Anaconda exercises Magistral option

Vancouver — Having completed an internal scoping study of Inca Pacific Resources‘ (IP-V) Magistral porphyry-skarn project in northern Peru, Anaconda Peru is continuing its exploration effort.

As part of its option agreement, the company delivered the scoping study and paid US$400,000 to Banco Mineral del Peru. The property has now been assigned to a new Peruvian company, Ancash Cobre, which is held 70% by Inca Pacific and 30% by Anaconda. Anaconda is a wholly owned subsidiary of London-based Antofagasta (ANFGF-O).

Through Anaconda, Antofagasta can earn a 51% interest by spending US$2.95 million this year, including 14,000 metres of diamond drilling. Once this has been completed, the company can increase its ownership to 65% by advancing the property to the feasibility stage within two years.

The scoping study defined a drill-inferred mining resource of 130 million tonnes grading 0.81% copper and 0.06% molybdenum. It indicates the potential for an open-pit operation capable of producing 25,000 tonnes per day over a 16-year mine life. The stripping ratio comes in at a moderate 2.6-to-1, with operating costs hitting US54 per lb. copper. Using a 10% discount rate, the net present value of the project before taxes is US$130 million.

The company has outlined a saddle-shaped body of mineralization measuring 1.2 km long by 125 metres wide. This was drill-tested with 27 holes totalling 8,500 metres and defined to 350 metres below the surface. It remains open at depth.

Anaconda says the success of the project will depend on three factors:

– keeping the capital costs under US$280 million;

– lowering operating costs to less than US50 per lb. copper; and

– upgrading the geological resource (190 million tonnes grading 0.83% copper and 0.06% moly) to the drill-indicated category.

Structural and stratigraphic mapping and analysis of drill core and skarn outcrops at Magistral indicate similarities with other large copper skarns in Peru, particularly Antamina, 160 km to the southeast (proven reserves of 313 million tonnes averaging 1.3% copper, 1.06% zinc, 0.03% molybdenum and 14.13 grams silver per tonne).

In December 1998, the government of Peru auctioned Magistral. Inca Pacific won the bid by agreeing to spend US$2.1 million and pay US$750,000 by Jan. 1, 2002. Once vested, Inca Pacific will have seven years to complete a feasibility study and bring the deposit on-stream. The government will retain a net profits royalty; this is estimated to equate to a 0.5-3% net smelter return royalty, depending on metal prices.