Copper crash delays Gibraltar’s Lomas Bayas

Gibraltar Mines (GBM-T) is the first casualty to surface in the wake of the Sumitomo trading scandal.

With the recent collapse in copper prices, Gibraltar is delaying the development of the Lomas Bayas copper oxide project in northern Chile, as it has been unable to secure US$160 million in project

financing.

President William Myckatyn said in a statement, “if it were not for the recent collapse in the copper price, we would have likely been announcing a full development program today.”

The company remains committed to the project, which contains a minable reserve of 284 million tonnes grading 0.36% copper at an overall stripping ratio of 0.4-to-1.

“We will be exploring all avenues available to us to develop Lomas Bayas. The question is not whether we have a mine but, rather, when will it be built,” Myckatyn said.

Total cash requirements for the project are estimated at US$240 million.

Gibraltar has $55 million in cash on hand earmarked for the project.

The proposed 90,000-tonne-per-day, open-pit mine is projected to produce an annual 125 million lb. cathode copper over a 12-year life at an average cash cost of US54.4 cents per lb.

Gibraltar acquired the Lomas Bayas project in October 1994 at a price tag of US$19.3 million. A feasibility study was completed in December 1995 at a cost of US$7.2 million.

Based in Williams Lake, B.C., Gibraltar owns and operates the McLeese Lake open-pit mine, which produces copper in concentrate and cathode form, with molybdenum as a byproduct.

In 1995, when copper prices averaged US$1.33 per lb. the McLeese Lake mine produced 66.9 million lb. copper at a cash operating cost of US89 cents per lb. On revenue of $100 million, the company earned $3.4 million (or 13 cents per share), with a cash flow of $24.6 million.

For the first quarter of 1996, Gibraltar earned $69,000 on revenue of $17.1 million. Production totalled 14.3 million lb. copper at a cash cost of US97 cents per lb. The average London Metal Exchange price for copper during the quarter slipped to US$1.17 per lb.

Proven and probable reserves at McLeese Lake, as of Dec. 31, 1995, stood at 179 million tons grading 0.3% copper and 0.009% molybdenum at an average stripping ratio of 1.2-to-1.