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Golden Arrow Announces Positive Preliminary Economic Assessment for the Chinchillas Silver Project, with $98.5M After-tax NPV and 17.5% IRR

December 5, 2013

Golden Arrow Resources Corporation (TSX-V: GRG, FRA: GAC (WKN: A0B6XQ), "Golden Arrow" or the "Company") is pleased to announce the results of a Preliminary Economic Assessment ("PEA") for the Chinchillas silver-lead-zinc project in Jujuy Province, Argentina ("Chinchillas" or "the Project"). The PEA highlights the advantages of the Chinchillas deposit, including its near-surface mineralization, good silver grades, access to infrastructure and amenability to conventional mining and processing. A US$2 million 6,000 metre Phase III drill program is planned to commence in the first quarter of 2014 with the objective of increasing the size of the resource.


All values are quoted in US dollars, using base case metal prices of $22 per ounce of silver, $1.00 per pound of lead, $1.00 per pound of zinc.

  • Open-pit mining scenario with a processing design of 6,000 tonnes per day at a 2.2:1 strip ratio, and 12 year mine life
  • After-tax net present value ("NPV") of $98.5 million at 8% discount rate
  • Internal rate of return ("IRR") of 17.5%
  • Payback period of 3.8 years
  • Pre-production capital costs of $202 million, including a 25% contingency
  • Cash operating costs of $10.96 per ounce of silver, without lead and zinc credits
  • Average annual silver production of 5.4 million ounces

"The positive results of this PEA give our shareholders a snapshot of how good the potential economics of this project are, even though we expect them to evolve and improve as we increase resources," stated Brian McEwen, VP Exploration and Development. "The existing Chinchillas resource has room to grow in nearly every direction, and over the next six months we will work to upgrade and expand the resource, delineate new mineralization on the property, and move the project towards a feasibility stage."

The project demonstrates positive economics at a range of silver price scenarios:

Silver Price Per Ounce Pre-tax NPV8%
Pre-tax IRR After-tax NPV8%
After-tax IRR After-tax
Payback Period
$19 $ 89.0 15.7% $ 39.4 12.0% 5.1
$22 $177.5 22.4% $ 98.5 17.5% 3.8
$25 $266.0 28.4% $157.4 22.5% 3.1

This preliminary economic assessment was initiated with a goal of providing investors and interested parties with a baseline for the potential economics of the Project, while management continues the exploration and development process. The Chinchillas deposit remains open to expansion in most directions. In addition, recent exploration throughout the property has provided targets with potential for additional resources.

The US$2 million 6,000 metre Phase III drill program will include approximately 3,700 metres in 28 holes to expand and upgrade the current resource as well as 10 holes or approximately 2,300 metres in exploration targets throughout the property.

Management plans to move the Chinchillas project to a feasibility stage with an expanded resource in 2014, and, a production decision within the next 3 years.

Mineral Resources

The PEA is based on the mineral resource estimate first reported on May 9th, 2013, and subsequently filed on SEDAR in a NI 43-101 Technical Report authored by Bruce Davis, FAusIMM and Kyle Howie, MAIG, dated June 20th, 2013.

Table 1. Mineral Resource Statement for the Chinchillas Project. May 9th, 2013.


Resource Class/Zone Tonnage Ag Grade Pb Grade Zn Grade Ag Eq Grade Ag Pb Zn Total
  (Mt) (g/t) (%) (%) (g/t) (Moz) (Mlbs) Ag Eq (Moz) (Mlbs) Ag Eq (Moz) Ag Eq (Moz)
Indicated Resources
Silver Mantos 7.2 118.6 0.57 0.48 141.2 27.4 90.2 2.8 76.0 2.4 32.6
Total Indicated Resources 7.2 118.6 0.57 0.48 141.2 27.4 90.2 2.8 76.0 2.4 32.6
Inferred Resources
Silver Mantos 3.3 90.7 0.51 0.43 111.0 9.7 37.5 1.2 31.6 1.0 11.9
Mantos Contact 2.5 78.7 0.71 0.88 113.1 6.3 39.0 1.2 48.4 1.5 9.1
Mantos Basement 8.4 99.5 0.85 0.24 123.0 26.8 157.3 5.0 44.4 1.4 33.2
Socavon del Diablo 6.8 46.6 0.58 1.1 82.8 10.2 86.7 2.7 164.5 5.2 18.1
Total Inferred Resources 21.0 78.5 0.69 0.62 107.0 53.0 320.5 10.1 288.9 9.1 72.2



  1. Resources in Table 1 are reported at 50g/t silver equivalent cut-off, at $27/ounce silver, $0.85/ pound zinc and $0.85/pound lead at 100% recovery.
  2. Silver equivalent calculations were used because of the contribution to value that Pb and Zn add to the deposit, especially in the zinc-rich Socavon del Diablo Zone.
  3. Totals may not add correctly due to rounding.

