I like how TNR Gold Corp's 100% fully owned subsidiary, Solitario Argentina (SA) is mentioned in MAi's news release. 25% back in right... wonder how that'll work out if Xstrata doesn't end up backing in? After all, the giant's having some problems of their own lately...(Issuing $5.9 billion shares to pay debt)
Minera Andes receives positive PA study for Los Azules
Los Azules worth $496 Million - NPV estimateMr. Art Johnson reports
MINERA ANDES ANNOUNCES RESULTS OF PRELIMINARY ASSESSMENT AT LOS AZULES COPPER DEPOSIT
Minera Andes Inc. has released results of a preliminary assessment (PA) on the Los Azules copper project located in the San Juan province of western-central Argentina. The deposit as currently defined is open in several directions and further drilling will be required to fully define the limits of the mineralization, especially along the strike to the north and at depth. All financial amounts are stated in United States dollars unless otherwise indicated.
The project is an exploration area comprising adjoining properties that straddle a large copper porphyry system and is subject to an option agreement. The properties are owned by Minera Andes through its subsidiary company, Minera Andes S.A., and by Xstrata Copper, one of the commodity business units within Xstrata PLC, through Xstrata Queensland Ltd. and its subsidiary company, MIM Argentina Exploraciones S.A.
Highlights
Highlights of the study are as follows:
- The base case for the project on a pretax basis indicates a net present value (NPV) of $496-million and an internal rate of return (IRR) of 10.8 per cent (using $1.90 per pound copper, 8-per-cent discount rate, $70-per-tonne treatment charge and 7.5-cent-per-pound refining charge);
- Capital payback in 6.4 years;
- Average copper-in-concentrate production estimated at 170,000 tonnes per year for 23.6 years. Annual byproduct production estimated to average 38,000 ounces of gold and 1.26 million ounces of silver;
- C-1 life-of-mine (LOM) cash costs (net of byproduct credits) are estimated to average 85 cents per pound of copper mined;
- The project would generate approximately 550 permanent jobs;
The salient details PA are summarized below:
NPV ($1.90 per pound Cu, 8% discount rate): $496-million;
IRR: 10.8%
Initial capital expenditure: $2,747-million;
LOM average operating costs: $7.59 per tonne ore;
LOM C-1 cash costs (net byproduct credits): 85 cents per pound Cu mined;
Nominal mill capacity: 100,000 tpd;
Annual throughput: 36 million tonnes;
Mine life: 23.6 years;
Life-of-mine strip ratio: 1.50;
LOM average annual copper-in-concentrate production: 170,000 tonnes;
First five years average annual copper-in-concentrate production: 213,000 tonnes.
The PA is preliminary in nature and includes the use of inferred resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Thus, there is no certainty that the results of the PA will be realized. Actual results may vary, perhaps materially.
The PA was finalized by Samuel Engineering, Inc. and Randolph P. Schneider, MAusIMM. The PA was managed by MTB project management professionals (project management, infrastructure, capital and operating costs), and Robert Sim (SIM Geological Inc.) and Bruce Davis (BD Resource Consulting Inc.) developed the resource estimate, Ken Rippere completed pit slope studies, while Bill Rose (WLR Consulting Inc.) developed the mine plan and production schedule:
- C.H. Plenge & Cia (metallurgy);
- Samuel Engineering (process engineering, infrastructure, capital and operating costs, cash flow modelling, and valuation);
- Vector Engineering (tailings, waste rock, environmental management, capital and operating costs, and baseline environmental and socioeconomic studies).
Project economics
The PA contains a cash flow valuation model based upon the geological and engineering work completed to date, and technical and cost inputs developed by Samuel Engineering and MTB. The base case was developed using long-term forecast metal prices of $1.90 per pound for copper, $750 per ounce for gold and $12 per ounce for silver.
NPV OF THE BASE CASE AT VARIOUS DISCOUNT RATES
Discount rate
(real) NPV
0% $4,691-million
5% $1,399-million
8% $496-million
10% $113-million
15% ($428-million)
Resources
The resource block model used in the PA were reported in the technical report titled, Los Azules Copper Project, San Juan Province, Argentina, dated Sept. 26, 2008, and filed under the company's profile on SEDAR in October, 2008. That resource estimate determined inferred mineral resources of 922 million tonnes grading 0.55 per cent copper at a 0.35-per-cent total copper cut-off. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
The resource block model was used to evaluate potential economic pit limits using the floating cone algorithm, and develop a mine plan and production schedule for the PA. The resulting designed ultimate pit was estimated to contain 843 million tonnes of inferred mineral resources grading 0.51 per cent copper above an internal cut-off of 0.22 per cent copper. A total of 1,273 million tonnes of waste rock were also estimated within this pit. A mine production schedule from these estimates indicates 150 million tonnes of preproduction stripping and a mine life of 23.6 years. The average stripping ratio over the life of the mine is projected at about 1.5:1 (tonnes of waste per tonne of ore).
The PA is preliminary in nature and includes the use of inferred resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Thus, there is no certainty that the results of the PA will be realized. Actual results may vary, perhaps materially.
Mining and milling
The project will use conventional mining and milling processes, and will benefit from having a higher-grade copper core.
