Boleo economics meet hurdle (October 03, 2005)

A preliminary economic study on the Boleo base metal deposit in the state of Baja California Sur, Mexico, shows the project is attractive enough to justify a final feasibility study.

Owner Baja Mining (BAJ-V) is now preparing for a final feasibility study in mid-2006, starting with a month-long test mining trial to begin in September.

The study was based on a measured and indicated resource estimate of 86 million tonnes grading 1.09% copper, 0.09% cobalt and 0.7% zinc, in three manto bodies on the property. An additional inferred resource of 108 million tonnes, with average grades of 1.18% copper, 0.08% cobalt and 1.07% zinc, is spread over those three mantos plus one more.

The deposit, which is relatively flat-lying, would be mined by either a bord-and-pillar method (a modification of room-and-pillar where the hanging wall is allowed to collapse after mining) or by shortwall mining. Both methods use continuous-mining machines. Some near-surface resources would be mined by open pit.

The mine and a plant producing 50,000 tonnes of copper cathode, 2,000 tonnes cobalt cathode and 23,000 tonnes zinc sulphate annually, would have a capital cost around US$292 million. Operating costs of US$19.90 per tonne of ore translate to a zero production cost for copper after credits based on a cobalt price of US$12 per lb. and a zinc price of US45 per lb. (US$990 per tonne). Copper prices are assumed to average US95 per lb. (US$2,315 per tonne).

Boleo has been in production before, including a long period in production under the French Compagnie de Boleo. Between 1865 and 1972, the mine produced about 19 million tonnes of direct-shipping ore running 4.5% copper. Subsequent attempts to bring it into production have been thwarted by difficult metallurgy.

The Boleo mineralization is 40 to 50% montmorillonite clay, and while the metallic minerals themselves are in easy-to-leach forms, the clay has made actual processing difficult.

Baja hopes to surmount that problem using an oxidizing acid leach in which naturally occurring manganese oxides will react with metallic sulphides to produce base metal and manganese sulphates. A second reduction step precipitates more manganese sulphate.

The clay problem was addressed in metallurgical tests using a high-rate thickening process that produces a clear pregnant leach solution.

Because large quantities of fresh water are unavailable in the Baja desert, the leach process uses seawater and the solvent-extraction process needs a washing step to prevent chloride from being transferred in the organic solvents. The wash process has been used before in Chile at mines with highly saline leach solutions.

The plant produces copper and cobalt by electrowinning, and zinc by precipitating zinc sulphide from a zinc-cobalt solvent extraction solution.

Pilot-plant studies at SGS Lakefield Research in Lakefield, Ont., confirmed that the circuit design would work, with recoveries of 89% for copper, 80% for cobalt and 67% for zinc.

Discounted cash flow analyses of the project put the internal rate of return at 21%. The project showed after-tax net present values of US$308 million at a 6% discount rate, US$226 million at 8%, and US$164 million at 10%, all using the same base assumptions for metal prices used in calculating production costs.