The PEA is considered preliminary in nature. All mineralized material classified as indicated and inferred mineral resources are considered in the pit optimization and mine plan. Mineral resources, which are not mineral reserves, do not have demonstrated economic viability. In addition, inferred resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves, and it is uncertain if further exploration will result in upgrading these resources.

Project Development Plan

The project concept is to develop an owner-operated open pit silver-lead-zinc mine with an on-site concentrator using conventional flotation concentration methods to produce a silver-bearing lead concentrate and a zinc concentrate.

A series of pit optimizations were run using the resource block model, applying a range of metal prices and recoveries, and estimated costs for mining, processing, and general and administrative (G&A). The operational pits were designed based on the optimized shells, and the potentially mineable portion of the resource was estimated within those pits. The ultimate pit contains a total of 81 million tonnes of combined mill feed and waste material including 25 million tonnes of mill feed, for a strip ratio of 2.2:1. The mill feed tonnages incorporates an ore loss factor of 3% and dilution at 10%.

A mill production rate of 6,300 tons per day is assumed. The production schedule includes one year of pre-production pre-stripping, mainly to acquire material to build the tailings starter dam, followed by twelve years of operating mine life.

It is assumed that lead and zinc concentrates will be shipped to a smelter/refiner via Antofagasta, Chile. An estimated 64.5 million ounces of silver are to be produced through the life of the mine, at an average head grade of 86.1g/t silver. In addition, 253 million pounds of zinc and 305 million pounds of lead will be produced with average head grades of 0.56% zinc and 0.64% lead respectively.

Project Economics

The PEA project economics are based on long term metal prices of $US 22.00/oz silver, $US 1.00/lb lead, $US 1.00/lb zinc. Management has assumed a base case long-term price scenario of $22 per ounce of silver and an 8% discount rate. The silver price was based on a survey of silver price forecasts provided by CPM Group that projected between $22 and $23 per ounce in 2015, the estimated Project start date. The revenue is mainly derived from silver with lead and zinc as by-products. The lead-silver concentrate generates 88% of the total revenue. Table 2 summarizes the parameters of the cash flow model.

Table 2. Cash Flow Analysis Summary


Parameter Unit  
Average Annual Silver Production Moz 5.4
Total Ag produced Moz 64.5
Average Ag grade oz/t 86.1
Average Ag recovery (Pb Con) % 85%
Life of Mine years 12
Total Unit operating cost $/t feed $27.96
Total Unit cash cost without credits $/oz Ag $10.96

The cash flow model includes a provincial mining royalty of 3% on the mine head value and a federal income tax at 35%. The export tax rate has been assumed at 7.5%, which is based on a 10% tax rate less a 2.5% credit for projects located in the Puna region, as outlined in Resolution No. 762/93 of the Ministry of Economy of Argentina. Table 3 summarizes the financial analysis from the cash flow model.

Table 3. Financial Analysis


  Before Tax After Tax
NPV 0% (millions) $451.4 $289.7
NPV 5% (millions) $255.3 $153.0
NPV 8% (millions) $177.5 $ 98.5
IRR 22.4% 17.5%
Payback period (years) 3.6 3.8

Capital and operating costs were estimated at +/-35% by the qualified persons based on their experience with similar operations. The capital and operating costs are summarized in Tables 4 and 5 below.

Table 4. Summary of Capital Costs, including 25% contingency, US$(millions)

Pre-production Capital
(Includes pre-stripping, mining capital costs, process plant, infrastructure)
Sustaining Capital over life-of-mine $56.8
Total Capital $259.1


Table 5. Summary of Unit Operating Cost Assumptions, US$


    Unit Cost $/t feed
Mining -- Ore $/t material $2.47 $2.47
Mining -- Waste (2.2:1 strip) $/t material $2.47 $5.44
Processing $/t feed $16.00 $16.00
Tailings $/t feed $0.11 $0.11
G&A $/t feed $3.94 $3.94
Total     $27.96

