Atna grabs Cerro Negro option

Junior Atna Resources (ATN-T) has picked up an option to acquire the large Cerro Negro copper-oxide deposit in northern Chile from a Chilean subsidiary of Phelps Dodge (PD-N).

The deal calls for Atna to make escalating payments totalling $750,000 to Phelps over five years. To acquire the property, Atna must pay Chilean state-owned Enami $6 million. To maintain its option, Atna is required to spend $2.5 million on the property during the five years.

Enami will retain a sliding scale net smelter return royalty ranging from nil to 2% on any concentrate production and a sliding scale operating margin royalty ranging from nil to 3.25% on cathode production. The sliding scale is based on the operating margin and number of years after production begins.

Atna has committed to begin commercial production within five years. The period may be extended by three years in return for a series of advance royalty payments totalling $600,000.

The start up of commercial production and annual purchase payments can be pushed back for a time equal to the cumulative period in which the price of copper remains below US73 per lb. for thirty consecutive days.

Atna will act as operator throughout the agreement and is responsible for arranging for project financing through to commercial production.

Cerro Negro is situated 50 km northeast of the port city of Chanaral, in Region III of Chile at an elevation of 1,100 metres. A government maintained gravel road connects the project to a paved highway 15 km to the southwest. Power lines run adjacent to the property and there is a potential water source about 10 km to the east.

The project is part of a 7-km-long belt of tightly clustered iron oxide copper-gold breccia pipes and associated manto deposits. High-grade copper has been mined from the area by artisan miners since the early 1900s and continues today with a few miners producing a small tonnage of oxide ore grading 3% to 5% copper.

Exploration by previous operators, including Phelps Dodge, put the property’s estimated oxide mineral resource at 191 million tonnes grading 0.46% copper, based on a total of 115 drill holes and extensive underground channel sampling.

Atna believes that by focusing exploration on already identified higher grade areas, an oxide resource of more than 40 million tonnes running more than 0.8 % copper could be defined to support a solvent extraction-electrowinning (SX-EW) facility capable of producing 25,000 tonnes of copper cathode annually, with potential to increase as additional reserves are proven up.

Atna’s immediate plans are to collect samples from column leach tests to determine metallurgical performance, followed by infill drilling to verify the continuity of the high-grade mineralization. Atna has budgeted $500,000 for this work. A decision on a feasibility study will follow.

Ultimately, Atna hopes that Cerro Negro might become a SX-EW production centre for other oxide deposits in the area, including its Barreal Seco project about 30 km to the northeast.

Atna acquired Barreal Seco in June 2001 and has since conducted prefeasibility work, including metallurgical tests and more than 2,400 metres of drilling.

Based on 20,000 metres of drilling by Rio Tinto (RTP-N) and Enami, the property is believed to host 17 million tonnes of oxides grading 0.7% copper at a cutoff grade of 0.3% copper, and 54 million tonnes of sulphides averaging 0.65% copper at a 0.4% copper cutoff.

Atna has been considering the possibility of producing at a minimum rate of 10,000 tonnes per year over at least 10 years using solvent extraction-electrowinning. Capital costs are not expected to exceed $25 million, and metallurgical test results are slated for release shortly.