDAR on May 9, 2014.
  4. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

(Complete details of the reserve and resource estimate are available in the NI 43-101 technical report - please click here)

OVERVIEW

The Company's Cusi Mine is located in Chihuahua State, Mexico some 135 kilometres from Chihuahua City. The Property encompasses 60 concessions covering 11,319 hectares that include 12 inactive mines, each located on a mineralized structure, and which lie within 40 kilometres of the Company's Malpaso Mill. The Promontorio and Santa Eduwiges are currently providing most of the ore to the mill.

Although commercial production was declared in January 2013, the Cusi mine is still considered to be in the development stage as the majority of the production comes from development rock. The Company`s goal to reach 600 tonnes per day of production was achieved in late 2014. The Company has hired a third party consultant to complete a pre-feasibility study on the Cusi Mine and Malpaso Mill to allow a declaration of reserves for the first time and to comlete an economic analysis of building a new on-site processing plant.

LOCATION

The Cusi Mine is located within the municipality of Cusihuiriachic in the central portion of Chihuahua State, Mexico. Climate is conducive for year round mining operations. The mine area encompasses 11,657 hectares over a range of elevation of 1,950 to 2,460 masl in the Sierra Madre Occidental Mountain Range. The shaft of the Promontorio Mine is located at UTM 3,125,854 m N 319,019 m E in the 13R UTM grid in WGS84 ellipsoid.

ACCESS

The Cusi Mine is accessed 135 km by road from the City of Chihuahua, Mexico via Federal Highway No. 16 for 105 km to Cuauhtémoc, and then south along a paved road to the village of Cusihuiriachic, where the Cusi Property is located.

OWNERSHIP

Sierra Metals initially acquired mineral concessions on the Cusi property in 2006. Sierra Metals wholly owns the exploration and mining rights on 73 mineral concessions covering an area of 11,657 hectares. Production from the Cusi Mine is subject to net smelter royalties ranging from 1.5 to 3%, depending on origin of the mined quantity with respect to the mineral concession area.

Sierra Metals also holds surface rights to an area of 1,020 hectares located generally within the area where Sierra Metals holds mineral concessions and including the access points to the Promontorio and Santa Eduwiges underground mines that are in operation.

HISTORY

Gold and silver were first discovered in the Cusi project area within the San Miguel and La Candelaria zones by a Spaniard, Antonio Rodríguez, in 1687, and continued until the Mexican war of independence, which began in 1810. The amounts mined during the Spanish colonial time are not well documented.

The Mexican war of independence occurred from 1810 to 1821. Operators and mined quantities from 1821 to 1881 are not known. From 1881 to 1890, Don Enrique Mining Co. conducted mining operations. From 1896 to 1911, the Helena Mining Company purchased and conducted mining operations: during this period, the Santa Marina and San Bartolo shafts were sunk to the 1,000 foot level. North Mexican Mining Company acquired a portion of the Cusi Project area. In 1911, Cusi Mexicana Mining Co. purchased the property from Helena Mining Company. During the period of the Mexican Revolution from 1910 to 1920, mining at the Cusi Project area occurred intermittently. Total tonnage mined from 1821 – 1920 is not known.

From the 1920s to 1937, concessions of the Cusi project area were acquired by The Cusi Mining Company of American Capital. Over one million tonnes were mined. From 1924 to 1942, 504,048 tonnes were mined, producing 265,460 kilograms of silver; however, mined areas were not reported. From 1937 to the 1970s, mining from the Cusi property was reportedly dormant. In the 1970s, mining occurred in several mines in the Cusi Project area: an estimated 3,000 tons of ore per month were being produced at an average silver grade of 12 to 18 ounces per ton silver.

As reported in RPA (2006), during the 1980s, Minera Cusi conducted limited mining: no quantities were reported.