Metallurgy and Processing

Metallurgical test work was undertaken at Inspectorate Exploration and Mining Services Ltd. and the PEA incorporates test results to September 2013. Samples representing the three main zones of mineralization have been tested. However, it has been determined that the material representing the basement zone had not been properly sampled and was not representative. A new sample was taken but testing was not complete at the time of publishing the PEA. As the mineralization of that zone is mainly silver with significantly less lead and zinc, it is broadly similar to that of Silver Mantos and Contact zones. For the purposes of the PEA only two mineralization types were considered. Ore type 1 includes material from the Silver Mantos, Contact and Basement zones while Ore type 2 includes the Socavon del Diablo zone. These two mineralization types have demonstrated amenability to selective flotation and yielded commercial concentrates by conventional methods, and there are no significant penalty elements in either concentrate. The metallurgical test work completed to date is preliminary, and on-going work will look at optimization of the process for all mineralization types. In addition, bulk sampling is planned in the next phase of test work.

The planned processing plant for Chinchillas is designed to process polymetallic mineralization at a rate of 6,000 tonnes per day. The proposed processing flow sheet consists of primary crushing, grinding in SAG/Ball mills and differential flotation to sequentially float ore from the pulp, producing first a silver-bearing lead concentrate and then a zinc concentrate. The rougher concentrates will subsequently be cleaned to enhance concentrate grades.

The Chinchillas Project's recovery assumptions for the two ore types are summarized Table 6. The silver concentrate grades will fluctuate since they are dependent on the head grades mined in each year, and the average annual grades are shown. Lead and zinc concentrate grades are fixed.

Table 6. Recovery Assumptions for Payable Metals


  Lead Concentrate Zinc Concentrate
Ore_1 (MAN) Recovery Concentrate Grade Recovery Concentrate Grade
Lead 87.0% 65.0% 2.0%  
Zinc 12.0%   75.0% 53.0%
Silver 85.0% 9,244g/t 7.5% 1,209 g/t
Ore_2(SOC) Recovery Concentrate Grade Recovery Concentrate Grade
Lead 78.0% 67.0% 12.0%  
Zinc 2.8%   92.0% 57.0%
Silver 70.0% 3,996g/t 18.0% 310g/t


With the Silver Standard's Pirquitas operation 30 km away, good infrastructure to support mining is in place and the Project has two all season access routes. Power is available at the nearby village of Santo Domingo; however it is not sufficient for the mining operation and project development would require additional power supplies to be sourced. It is assumed that a new high voltage (69 kV) power line would be constructed from Abra Pampa to the project site, a distance of 66 km. The water consumption for the future operations of the mining project is estimated to be approximately 0.75 M m3/year. Water for future operations needs to be sourced from local and regional wells. Site water management facilities will include diversion channels for non-contact water and collection channels for contact water. Water will be conserved and recycled to the maximum extent possible. Chinchillas will produce thickened tailings that will be stored within a lined tailings impoundment that will be constructed and expanded in stages using mine waste rock to distribute expenditures over the life of the mine.

Economic Sensitivity

A sensitivity analysis was conducted based on several metal price cases, as summarized in Table 7 below. The economic results for the variable metal prices do not incorporate modifications to the production plan tonnages and grades that may be driven by the variable prices. The same production profile is maintained for all price scenarios.

Table 7. Sensitivity Analysis to Silver Price, 8% Discount Rate


Silver Price Per Ounce Pre-tax NPV
Pre-tax IRR After-tax NPV
After-tax IRR After-tax
Payback Period
$19 $ 89.0 15.7% $ 39.4 12.0% 5.1
$22 $177.5 22.4% $ 98.5 17.5% 3.8
$26 $266.0 28.4% $157.4 22.5% 3.1

The analysis indicates that the project demonstrates positive economics at all three silver price scenarios.


This preliminary economic assessment was initiated with a goal of providing investors and interested parties with a baseline for the potential economics of the Project, while management continues the exploration and development process. The Chinchillas deposit remains open to expansion in most directions. In particular, a recent re-interpretation of previously completed geophysics has expanded the targets below the currently defined resources, at depths of 150 to 300 metres. In addition, several areas within the deposit have not been drilled at sufficient spacing to be included in the resource estimate. Management expects that infill drilling will increase resources in these areas. A US$2 million Phase III drill program is planned to commence in the first quarter of 2014, and will include approximately 3,700 metres in 28 holes to expand and upgrade the current resource.

