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Bear Creek announces robust Corani prefeasibility study; over 250 million ounces of silver converted to reserves

September 14, 2009

VANCOUVER, Sept. 14 /PRNewswire-FirstCall/ – Bear Creek Mining Corporation (TSX Venture: BCM) (“Bear Creek” or the “Company”) is very pleased to announce the results of a positive Prefeasibility Study (“PFS”),) as defined by NI-43-101 for its 100% owned Corani silver-lead-zinc deposit located in southern Peru. Highlights of this study include (all figures in US dollars):

    -   The net present value is $348 million at a 5% discount rate and the
        after tax internal rate of return for the project is 25%
    -   Proven and Probable Mineral Reserves containing 258 million ounces of
        silver, plus 2.9 billion pounds of lead and 1.4 billion pounds of
        zinc, respectively
    -   Average annual saleable silver production of 10M ounces per year for
        first 6 years, 6.4M opy LOM. On a silver equivalent ounce basis,
        17.1M opy for the first six years and 12M opy for the life of the
        project
    -   Project produces two highly-marketable concentrates
    -   Cash cost of $1.06 per ounce silver for the first 10 years, LOM cash
        costs of $2.81 per ounce (net of base metal credits)
    -   Metals price assumptions; $13/oz Ag, $0.70 Pb, and $0.65 Zn
    -   Capital costs of $339 million with Capital Payback in less than three
        years
    -   Life of Mine 27 years
    -   Mill capacity 15,000 tonne per day
    -   Stripping ratio of 1.56:1 (Waste:Ore)
    -   Feasibility Study to be initiated

Project summary – The project has an after-tax internal rate of return (IRR) of 25%, net present value of $348 million at a 5% discount rate and a EBITDA of $1.8 billion based upon metals prices of $13 per ounce silver, and $0.70 and $0.65 per pound of lead and zinc, respectively.

Recovered silver production in the first six years averages 10 million ounces/year and the project will produce an average of 6.4 million payable ounces of silver, 73 million pounds of lead and 32 million pounds of zinc annually over a 27 year mine-life. Life of mine cash cost per ounce of silver is $2.81, net of base metals credits and $1.06 per ounce silver for the first 10 years. Pre-production capital investment in the project is estimated to be $339M and sustaining capital expenditures are estimated at an average $13.1 million per year over the 27-year life of the mine. Based upon the aforementioned metals prices, the project achieves payback of capital in 2.9 years. The Prefeasibility Study has been prepared using cost bids and estimates and production forecasts provided by qualified engineering consulting groups and the economic analysis was done in conjunction with Bear Creek’s financial advisor.

Andrew Swarthout, President and CEO, states, “We are very pleased that the prefeasibility study establishes Corani as a large, robust silver and base metals deposit now advancing to full feasibility. Using current spot metals prices ($16.85/oz silver, $0.86/lb zinc, $0.97/lb lead), Corani has an NPV of approximately $757M at a 5% discount rate and a 41% IRR after tax showing that the project is highly leveraged to rising metals prices. The study describes the project as imminently buildable using conventional mining and processing technology. We are particularly pleased that the Prefeasibility Study meets our expectations for maximizing the value of the project: namely, creating a higher grade mine, dramatically lowering capital costs, and balancing metal recoveries into two highly marketable and separate lead and zinc concentrates. In addition to the leverage to conservative metals prices used in the study, our engineering consultants have identified several additional opportunities such as increased throughput and contract mining alternatives to further enhance value during the Feasibility Study.”

                             PREFEASIBILITY STUDY

The reserve and resource estimates were updated for the PFS by Independent Mining Consultants (IMC), Tucson, AZ. Samuel Engineering, Denver, Colorado and Vector Engineering, Lima, Peru co-lead the study with support from Resource Development Inc. (RDI) (Metallurgy), and SGS Vancouver (Metallurgical Testing). All are independent preeminent engineering and metallurgical testing firms with recent mine development and operating experience in Peru.