PROCESSING

Sierra Metals acquired the Malpaso Mill in 2004 and processed ore from the Bolivar Mine from 2005 to 2011. Since late 2011, ore from Bolivar has been processed at the Piedras Verdes Mill, which was built 6 km from the Bolivar Mine. The Malpaso Mill is located 35 km northwest of the Cusi Mine. In 2014, throughput of Cusi ore increased from 300 to approximately 600 tpd. The Company has hired a third party consultant to complete a pre-feasibility study on the Cusi Mine and Malpaso Mill to allow a declaration of reserves for the first time and to comlete an economic analysis of building a new on-site processing plant.

GEOLOGY AND MINERALIZATION

Rocks in the Cusi area are mainly volcanic rocks of the Sierra Madre Occidental, predominantly volcanic rocks of Eocene-Oligocene age, continental deposits of the Upper-Middle Tertiary, and in smaller proportion, Quaternary deposits. The geologic column comprises a sequence of volcanic rocks, with a minimum thickness of 750 m in "La Bufa" mountain, but possibly thicker since its base is not exposed nor it has been reached by the deepest mining operations. Volcanic rocks in the area are of the Lower Volcanic Series, the base of which is represented by felsic lavas and tuff dated at 37 Ma. They overlie a sequence of 37 Ma old agglomerates and andesitic lavas with a smaller amount of intercalated volcano-clastic sediments and andesitic tuffs.

The Upper Volcanic Series unconformably overlies the earlier series and is represented by felsic, intermediate and mafic volcanic rocks with an age range of 36-27 Ma. The mafic rocks originated during periods of faulting and are represented by andesitic basalts dated at 28 Ma. The rhyolitic rocks, such as tuffs, breccias and ignimbrites, belong to the Sierra Madre Occidental Superior Volcanic Group. The rocks are intruded and altered by monzonitic intrusions and cut by rhyolitic dykes associated with Ag-Pb-Zn-Cu-Au mineralization.

Epithermal (silver dominant) and base-metal veins occur as hydrothermal fissures filling faults and fractures. The veins are generally narrow, vuggy and chalcedonic and fill major structures. The faults that host veins are undulatory in both strike and dip and fracturing and brecciation increase at inflection points that often correlate with cross structures/veins. Broad zones of disseminated silver mineralization occur at some of these structural intersections, most notably at the Promontorio mine.

The length of the major structures varies between 500 to 2,000 m, with high-grade zones and also barren sections. Second and third-order faults are of much shorter length, on the order of tens to a few hundred meters. Alteration is mainly silicification, oxidation and chloritization.

EXPLORATION

In 2014, a successful surface and underground drilling program at Cusi concentrated on expanding and upgrading the resources for the Promontorio and Santa Eduwiges mines and testing for depth extension of several of the veins. In addition, underground development work at the Promontorio Mine exposed several hundreds of meters of mineralized shoots, some of which lie outside of the current resource estimate.

The 2015 exploration program for Cusi includes over 37,000 meters of drilling with over 33,000 meters allocated toward resource expansion and over 4,000 meters for exploration. This program more than triples the total meters drilled in 2014 and will focus on significant expansion of the currently defined resources at both the Promontorio and Santa Eduwiges mines, as well as surface exploration drilling at five areas: San Nicolas Central, Milagro, Candelaria, the La India/Candelaria junction, and San Juan.

GOING FORWARD

Construction is underway on a new four-compartment rectangular shaft at the Santa Eduwiges Mine. The objective is to access the deeper levels and to allow a higher mine output and have a cost efficient method of moving the ore to surface versus the current underground truck haulage. The new shaft will be operational in 2016.

In 2014, the Company increased the throughput at the Malpaso Mill from 300 tpd to 600 tpd. Work on the tailings dam to support the increase in throughput is estimated to be completed during the first half of 2015.

A pre-feasibility study on the Cusi Mine and Malpaso Mill is underway and will allow for the declaration of a NI 43-101 compliant reserve estimate for the first time at Cusi and provide an economic analysis of building a new on-site processing plant.

An aggressive 2015 exploration program at Cusi is directed toward expanding and upgrading the mineral resources as well as following up on a number of high-priority exploration targets.

Footnotes
1For the 12 month period ended December 31, 2014.

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