In addition to expansion around the current deposit, management believes that the Chinchillas project has considerable potential for additional resources throughout the property. Since July 2013, the Company has completed surface mapping, sampling and a ground magnetic geophysical survey over portions of the Project area that were recently granted (see news release dated July 24th, 2013). An IP-resistivity survey is also now underway over the property to delineate deeper targets. Results from this work will be compiled with the recent surface mapping and magnetic survey to refine exploration drill targets. The Phase III drill program includes a budget for 10 holes or approximately 2,300 metres in exploration targets throughout the property.

The Phase III program is expected to last approximately six months, following which management plans to move the Chinchillas project to a feasibility stage with an expanded resource.

Qualified Persons

The updated NI 43-101 Technical Report for the PEA will be filed on SEDAR within 45 days of this news release. The report is being coordinated by independent consultant Ken Kuchling, P.Eng., a mining engineer specializing in economic reviews and a Qualified Person ("QP") as defined in NI 43-101. Contributing Qualified Persons on the report will include:

  • John Fox, P.Eng. of Laurion Consulting Inc. (metallurgy)
  • Ken Embree,P.Eng. of Knight Piésold Ltd (tailings and infrastructure)
  • Bruce Davis, Ph.D. F. AusIMM of BD Consulting Inc. (resource estimate)
  • Kyle Howie, MAIG (resource estimate)

All Qualified Persons have reviewed and approved the content of this news release.

About Golden Arrow:

Golden Arrow is a Vancouver-based explorer focused on identifying, acquiring and advancing precious and base metal projects in Argentina with the goal of achieving a world class discovery. The core focus is on advancing the flagship Chinchillas Silver Project located in Jujuy, Argentina. Golden Arrow has a strong treasury which will allow the company to advance its Chinchillas Silver Project. Golden Arrow will continue to execute its strategy to leverage the Company's exploration exposure by attracting partners to fund work on its other high quality mineral projects. Golden Arrow is a member of Grosso Group, a management company specialized in resource exploration, and working in Argentina where it is highly regarded and trusted since 1993.


"Joseph Grosso"


Mr. Joseph Grosso

Executive Chairman, President, CEO and Director

For further information please contact:

Corporate Communications

Tel: 1-604-687-1828

Toll-Free: 1-800-901-0058

Email: info@goldenarrowresources.com

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


This news release contains "forward-looking statements" within the meaning of Canadian securities legislation. Such forward-looking statements concern the Company's anticipated results and developments in the Company's operations in future periods, planned exploration and development of the Chinchillas project, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on expectations of future performance as outlined in the PEA, including silver, lead and zinc production and planned work programs at Chinchillas. Statements concerning reserves and mineral resource estimates may also constitute forward-looking statements to the extent that they involve estimates of the mineralization that will be encountered if the Chinchillas property is developed and, in the case of mineral reserves, such statements reflect the conclusion based on certain assumptions that the mineral deposit can be economically exploited.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation: risks related to precious and base metal price fluctuations; risks related to fluctuations in the currency markets (particularly the Argentinean peso, Canadian dollar and United States dollar); risks related to the inherently dangerous activity of mining, including conditions or events beyond our control, and operating or technical difficulties in mineral exploration, development and mining activities; uncertainty in the Company's ability to raise financing and fund the development of the Chinchillas project pursuant to the PEA; uncertainty as to actual capital costs, operating costs, production and economic returns, and uncertainty that development activities will result in a profitable mining operation at Chinchillas; risks related to mineral resource figures being estimates based on interpretations and assumptions which may result in less mineral production under actual conditions than is currently estimated and to diminishing quantities or grades of mineral resources as properties are mined; risks related to governmental regulations and obtaining necessary licenses and permits; risks related to the business being subject to environmental laws and regulations which may increase costs of doing business and restrict our operations; risks related to the Chinchillas property being subject to prior unregistered agreements, transfers, or claims and other defects in title; risks relating to inadequate insurance or inability to obtain insurance; risks related to potential litigation; risks related to the global economy; risks related to the Chinchillas property being located in Argentina, including political, economic, social and regulatory instability. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward-looking statements. The Company's forward-looking statements are based on beliefs, expectations and opinions of management on the date the statements are made. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

The information provided in this news release addresses the Chinchillas PEA and is not intended to be a comprehensive review of all matters and developments concerning the Company. It should be read in conjunction with all other disclosure documents of the Company. The information contained herein is not a substitute for detailed investigation or analysis. No securities commission or regulatory authority has reviewed the accuracy or adequacy of the information presented. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

We advise U.S. investors that the SEC's mining guidelines strictly prohibit information of this type in documents filed with the SEC. U.S. investors are cautioned that mineral deposits on adjacent properties are not indicative of mineral deposits on our properties.