Metallica tables La Fortuna study

Metallica Resources (MR-T) has tabled the results of an independent economic study of the La Fortuna area of the El Morro copper-gold prospect in north-central Chile.

The study envisages the annual production of 298 million lbs. of copper and 332,000 oz. of gold over 15 years. In all, the operation would churn out 4.5 billion lbs. of copper and 5 million oz. of gold. Cash operating costs are estimated at US33 per lb. copper, net of gold credits, and US$4.35 per tonne of ore.

A conceptual mining plan calls for the processing of 375 million tonnes of material averaging 0.6% copper and 0.55 grams gold per tonne at a waste to ore ratio of 1.25:1. The plan utilizes a smaller tonnage and lower copper and gold grades than the area’s inferred resource.

In September, Noranda (NRD-T) released an inferred resource of 410 million tonnes grading 0.61% copper and 0.56 gram gold per tonne (5.5 billion lbs. contained copper and 7.4 million oz. contained gold) at La Fortuna. The figure is based on a cutoff grade of 0.4% copper.

Most of La Fortuna’s resource (350 million tonnes) comprises primary sulphides averaging 0.58% copper and 0.6 gram gold. The remainder, 60 million tonnes, sits in a zone of supergene enrichment running 0.76% copper and 0.27 gram gold. La Fortuna covers an area measuring 1,200 metres in length and 900 metres in width. A higher-grade core of mineralization remains open to the north, northwest and at depth.

Material from the open pit would undergo conventional milling and flotation to produce a single concentrate containing both copper and gold. Smelting and refining would take place in Chile.

The study pegs capital costs for the 75,000-tonne-per-day project at about US$800 million. At a gold price of US$300 per oz. and copper price of US$1 per lb., the project’s net present value is estimated at US$345 million. El Morro’s internal rate of return is projected at 19.6%. At even more optimistic metal prices of US$325 per oz. for gold and US$1.25 per lb. for copper, the net present value jumps to US$694 million and the rate of return climbs to US$27.6 million. The study employs a discount rate of 10%.

La Fortuna is one of three zones (La Fortuna, El Morro and El Negro) of copper-gold, porphyry-style mineralization that have been discovered on the property. A fourth, dubbed Cantarito, is a high-sulphidation, epithermal-gold system that is related to La Fortuna.

Noranda can earn a 70% interest in the El Morro property by spending US$10 million on exploration and paying US$10 million to Metallica by September 2005. The major may be required to provide 70% of Metallica’s share of development costs at an interest rate of Noranda’s cost of financing plus 1%. Noranda must also complete a bankable feasibility study on the project by September 2007.

The partners plan a 6,000-metre drilling program aimed at expanding La Fortuna’s inferred resource to the north, northwest and at depth. Drilling will begin this month.