Amerigo squeezed by tailings flow restrictions

Vancouver – Copper production from Amerigo Resources‘ (ARG-T, ARGOF-O) Minera Valle Central (MVC) operation will be curtailed following notification from Codelco that it is restricting tailing flow downstream from the plant.

Codelco’s El Teniente operating arm cited environmental concerns stemming from both the volume of water in the tailings being discharged at its Caren impoundment reservoir and the structural condition of a bridge forming part of the launder. The restriction on MVC will last for an estimated four months.

As a result, Amerigo anticipates 3rd quarter production will fall about 20% below the 6.57 million lbs. (2,980 tonnes) of copper and 203,548 lbs. of molybdenum output in 2006-Q2.

The launder transports tailings slurry from the El Teniente copper mine in the Andes of eastern Chile to the Caren reservoir, a distance of some 86 km to the west. MVC, located about 36 km west of El Teniente, reprocesses the tailings through a milling circuit to regrind it and then uses a flotation recovery circuit to extract the freshly liberated sulphide copper plus byproduct molybdenum from the material.

Earlier this year, Amerigo was asked by Codelco to temporarily cease processing old tailings from the Colihues impoundment due to concerns with the structural condition of the launder. Located south of and adjacent to MVC, Colihues is a 368-hectare flooded impoundment utilized by Codelco for a decade (from 1977-87) as a tailings repository. It contains over 200 million tonnes of tailings with an estimated average grade of about 0.27% total copper; more than double that of the current fresh tailings.

The company has constructed a separate pipeline system to allow for treatment of the Colihues tails at MVC and its return to the impoundment, mitigating part of its reliance on Codelco’s launder. Amerigo anticipates initially processing about 10,000-tonnes-per-day of Colihues tailings once it has approval from Codelco.

Shares of Amerigo dropped almost 15% on the news to close down 32 at $1.90 apiece with volume of over 670,000 in TSX trading. The stock has a 52-week price range of $1.61-to-$3.18.