Chariot gets some solid numbers on Marcona

After a long wait, Chariot Resources (CHD-T) has finally released a feasibility study on its Marcona copper project in Peru, and the results are stellar.

Most impressive is the low cash costs the study outlines. With silver credits, Chariot will be able to produce copper for total cash costs of just 88¢, offering it plenty of protection if copper prices remain volatile going forward.

“We are insulated from operating cost fluctuation and sensitive to rise in copper price,” Chariots chief executive Ulli Rath said on a conference call.

Other key metrics from the study are an after tax net present value (NPV) of US$280.7 million along with an after tax internal rate of return (IRR) of 15%. The payback period is estimated at 5 years.

To emphasize the resilience of the project to various cost environments Rath said the study shows that even with copper prices as low as US$1.52 per lb, the project would still have an NPV of zero and an IRR of 8%.

Fuelling those returns is a deposit that with a 0.3% copper cut-off, has indicated resources of 337 million tonnes grading 0.76% copper for 5.7 billion lbs. copper.

Out of that comes a probable mineral reserve of 163 million tonnes grading 0.8% copper.

In the inferred category the company has another 64.6 million tonnes with an average grade of 0.82% copper for 1.1 billion lbs of copper.

Chariot holds 70% of project with its two Korean partners – with which it also has off-take agreements — holding the remaining 30%.

With the economics of the project proven up, Chariot now will turn to devising a plan for how it will pay for it all.

Towards that end, Rath says he will first take a grass roots approach.

“I will meet with shareholders in May and will solicit their input as a first step,” he says.

Rath did say that while the commercial banks are tight on providing credit, governmental institutions are still quite strong and willing to lend.

Importantly for the company, the release of the study gives the market tangible numbers with which to re-value the company.

When combined with the company’s cash in hand, Rath says the project values its fully diluted shares at 86¢ per share — a good chunk of change higher than the 30¢ they were trading for in Toronto on Apr. 23. And that price comes after a long climb up from the 12¢ range they were trading in a little over a month ago.

If funding can be secured and the project pushes ahead, ore would be mined at a 2.46:1 strip ratio and then make its way to one of two processing facilities.

Oxide ore will go through a VAT leaching process while sulphides will be put through a conventional flotation concentrator

VAT leaching will go on for 10 years, processing 110 million lbs of copper per year to produce 1.1 billion lbs of copper, while it is estimated that the concentrator will turn out 1.3 billion lbs of copper and will also be responsible for generating the silver credits.

Combined, the two processing facilities will turn out 245 million lbs of copper per year with 93% recovery rates for copper and 60% for silver.

Building it all will take no small amount of change. The study estimates that all in capital costs will be in the order of US$743.5 million.

All of that cost, however, wouldn’t be born up front. With oxide ore being mined first, the plan would be to build the oxide processing facility first, so initial capital costs for infrastructure, the mining pit and the first processing facility would be US$576 million.