Copper projects bloom in Sonoran desert

One of the boats that has been lifted highest by the rising tide in the base metal markets has been the mining industry of Sonora state, Mexico. Sonora, the birthplace of Mexico’s large copper industry, also benefits from being mining-friendly and from being a place many Canadian juniors are familiar with.

While the large mines like Cananea, owned by Grupo Mexico (GMBXF-O, GMEXICOB-M) are still dominant, newer projects, most on a smaller scale, have been shaping up over the last four years as investor interest returned to the development and exploration side of the industry. That may in turn mean a more diversified, and so possibly more durable, mining industry in the state.

The most advanced of the “new” projects, the Piedras Verdes heap-leach copper mine owned by Frontera Copper (FCC-T, FRCPF-O), started production in October of last year, and to year-end had produced 4,170 tonnes copper cathode. About 9 million tonnes of ore went on the leach pad in the last three months of 2006. Copper production is behind schedule, because the leachate has not carried as much copper as had been expected.

To remedy the low concentrations in solution, Frontera has started placing the ore on the pad in 5-metre layers, half the depth it was using before, and pre-soaking ore with sulphuric acid before placing it. Column tests of the new procedures were encouraging and Frontera expects the leach cycle to shrink to 60 days from the present 120 days, bringing more copper off the pad earlier.

A prospect 1.5 km west of Piedras Verdes, called Cerro Chato, was drilled in the last half of the year, but assay results are not all available. Frontera said in February that the prospect has leachable copper at comparable grades to the main orebody, but that the mineralized zones were not clearly continuous; the company remains hopeful that further assay results may show enough mineralization to put a resource together.

Now at the feasibility stage, the Luz del Cobre project owned by Zaruma Resources (ZMR-T, ZMRAF-O) is expected to be ready to produce in a little over a year, once financing is in place. Luz del Cobre, about 170 km east of Hermosillo, is a relatively small copper deposit, about 958,000 tonnes of oxide material grading 0.3% copper and another 3.4 million tonnes of mixed oxide and sulphide ore grading 1.1% copper in proven and probable reserves.

Small, but it is expected to be profitable: a feasibility study based on production of 6,800 tonnes copper annually showed cash flow of US$19.4 million a year assuming a copper price of US$4,925 per tonne (US$2.235 per lb.). In a cash flow model, it had a net present value of US$39 million at a discount rate of 5%, which fell by only US$9 million at a 10% discount; the internal rate of return was 60%.

Capital cost was estimated at US$24.4 million to build an open-pit mine and a solvent extraction and electrowinning plant. The study estimated a cash operating cost of US$2,030 per tonne (US92 per lb.), which at the assumed copper price, would pay back in just under two years.

Metallurgical tests using conventional leaching and solvent extraction showed a recovery of 89% of the copper in mixed ore and 80% of the copper in oxide ore, although the feasibility study used a more conservative 79% figure.

Zaruma’s environmental impact and risk assessments have the approval of the Federal Secretariat of the Environment and Natural Resources, and local approvals — an agreement with the local land co-operative and a permit for the change of land use — are in place. It also has its water and electrical supplies lined up.

Another exploration target, Trion, about 1 km southwest, is geologically similar to Luz del Cobre; a breccia zone on the contact between a tonalite intrusion and earlier sandstone, with manto-like replacement zones of copper mineralization.

To build the project, Zaruma has a preliminary agreement — at the memorandum-of-understanding stage — with Swiss metal trader Glencore, the parent of Xstrata (XSRAF-O, XTA-L), trading funding for an offtake agreement on the copper, with payments on the financing coming out of project cash flow.

San Javier

Luz del Cobre is not far from the San Javier project of Constellation Copper (CCU-T, CCUDF-O). Geologically, they both appear to be iron oxide-copper-gold deposits, rather than true porphyry coppers.

San Javier is about 1 km long by 500 metres wide, and recent drill holes intersected an average thickness around 96 metres. Copper grades mainly range from 0.2% to 0.6%, though higher-grade enriched areas have been drilled; one drill hole, results of which were released in January, averaged 1.46% copper over 102 metres.

The new result is in the western part of the property, where previous operators had concluded the deposit was cut off.

Constellation also recently drilled two prospects to the northeast of San Javier, La Trinidad and Mesa Grande. At La Trinidad, four holes of nine intersected significant copper mineralization, grading 0.3% to 0.9% copper over drilled widths of 20 to 50 metres; the best result was 0.88% copper over 42 metres.

