Europa Metals: Independent Preliminary Economic Study

18th November 2020

US$156m NPV and 31.3% IRR with a 49% Operating Margin Demonstrated from Independent Preliminary Economic Study Toral Pb, Zn & Ag Project, Spain

Europa Metals, the European focused lead-zinc and silver developer, is pleased to announce results from an independent Preliminary Economic Study (the “Study”) in respect of its wholly owned Toral lead, zinc and silver project (“Toral” or the “Toral Project”), located in the region of Castilla y León, north-west Spain. The Study has, inter alia, updated the economics from the previous Scoping Study undertaken by Addison Mining Services Limited (“AMS”) in late 2018 (the “2018 Scoping Study”), and incorporated the positive findings generated from the workstreams conducted by the Company and its consultants over the last 12-18 months, including the results from ore-sorting undertaken by Bara Consulting (“Bara”), metallurgical testwork by Wardell Armstrong International, as well as reflecting a change in the selected future mining method and a general improvement in metal prices since 2018.

Highlights :·

  • US$156m NPV at an 8% discount rate
  • 31.3% IRR
  • 17Mt @ 6.7% ZnEq (including Pb credits) resource (JORC 2012) including indicated resource of 3.8Mt @ 8.1% ZnEq (including Pb and Ag credits) – 4% cut off grade
  • Sub-Level Longhole Stoping (“SLOS”) mining method selected
  • 700k tonnes per annum operation with a 7.6% ZnEq mined grade:
    • SLOS with ramp/raise-bore shaft access;
    • 10% dilution;
    • 3.5m average mined mineralised widths
  • Processing comprises an ore sorting front-end using X-ray Transmission (“XRT”) followed by grinding and flotation
  • Grade/recovery: 3.3% Pb/87%; 4.2% Zn/86%; 26.7g/t Ag/85%
  • US$79m upfront Capex
  • 3-year trailing average metals prices of US$2,668/t for zinc, US$2,099/t for lead and US$16.5/oz for silver
  • US$963m Revenue over Life of Mine (“LOM”)
  • US$477m Opex over LOM
  • US$471m EBITDA over LOM
  • 49% Operating Margin (US$63.56/t all-in cost)
  • 12-year LOM scenario
  • Conceptual LOM production schedule incorporates 100% of the existing Indicated resource in the early years, ending with elevated zinc grades in the deep Inferred zones
  • Deposit open to the east and at depth for potential production expansion during the mine’s life
  • Project’s 3-year Investigation Permit renewed until 15 November 2023 (as announced previously on 12 November 2020)

Key economic and production factors as summarised within the Study are as follows :

  • Significant production expansion over the 2018 Scoping Study, with enhanced economics derived from a change in the mining method, increased ROM, the addition of ore sorting, and increased understanding of the metallurgical characteristics of the project
  • Production profile demonstrates a very robust project capable of producing high grade saleable concentrates within an EU jurisdiction
  • Conceptual production schedule terminates in elevated zinc grades within the current Inferred resource areas that remain open at depth as well as to the east. Such open areas have not yet been subject to structured exploration
  • Bara recommends moving to the Pre-Feasibility Study (“PFS”) stage based on the current data, although notes that the mine plan outlined in the Study would accommodate further production expansion if further resource targets were successfully developed prior to, or during, production

Outlook

The robust updated economics (+/- 30%) for Toral are well supported by a global supply situation for lead and zinc, which the Company’s Board believes will put such higher grade potential producers at a distinct commercial advantage.

Aided by the drawdown of the initial tranche ( €163,380) of the recently announced innovation grant from the Centre for the Development of Industrial Technology (CDTI), the Company will now progress work streams towards a PFS and ultimately seek to make an application for a mining licence, including:

  • Additional resource drilling to:
    • Convert additional Inferred resources to the Indicated category;
    • Increase its knowledge base with respect to the potential lower-grade mineralisation zones to potentially bring them into the mining inventory through XRT ore-sorting; and
    • Geometallurgical drilling
  • Further metallurgical testwork on the current ore types identified
  • Geotechnical assessment across all aspects of the project:
    • Rock mechanics
    • Waste management
    • Plant location
  • Hydrogeological testwork:
    • Drilling of a further two holes for piezometers
    • Pump testing
    • Water monitoring
  • Environmental assessment:
    • Continuation of baseline studies
    • Increase data gathering
  • Social/community aspects:
    • Build on existing strong relationships with the local community

Such workstreams will help determine the most value accretive ways to develop the Toral project towards production.

Commenting today, Laurence Read, CEO of Europa Metals, said :

“Today’s economic report proposes a significantly expanded potential mining operation at the Toral lead, zinc and silver project with a 700k tonnes per annum production rate over a 12-year mine life, within a highly robust operating regime, with a projected 49% operating margin. With a mining grade of 7.6% zinc equivalent and as a potential high margin operator, Toral has the scope to generate over US$470m EBITDA from US$963m of revenue over the life of mine from upfront capex of US$79m and estimated payback in year 4.

“Having recently secured a new three-year Investigation Permit for Toral and with today’s updated economics attributing a US$156m NPV and a 31.3% IRR, the Board shall progress Europa’s strategy to secure the most value-accretive pathway to advance the project.

“With work towards a PFS for Toral now underway, we look forward to updating the market in due course on our hydrogeology programme, planned resource and metallurgical drilling and geotechnical work.

“We are also pleased to confirm that the initial €163,380 tranche of the CDTI grant has been drawn down and received by the Company and look forward to contributing to our technology partnership with SPI drilling and Salamanca University during the forthcoming drill campaign. “

Commenting today, Myles Campion, Chairman of Europa Metals, said :

” Today’s release of the new economic numbers is a culmination of two years’ work covering many aspects of the Toral deposit. All necessary programmes needed to move the project towards a PFS have been completed and we now look forward to advancing all these studies to put the Company in the best position to assess all options. “