Sherwood aims to fast-track Minto

Vancouver – Armed with a newly released positive feasibility study, Sherwood Copper (SWC-V) plans to fast-track construction of an open-pit copper-gold mine at its wholly owned Minto project in Canada’s Yukon Territory.

Development is already under way at the site, where more than one million tonnes of pre-strip was completed by the end of June. The camp expansion is also complete at minimal cost, reflecting the $10 million spent by a previous operator on site development in the 1990s.

The independent feasibility study prepared by Hatch and other technical consultants envisions average annual production of 40.7 million lbs. of copper, 17,150 oz. gold and 250,000 oz. silver during the first six years of operation, starting in mid-2007, or earlier if the accelerated construction and development program is achieved. This production rate is based on exploiting existing proven and probable reserves of 8.85 million tonnes averaging 1.68% copper, 0.6 gram gold and 6.9 grams silver per tonne within the first six years.

Head grades would be highest in the first year, at 3.3% copper and 0.94 gram gold, and would average 2.4% copper and 0.88 gram gold over the initial six-year production run. The mine would continue to process stockpiled material grading lower than 1% copper for another five years, which would boost life-of-mine production to more than 300 million lbs. copper, 122,000 oz. gold and 1.8 million oz. silver in concentrates.

Capital costs are estimated at $86.7 million, plus contingency and owner’s costs. Debt facilities have been arranged for capital costs and the company is evaluating offers from off-take companies for another US$20 million of working capital.

Cash costs are projected to average US$0.60 per lb. copper, net of by-product credits, over the first six years, and US$0.73 per lb. over the life of the proposed mine life. The rate of return is estimated at 34.6%, pre-tax, assuming 100% equity financing, giving a pre-tax net present value of $119.1 million at a 7.5% discount rate, or $144.6 million at a 5% discount rate, assuming 100% equity financing.

To ensure a robust return, Sherwood plans to institute a price protection program that would cover 75% of the first four years of planned payable copper production, and 75% of the first six years of payable gold and silver protection. The company sees room for “significant retained upside” through uncommitted reserves, short-term reserve expansion opportunities, exploration upside and potential purchase of calls. Such measures could increase the internal rate of return to 60.6%, while reducing the payback period to 1.5 years.

The company is also looking to improve overall economics through an optimization process focused on capital cost reductions and various other measures, such as converting to grid electric power from diesel, seeking a more cost-efficient method of tailings disposal, and process improvements related to an expansion of the mill by more than 50% during the first year of operation.