The PFS, which is dated effective Monday September 14th, 2009, is based upon mining assumptions derived from mine planning sequences completed by IMC and metallurgical test work performed by SGS Laboratories and G T Metallurgical. The mining sequence primarily derives ore from the higher-grade starter pits in the early years and moves to lower-grade areas in the later years of production. Operations are to be 27 years based on current reserves. Only measured and indicated resources were used when defining the operations plan when converting resource to reserves. Note that in the mine sequence, only 258 million ounces contained within 139.6M tonnes have been used as reserve in this plan. An additional 110.4M additional tonnes of measured and indicated resource (containing 71.8 million ounces of silver) and 34.2 million tonnes of inferred resource (containing 35.6 million ounces of silver) remain that could be included in later plans of operations should metals prices and/or operating parameters (recoveries) improve.

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             Key Assumptions for the Corani Project - Base Case
    -------------------------------------------------------------------------
                                Item
    -------------------------------------------------------------------------
    Annual ore production - years 1 to end of life (tonnes)        5,250,000
    -------------------------------------------------------------------------
    Overall Process Recovery - Silver - Into both Lead and
     Zinc Cons                                                         74.5%
    -------------------------------------------------------------------------
    Overall Process Recovery - Lead - Into Lead Cons                   71.7%
    -------------------------------------------------------------------------
    Overall Process Recovery - Zinc - Into Zinc Cons                   71.3%
    -------------------------------------------------------------------------
    Total Processed Tonnes                                       139,623,000
    -------------------------------------------------------------------------
    Average Silver Grade (g/t)                                      57.5 g/t
    -------------------------------------------------------------------------
    Average Lead Grade (%)                                             0.94%
    -------------------------------------------------------------------------
    Average Zinc Grade (%)                                             0.46%
    -------------------------------------------------------------------------
    Payable ounces of silver net of Smelter payment terms
     (total)                                                   173.9 million
    -------------------------------------------------------------------------
    Payable pounds of lead net of Smelter payment terms
     (total)                                                    1.97 billion
    -------------------------------------------------------------------------
    Payable pounds of zinc net of Smelter payment terms (total)  856 million
    -------------------------------------------------------------------------
    Overall stripping ratio                                        1.56 to 1
    -------------------------------------------------------------------------
    Life of mine (mining only) years                                      24
    -------------------------------------------------------------------------
    Life of mine (processing) years                                       27
    -------------------------------------------------------------------------

Resource prices determined in the resource model of August 2009 utilizing three-year backward and two-year forward metals prices weighted 60:40 were maintained for the PFS as is consistent with the Company’s policy and industry standards.

The Prefeasibility Study recommends proceeding to a Bankable Feasibility Study based upon:

    -   Positive economics with excellent exposure to up-side silver and base
        metals prices
    -   Well-defined resources open to expansion and conversion to reserves
    -   Favorable infrastructure; tailings storage, power and access
    -   Available local water supply
    -   Well-defined permitting path
    -   Local community acceptance

                              PROJECT ECONOMICS

    Sensitivities to various parameters are summarized below:

    -------------------------------------------------------------------------
             Case                     IRR       NPV @ 5%      NPV @ 0%
    -------------------------------------------------------------------------
    Base Case                         25%          $348 M           $683 M
    -------------------------------------------------------------------------
    Recovery +10%                     30%          $466 M           $909 M
    -------------------------------------------------------------------------
    Recovery -10%                     19%          $229 M           $457 M
    -------------------------------------------------------------------------
    Metal Price +10%                  30%          $479 M           $936 M
    -------------------------------------------------------------------------
    Metal Price -10%                  19%          $210 M           $420 M
    -------------------------------------------------------------------------
    Initial Capital Cost +10%         22%          $316 M           $636 M
    -------------------------------------------------------------------------
    Initial Capital Cost -10%         29%          $379 M           $731 M
    -------------------------------------------------------------------------
    Operating Cost +10%               23%          $294 M           $570 M
    -------------------------------------------------------------------------
    Operating Cost -10%               27%          $401 M           $797 M
    -------------------------------------------------------------------------
    Metal Prices Sep 11, 2009         41%          $757 M         $1,468 M
    -------------------------------------------------------------------------
    Note: Base case prices are $13.00/oz Silver, $0.70/lb Lead, $0.65.lb
    Zinc; Spot prices are from September 11, 2009 and were $16.85/oz Ag,
    $0.97/lb. Pb and $0.86/lb. Zn

