LATIN AMERICA — Low copper prices stall Petaquilla

With total minable reserves of 1.1 billion tonnes averaging 0.5% copper, 0.09 gram gold per tonne and minor molybdenum, the Petaquilla property in eastern Panama is one of the largest undeveloped copper projects in the world. And it will remain undeveloped for at least another year, now that Teck (TEK-T) has decided to defer development because of continuing low copper prices.

The major recently informed Adrian Resources (ADL-T) that it will wait until next year to decide whether to exercise its right to earn a stake in the project by developing the mine. Adrian holds a 52% interest in the project, while Inmet Mining (IMN-T) has a 48% stake.

Teck based its deferral decision on a review of the final feasibility study, completed by H.A. Simons more than a year ago, which envisioned an annual throughput rate of 120,000 tonnes to produce an average of 419 million lbs. copper, 61,000 oz. gold, 5.8 million lbs. moly and 1.1 million oz. silver.

While the final feasibility study showed that the project had an internal rate of return of 14.2% and a payback period of 4.8 years, the price of copper is now about 50% below the long-term price assumed in the study. The deferral decision also took into account the generally poor outlook for copper prices.

Teck currently has no stake in Petaquilla, but can acquire an effective 26% stake by funding Adrian’s share of placing the project into production. If it decides not to go ahead next year, Adrian can elect to proceed with development, whereupon Teck must either fund 52% of the costs or lose its right to acquire one-half of Adrian’s interest.