Andacollo’s sulphides look profitable to Aur (May 15, 2006)

It’s been a long time coming, but a new bankable feasibility study of the underlying copper-sulphide mineralization at Aur Resources’ (AUR-T, AURRF-O) 9-year-old Andacollo copper-gold mine in Chile is showing positive economics, and a production decision could be made within months.

Situated 55 km from the port city of La Serena, in north-central Chile, the current Andacollo open-pit mine exploits oxide reserves, producing about 46 million lbs. (20,884 tonnes) of high-quality cathode copper annually.

The mine is owned by: Aur, its operator and discoverer (63%); Minera del Pacifico (27%); and the Chilean state agency Empresa Nacional de Minera (ENAMI) (10%).

The underlying sulphide reserves total 422 million tonnes grading a mere 0.38% copper and 0.13 gram gold per tonne, using a cutoff grade of 0.2% copper. From that, Aur would mine an average of 68,700 tonnes copper and 57,900 oz. gold per year for 21 years.

An on-site mill and processing plant would produce copper concentrates containing byproduct gold at an annual, average rate of 254,000 tonnes of concentrate grading 27% copper and 6 grams gold. This concentrate would be hauled by truck almost 60 km to the Chilean port of Coquimbo for shipping to smelters.

The after-tax internal rate of return is estimated to exceed 15% on US$336 million of preproduction capital, with a capital payback of 5.1 years.

This US$336-million price tag includes US$51 million for the mine, US$194 million for the processing plant, US$30 million for the tailings facility, US$61 million for other infrastructure, and US$29 million for contingencies.

The average cash cost per lb. copper sold, net of gold credits at US$400 per oz., is expected to be US78 for the first 10 years and US86 over 21 years.

The study uses a copper price of US$1.20 per lb. and a gold price of US$400 per oz., though today’s prices well exceed US$3 per lb. and US$600 per oz., respectively.

Production from the sulphides could begin in late 2009, and Aur says its board could make a positive production decision before August 2006.

Last October, Aur added some 12.5 million tonnes of low-grade oxide ore to the resource base at Andacollo by adopting dump-leaching plans to augment existing heap-leach mining methods.

Shares in Aur Resources trade in a 52-week range of $18.75 to $6.18 per share. At presstime, shares were trading at around $18.35 apiece.