Major program under way at Magistral

Vancouver — Having completed an internal scoping study on Inca Pacific Resources‘ (IP-V) Magistral porphyry-skarn property, Anaconda Peru has launched a US$3-million exploration program on the promising copper project in northern Peru. Anaconda is a wholly owned subsidiary of London-based Antofagasta Minerals (ANFGF-O).

This year’s activities will include 14,000 metres of drilling with four diamond rigs, as well as metallurgical, engineering and environmental studies. The aim of the program is to bring the project to the prefeasibility stage. Initially, Anaconda will attempt to outline the high-grade core of the mineralization.

Through Anaconda, Antofagasta can earn a 51% interest by spending US$2.95 million this year. This would include the cost of 14,000 metres of diamond drilling. Antofagasta can then increase its ownership to 65% by bringing the property to the feasibility stage within two years.

The recently completed scoping study defined a drill-inferred mining resource of 130 million tonnes grading 0.81% copper and 0.06% molybdenum.

The preliminary study indicates the potential for an open-pit operation producing 25,000 tonnes per day over a 16-year mine life. The stripping ratio comes in at a moderate 2.6-to-1, with operating costs hitting US54 per lb. copper. Using a 10% discount rate, the net present value of the project (before taxes) is US$130 million.

The company has outlined a saddle-shaped body of mineralization that measures 1.2 km long by 125 metres wide. The mineralization was drill-tested with 27 holes (totaling 8,500 metres) and was defined to 350 metres below the surface. It remains open at depth.

Anaconda determined that the key to the project’s success lies in: keeping the capital costs at less than US$280 million; lowering the operating costs to less than US50 per lb. copper; and upgrading the geological resource (190 million tonnes grading 0.83% copper and 0.06% molybdenum) to the drill-indicated category.

Structural and stratigraphic mapping and analysis of drill core and skarn outcrops at Magistral indicate similarities with other large copper skarns in Peru, particularly Antamina, 160 km to the southeast, which has proven reserves of 313 million tonnes averaging 1.3% copper, 1.06% zinc, 0.03% molybdenum and 14.13 grams silver per tonne.

In December 1998, the government of Peru auctioned Magistral. Inca Pacific won by agreeing to spend US$2.1 million and pay US$750,000 by January 2002. Once vested, Inca Pacific will have seven years to complete a feasibility study and bring the deposit on-stream. The government will retain a net profits royalty. This is estimated to equate to a 0.5-3% net smelter return royalty, depending on metal prices.