Northern Peru Copper gets positive prefeasibility for Galeno

Vancouver – A positive prefeasibility study for Northern Peru Copper‘s (NOC-T, NPUCF-O) Galeno project in Peru’s Yanacocha District shows good economics for an open pit operation on the copper-gold-molybdenum-silver deposit.

“The prefeasibility study shows Galeno is an economically robust project and one of the best undeveloped copper projects in the world. We will aggressively advance the project with the completion of a bankable full feasibility study during the next year, with a view to making a construction decision in early 2008,” states Northern Peru Copper president and CEO Marshall Koval.

Initial capital expenditures of US$975.6 million are estimated for mine construction and infrastructure at the project expected to produce about 144,000 tonnes (317 million lbs.) of copper-in-concentrate annually over a 20.4-year mine-life. The capex includes a US$121.6-million contingency not included in the mid-2006 preliminary economic assessment.

A net present value (NPV) of US$560 million after tax has been assigned in the study using an 8% discount rate. The after tax internal rate of return (IRR) comes in at 18.2%.

Operating cost estimates show Galeno as a low cost producer. C-1 cash costs (including at-mine cash operating costs, concentrate transportation and freight costs and all treatment and refining charges) are projected at US51 per lb. of copper (net of by-products) over the life-of-mine.

Annual by-product output at Galeno is estimated at 82,300 oz. gold, 2 million oz. silver and 2,300 tonnes (5 million lbs.) of molybdenum-in-concentrate. Gold production in the first eight years is anticipated to average over 103,000 oz. per annum.

Based on probable reserves of 661 million tonnes grading 0.5% copper, 0.12 gram gold per tonne, 0.013% molybdenum and 2.51 grams silver per tonne reviewed in the study, the modeled Galeno open pit would have a very low life-of-mine stripping ratio of 0.28-to-1. However if the 55 million tonnes of in-pit inferred resources, classified as waste under National Instrument 43-101 requirements, was upgraded to a reserve classification the stripping ratio would drop even further to an exceptionally low 0.18-to-1. Pit modeling and reserve estimates were based on metal prices of US90 per lb. copper, US$360 per oz. gold, US$5.85 per oz. silver and US$5.40 per lb. molybdenum.

With a higher-grade starter-pit scenario, capital payback is expected in about 3.6 years; and would shorten to 1.1 years if a US$2.00 per lb. copper price is used.

Northern Peru Copper has completed all surface and groundwater, archaeological, socio-economic, biological, meteorological and re-vegetation studies required for the project. It expects Galeno will generate about 657 permanent jobs and 3,600 jobs during a 2.5 year construction period and $1.4 billion in taxes, government royalties and employee profit sharing payments.

Mineralization at Galeno is associated with “Andean-style” dacitic intrusives and Lower Cretaceous sedimentary rocks thrust over an Upper Cretaceous sequence. The deposit is not a “classic” porphyry-type, in that a large portion is hosted in sandstone-quartzite units adjacent to the intrusives. Mineralizing solutions essentially “hit” the sediments and branched out as sills within the unit. Some enrichment, typically consisting of covellite and chalcocite, tends to be associated with the phyllic alteration.

The deposit sits in close proximity to Newmont Mining‘s (NMC-T, NEM-N) 51.35%-owned Minera Yanacocha open-pit complex, located about 16 km to the west, where the major is actively developing and exploring new deposits to extend the operating life of South America’s largest gold producer. Its Conga deposit, located just 5 km from Galeno, hosts several million oz. of gold reserves.

Hilorico Gold Deposit

Meanwhile, the company also recently released an initial resource estimate for its Hilorico gold project, located about one km from Galeno.

The epithermal deposit hosts an inferred oxide resource of 19.4 million tonnes grading 0.65 gram gold and 3.3 grams silver (about 407,000 contained oz. gold and 2.1 million contained oz. silver) using a 0.3 gram gold cut-off grade. An additional inferred sulphide resource of 21.3 million tonnes at 0.93 gram gold and 4.8 grams silver (about 641,000 contained oz. gold and 3.3 million contained oz. silver) was estimated using a 0.5 gram gold cut-off grade.

The company is undertaking metallurgical studies on drill core samples to test both the oxide and sulphide gold mineralization.

Shares of Northern Peru Copper have rallied about 10% since the year-open and recently closed at the $6.50-level giving a market capitalization of $178 million based on its 27.3 million shares outstanding. The stock posts a 52-week trading range of $2.50-to-$7.38.