                        RESERVE and RESOURCE ESTIMATE

                Bear Creek Mining, Corani Project Silver Zone
                       Mineral Reserves and Resources
                               August 22, 2009

    -------------------------------------------------------------------------
                     Mineral Reserves, $9.10 NSR cut-off
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                                                                  Equivalent
                                             Contained Metal        Ounces
    -------------------------------------------------------------------------
                                                                  Eq.
                                        Silver   Lead     Zinc  Silver
                                         Mill-   Mill-    Mill-  Mill-   Eq.
                      Silver Lead  Zinc   ion     ion      ion    ion  Silver
    Category  Ktonnes  Gm/t    %     %    Ozs     Lbs      Lbs    Ozs   Gm/t
    -------------------------------------------------------------------------
    Proven     27,957  70.2  1.08  0.59   63.1    665.7    363.6  115.0 127.9
    Probable  111,666  54.3  0.90  0.43  194.9  2,215.6  1,058.6  360.3 100.4
    --------  -------  ----  ----  ----  -----  -------  -------  ----- -----
    Proven +
     Probable 139,623  57.5  0.94  0.46  258.0  2,881.3  1,422.2  475.3 105.9
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
         Mineral Resources in Addition to Reserves, $7.85 NSR cut-off
    -------------------------------------------------------------------------
                                                                  Equivalent
                                             Contained Metal        Ounces
    -------------------------------------------------------------------------
                                                                  Eq.
                                        Silver   Lead     Zinc  Silver
                                         Mill-   Mill-    Mill-  Mill-   Eq.
                      Silver Lead  Zinc   ion     ion      ion    ion  Silver
    Category  Ktonnes  Gm/t    %     %    Ozs     Lbs      Lbs    Ozs   Gm/t
    -------------------------------------------------------------------------
    Measured   10,791  16.7  0.43  0.45    5.8    102.3    107.1   16.2  46.8
    Indicated  99,626  20.6  0.45  0.39   66.0    988.4    856.6  158.2  49.4
    ---------  ------  ----  ----  ----   ----    -----    -----  -----  ----
    Measured +
     Indi-
     cated    110,417  20.2  0.45  0.40   71.8  1,090.7    963.7  174.4  49.1
    -------------------------------------------------------------------------
    Inferred   34,215  32.4  0.54  0.34   35.6    407.3    256.5   69.0  62.7
    -------------------------------------------------------------------------
    Note: See regulatory notes for calculation methods used for the reserve
    and resource and the Silver equivalency calculation.

The PFS is based upon an updated resource estimation and mine sequencing performed in August 2009 by IMC based upon 93,577 meters of drilling and sampling in 544 diamond drill holes and trenches completed through August 2009. The Company employs a Net Smelter Return (NSR) method to determine the break between ore and waste, with the cutoff NSR being $9.10 per tonne. Measured and Indicated Resources contained within the pre-feasibility study design pit were used to determine final pit limits and thus converted respectively into Proven and Probable Reserves. Importantly, 71% of the previously reported ounces of silver in resources were converted to reserves in this study. The additional resource material is mostly measured and indicated resource that occurs outside of the pre-feasibility study pit but which meets the CIM definition of mineral resource.

Metallurgical testing – The Company has completed metallurgical optimization tests on two master composites in order to define recoveries for the purposes of the PFS reserve calculation. The composites were designed using a blend of the Mixed Sulfide and the Transitional ores which constitute 82% and 18% of the ore deposit, respectively. The composites therefore approximate the expected life of mine concentrator feed material (see also “Mining and Milling”). The master composite test work establishes that when the two materials are blended in accordance with the mine sequence that the recoveries and resulting concentrate grades are as outlined in the table below. Additionally the Company has completed a re-logging of all drill core to identify the different metallurgical material types. The re-logging data was then utilized to define each block in the resource model with a metallurgical rock type and assigning every block a specific recovery and concentrate grade for the purposes of determining its NSR value and reserve classification. The specific grade and recovery parameters used for the flotation ores, the life-of-mine overall recoveries and concentrate grades are tabulated below.