Production is scheduled to deliver 100,000 tonnes per day (36 million tonnes per year) of sulphide ore to the primary crusher for 23.6 years. The milling and concentrator plant are forecast to produce, on average, 170,000 tonnes per year of copper in concentrate, 38,000 ounces per year of gold and 1.26 million ounces per year of silver. Average LOM metallurgical recoveries have been estimated to be 92.5 per cent for copper, 61 per cent for gold and 66 per cent for silver, producing a copper concentrate grading on average 31.9 per cent copper, 2.2 g/t gold and 74 g/t silver.
Capital costs
The Los Azules capital costs table summarizes the capital cost estimates for the project.
LOS AZULES CAPITAL COSTS
Direct capital costs $1,118-million
Indirect capital costs $486-million
Owner direct and indirect capital costs $602-million
Additional costs $541-million
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Total (base case) $2,747-million
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Upfront working capital $39-million
LOM sustaining capital costs $704-million
Note: The capital cost estimates have been compiled with an accuracy level
of minus 35 per cent to plus 35 per cent.
Operating costs
The average LOM operating cost is estimated to be $7.59 per tonne of ore and the C-1 cash costs (net of byproducts) over the LOM will average 85 cents per pound of copper mined. C-1 cash costs include at-mine cash operating costs, concentrate transportation and freight costs, and all treatment and refining charges.
Infrastructure
The project is in a remote location near the border of Chile in an isolated section of the Argentinean Andes at an elevation ranging from 3,500 metres to 4,500 metres above sea level (masl). Consequently, no infrastructure is present. In addition, there are no nearby towns and/or settlements. The key access issue for the project throughout the year is road closures due to snow and high stream flows in the spring. The snowline is at an approximate elevation of 3,000 masl. Presently, the project is accessible approximately five months out of the year with snow removal along the existing central road and after the snowfall season.
San Juan is a major regional centre serviced by an airport and highways. An existing highway extends from San Juan to a wide valley in which the community of Calingasta is located. Three potential mine access roads have been considered:
- A northern route;
- A central (existing) route;
- A southern route.
Both the central and southern routes were discarded due to their capital and operating costs as the length, terrain and high-altitude crossings would likely make the routes prone to significant snowfalls and require snow removal operations. Therefore, the northern route was selected for the economic valuation of the project.
Given the remote location of the project a man camp facility will be provided on site. It is assumed to contain facilities for 500 to 600 individuals at any given time. The man camp will also contain dining and recreation facilities.
The Calingasta substation is the nearest source of power to the project; however, it is isolated from the provincial network. Power supply to the region is currently satisfied by means of local hydro or thermal generation.
The infrastructure facilities addressed by the capital cost estimate include on-site ancillary facilities and infrastructure (man camp, offices and other buildings), off-site infrastructure (access roads, power lines, concentrate and fresh water pipelines) and tailings impoundment.
Environmental
Preliminary baseline studies completed to date have included initial hydrologic studies of surface water quality, climate and biological studies of the local flora and fauna.
Property agreements
The project is subject to an option agreement dated Nov. 2, 2007. Under the option agreement, MASA has the right to earn a 100-per-cent interest in the MIM properties by spending at least $1.0-million (U.S.) on the MIM properties by November, 2010, maintaining the property in good standing and delivering to Xstrata Copper an independent scoping study that contains an economic evaluation of inferred mineral resources and a technical report prepared in accordance with National Instrument (NI) 43-101 -- Standards of Disclosure for Mineral Properties in respect of the combined MIM properties and MASA properties, and delivering a notice of exercise. If in the opinion of Xstrata Copper, the independent scoping study and technical report show the potential to economically produce 100,000 tonnes (224 million pounds) of contained copper per year for 10 years or more on the combined properties, then MIM will have a right to earn a 51-per-cent interest in the combined property (the back-in right). To satisfy the conditions of the back-in right, Xstrata Copper must assume control and responsibility for the combined property, make a cash payment to Minera Andes of three times MASA's and its affiliates' direct expenditures incurred and paid on the combined properties after Nov. 25, 2005, and complete a bankable feasibility study within five years of its election to exercise the back-in right. In the event that the independent scoping study and technical report do not, in Xstrata Copper's opinion, meet the criterion contemplated above, Xstrata Copper's interest would be limited to a right of first refusal on a sale of the combined property, or any part thereof or interest therein.
Certain of the MIM properties are subject to an underlying option agreement, which is the subject of a dispute between Xstrata Copper, as optionholder, and Solitario Argentina S.A., as the grantor of that option and the holder of a back-in right of up to 25 per cent, exercisable upon the satisfaction of certain conditions, within 36 months after the exercise of the option by Xstrata Copper. The dispute surrounds the validity of the 36-month restriction described above. If Solitario is successful, MIM's interest in substantially all of the MIM properties may be reduced by up to 25 per cent and, upon exercise of the MASA option, MASA's interest in that part of the combined property may be similarly reduced.
A technical report in support of the PA, prepared in accordance with NI 43-101, will be filed on SEDAR within 45 days.
This news release was prepared by, or under the supervision of, Allen Ambrose, president of Minera Andes, a qualified person within the meaning of NI 43-101. For (i) the effective date of the resource estimate contained herein; a description of the key assumptions, parametres and methods used to estimate the mineral resources referred to in this news release; a general discussion of the extent to which the estimate of mineral resources may be materially affected by any unknown environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues, please refer to the October technical report.
We seek Safe Harbor.
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