At Mesa Grande, Constellation drilled seven holes, with three intersecting mineralization. Those intersected drilled widths of 15 to 81 metres, with grades clustering around 0.35% copper.

Virgin Metals (VGM-V, VGMTF-O) has recently posted an initial resource estimate for its Los Verdes copper-molybdenum project. Virgin’s 40-hole drill program showed a 10.5-million-tonne measured and indicated resource with average grades of 0.46% copper, 0.12% molybdenum and 0.09% tungsten. The deposit is about 250 metres long and 200 metres wide at surface, with a thickness of 30 to 130 metres. Through supergene enrichment, there are local zones of fairly high copper grades, around 1% to 2%.

Historical estimates on Los Verdes had shown 7 million tonnes grading 0.86% copper, 0.16% molybdenum and 0.11% tungsten. Virgin management believes previous operators, who were looking for a copper resource, may have left relatively molybdenum-rich areas out of the resource because those zones had low copper grades.

Exploration drilling on Los Verdes has indicated extensions of the deposit to the north, and in a separate faulted-off zone to the east.

Virgin has added a 55-hectare claim adjoining the property from the Mexican subsidiary of Teck Cominco (TCK.B-T, TCK-N). Teck receives just under 1.5 million shares in Virgin, plus US$25,000 and a 2% net smelter return on any production on that claim.

El Pilar

Toronto-based junior Stingray Resources (SRY-V, SGYRF-O) has inked a deal with Xstrata to take over a Sonoran copper project formerly held by Noranda, El Pilar. The deposit is about 45 km northwest of Grupo Mexico’s Cananea mine and hosts an inferred 306 million tonnes grading 0.28% copper. At a cutoff grade of 0.25%, the tonnage falls to 180 million tonnes with the grade rising to 0.37% copper.

Stingray also gets title to seven other exploration projects in Mexico in the deal, wherein it takes over Noranda’s Mexican subsidiary. Xstrata gets US$20 million in two payments, and a 10% interest in Stingray. It also retains a royalty on revenue of 1% to 3%, depending on how large the resource is, and can back in for 50% if more than 5 billion lbs. (2.3 million tonnes) copper is blocked out in a resource.

To finance the deal, Stingray has arranged an equity offering with Canaccord Capital and GMP Securities for $35 to $45 million. Stingray still owes Xstrata US$17.75 million.

The deposit itself is a geological curiosity; the mineralization is in chrysocolla, the copper oxide, hosted in a conglomerate that contains fragments of intrusive rock, porphyry, and silicified replacement or vein material. The current interpretation of its genesis is that a “normal” porphyry copper deposit has been eroded and redeposited as a conglomerate, with later remobilization.

Stingray plans metallurgical testing and infill drilling on the deposit, which is currently drilled off on 200-metre centr
es; Stingray plans to double the drill density in order to calculate an indicated resource. Noranda did some limited metallurgical testing, and Stingray sees the deposit as being amenable to leaching and solvent extraction.

Apart from development-stage projects, a number of juniors are working on projects nearer the grassroots level. West Timmins Mining (wtm-t) holds the Montana de Oro project, where it had been exploring a number of gold-silver showings, but in recent surface prospecting the company discovered a copper showing, which it dubbed BA. A 4-metre surface chip sample on the showing returned grades of 1.64% copper, 6.4 grams silver and 0.08 gram gold per tonne. Another copper showing is known about 8 km to the southeast. Both appear to be disseminations and veins controlled by a regional northwest-striking fault.

Another project in the state is operated by Australian junior Azure Minerals (AZS-A), which is earning a 51% interest in the Potreritos and Pozo de Nacho properties from Venture-listed Geoinformatics Exploration (GXL-V, GXLIF-O).

In central Sonora, two holes on Potreritos, testing soil geochemical and induced-polarization anomalies, encountered copper and silver mineralization in breccia zones. One cut a 24.4-metre length grading 1.21% copper and 11.3 grams silver per tonne, plus two other narrower and lower-grade zones. The other ran 0.15% copper and 1.9 grams silver over 53.3 metres.

At Pozo de Nacho, about 100 km south of Hermosillo, six drill holes intersected molybdenum mineralization in quartz-feldspar porphyry and in the sedimentary country rocks it intrudes. The holes cut mineralization ranging from 20 to 200 metres in drilled width, with molybdenum grades mainly in the 0.05% to 0.2% range. Some holes also kicked for copper, silver, or tungsten.

A buried chargeable zone is known at depth, but the holes did not test that area.