                Bear Creek Mining, Corani Project Silver Zone
     Average Recoveries and Concentrate Grades of the Life of the Project

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                     Average Recovery And Con Grades LOM
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                                        Lead Con               Zinc Con
    -------------------------------------------------------------------------
                                  Pb    Zn        Ag    Pb     Zn        Ag
    -------------------------------------------------------------------------
    Recovery                    71.7%  8.7%     60.8%  5.0%  71.3%     13.7%
    -------------------------------------------------------------------------
    Average Con Grades          56.8%  3.4%  2.9 kg/t  6.9%  52.3%  1.3 kg/t
    -------------------------------------------------------------------------

                             MINING AND MILLING

Mining will be performed using conventional open pit methods using 90t trucks and 12m(3) wheel loaders mining on 8 meter high benches. The mine requires minimal pre-production waste stripping of 10.8 million tonnes.

Processing of the ore will be by conventional flotation recovery methods. The ore will be crushed close to the mine and the material conveyed to the processing plant where it will be ground to 80% passing 106 microns in a SAG/Ball mill circuit. The material will then be floated with the rougher concentrates being reground to 80% passing 35 microns prior to cleaning to produce high-value separate lead-silver and zinc concentrates. Concentrates will be trucked to the Port of Maturani for ocean shipment to smelters.

                                CAPITAL COSTS

The project capital cost estimate has been prepared by three independent engineering companies. The mining costs were prepared by Independent Mining Consultants of Tucson, Arizona, the Process and part of the infrastructure capital cost has been prepared by Samuel Engineering of Denver, Colorado and the Tailings and remaining infrastructure costs have been prepared by Vector Peru. The initial startup capital is estimated to be $339 million and the total life of mine capital cost is estimated to be $693 million. The capital costs include detailed long-term plans for tailing dam expansions as well ongoing capital and mine closure.

                               OPERATING COSTS

Mining costs were prepared on a year by year basis with costs varying mostly due to changing haulage distances. The life-of-mine average mining costs will be $1.50 per tonne of the total material moved. The process costs are estimated to be $7.30 per tonne of process ore and the G A is estimated to be $1.20 per process tonne or $6.3 million per year.

                               INFRASTRUCTURE

The project has favorable infrastructure. Access will be via a new 63 km road to be built over flat topography resulting in low construction costs. The new road will connect to the Interoceanic Highway; a two-lane, paved highway connecting to the port of Matarani. The mine is 30 km from a new high-voltage power line with abundant capacity to meet the project needs. The project has an excellent site for tailings storage resulting in a very low capital and operating cost as the plant will be located immediately adjacent to the tailings pond. The site is also located in the upper part of the Atlantic drainage and as such there are several surface and underground water source alternatives.

                           ENVIRONMENTAL AND SOCIAL

The project has been designed to meet international standards of environmental compliance. The tailing storage facility has been designed to the highest standards of containment and stability. The waste rock storage facilities are designed to capture and manage any flows that may originate from the waste rock. Finally an initial closure plan has been developed that will provide covers for both the tailing storage and waste rock facilities that will result in safe and environmentally compliant closure of the mine. The Company has maintained very good working relationships with the local communities.

                                OPPORTUNITIES

    The study has identified areas of opportunities that will be analyzed in
later engineering studies and test work:

    -   Increase throughput while maintaining much of the same low start-up
        cost infrastructure.
    -   Investigate the use of contract mining to reduce the start-up and
        sustaining capital
    -   As the sensitivity analysis shows, the project is very sensitive to
        metallurgical recoveries. The Company and its consultants believe
        continued metallurgical optimization test work may further improve
        the metal recoveries and concentrate grades.

    The PFS will be filed and available for viewing on SEDAR (www.sedar.com)
within 45 days following the date of this news release.

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

Regulatory footnotes:

All of Bear Creek’s exploration programs and pertinent disclosure of a technical or scientific nature are prepared by or prepared under the direct supervision of Marc Leduc, P. Eng., Senior Vice President of Engineering and Development and the President and CEO, Andrew Swarthout, P.Geo., who serve as the Qualified Persons under the definitions of NI 43-101. The block model estimate, mine design and schedules were prepared by Independent Mining Consultants of Tucson Arizona. John Marek P.E. acted as the independent qualified person as defined by Canada’s National Instrument 43-101. Additionally the methods used in determining and reporting the mineral reserves and resources are consistent with the CIM Best Practices Guidelines. The method used in the resource calculation is equivalent to the method used in the resource calculation shown in our August 23, 2006 Press Release. For this resource estimate we have used metal prices based on a 3-year backward average and a 2-year forward price based on the metal markets in July 2009.

Assumptions used in the mineral reserve and PFS model by IMC are: Silver Price=$13.00/oz; Zinc Price=$0.65/lb; Lead Price=$0.70/lb; Mixed Sulfide Material Silver Recovery=62% to lead con and 16% to the zinc con, Zinc Recovery=75% to zinc con and Lead Recovery=76% to lead con; Transitional Material Silver Recovery= 56% to lead con and 5% to the zinc con, Zinc Recovery= 20% to zinc con and Lead Recovery= 52% to lead con. Average smelter charges against saleable metal: Silver= $0.68 per ounce; Zinc= $0.348 per pound; Lead= $0.286 per pound; Mining Costs per tonne= $1.25; Process cost per tonne= $7.00; G A per processed tonne= $0.85; Pit Slopes= 42 degrees in mineralized tuff and 46 degrees in post-mineralized tuff. The resulting mineral reserve cutoff is $9.10/tonne ore NSR. The mineral reserves are contained within a practical mining plan that utilized the ‘floating-cone” method as an initial guide for design.

The mineral resource portion of the project is contained in a larger pit than the PFS design pit, which was a floating cone using the following input assumptions: Silver Price=$13.85/oz; Zinc Price=$0.693/lb; Lead Price=$0.746lb; Mixed Sulfide Material Silver Recovery=68% to lead con and 17% to the zinc con, all other recoveries remained the same. The Mineral Resource cut-off was $7.85/tonne which represents the internal process cutoff. All metallurgical material types were included in the resource.

All diamond drilling has been performed using HQ diameter core with recoveries averaging greater than 95%. Core is logged and split on site under the supervision of Bear Creek geologists. Sampling is done on two-meter intervals and samples are transported by Company staff to Juliaca, Peru for direct shipping to ALS Chemex, Laboratories in Lima, Peru. ALS Chemex is an ISO 9001:2000-registered laboratory and is preparing for ISO 17025 certification. Silver, lead, and zinc assays utilize a multi-acid digestion with atomic absorption (“ore-grade assay method”). The QC/QA program includes the insertion every 20th sample of known standards prepared by SGS Laboratories, Lima. A section in Bear Creek’s website is dedicated to sampling, assay and quality control procedures.

The PFS was prepared by a team of independent engineering consultants. The mining and block model portion was prepared by Independent Mining Consultants of Tucson Arizona, John Marek, PE acting as QP. The process plant design was prepared by Samuel Engineering, Kathy Altman, PE acting as QP. Metallurgy and Process design criteria developed by Resource Development Inc. Deepak Malhotra, Ph.D acting as QP. And geotechnical, environmental, infrastructure, waste stockpile and tailings designs were prepared by Vector Peru, Scott Elfen, PE acting as the QP. Each of these individuals has read and approves the respective scientific and technical disclosure contained in this news release. Silver Equivalency calculation represents the contained equivalent silver ounces sent to concentrate and is based on the resource metal prices assumptions of $13.00/oz Ag, 0.70/lb Pb and 0.65/lb Zn and recoveries to concentrate of 74.5% for silver and 71.7% for lead and 71.3% for zinc. The calculation does not take into account the net smelter payment terms for the different metals in the two separate concentrates. The resulting equivalency is 1 oz Ag = 19.3 lb Pb and 1 oz Ag = 20.9 lb Zn.

This news release includes certain forward-looking statements or information. All statements other than statements of historical fact included in this release, including, without limitation, statements regarding future plans and objectives of the Company are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company’s plans or expectations include availability of capital and financing, general economic, market or business conditions, regulatory changes, timeliness of government or regulatory approvals, results of exploration and mining activities, risks inherent in the mineral exploration and production industry, and other risks detailed herein and in the PFS and from time to time in the filings made by the Company with securities regulators. The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise except as otherwise required by applicable securities legislation.

SOURCE Bear Creek Mining Corporation


Source: newswire



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