Aura buys copper mine in Mexico

Aura Minerals (ORA-T, ORAUF-O) has spent $70 million in cash and shares for a producing copper mine in Mexico that has the potential to turn out 28,000 tonnes of copper concentrate per year.

The Arroyos Azules copper mine, acquired from Clapham Luxembourg, a holding company for a private Mexican group, is part of the Aranzazu project in Zacateces state.

Although the mine is currently producing only 5,000 tonnes of copper concentrate per year, Aura plans to spend $10- 15 million to ramp up production to full capacity of 28,000 tonnes of concentrate per year. That translates to 700,000 tonnes of ore per year, or about 2,000 tonnes per day.

Aura’s operational output will depend on a year’s worth of drill results, the assays for which haven’t yet been received, says company president and CEO Patrick Downey.

“There’s forty thousand metres of drilling that has been completed that’s not in the market yet,” Down explains. “We have to review that from a point of view of quality control.”

To help pay for the project, Aura raised $60 million in May in a “best efforts” private placement led by Canaccord Capital. More than 44 million shares were issued at $1.65 each. On June 9, Aura shares were trading at $1.75 per share.

Aura got word of the opportunity to buy the Aranzazu project from Zacoro Metals, a private company based in Toronto. Zacoro had a 50% option on the project (then known as El Cobre) until early this year, when it could no longer meet the terms of the agreement.

“We came in at that point and looked at the data and liked what we saw,” Downey says.

Aura will pay Zacoro a finder’s fee of US$5 million in Aura shares for introducing the company to Clapham. Another US$3 million in cash will pay for data and equipment that Zacoro provided at Aranzazu.

The project is also subject to a 1% net smelter return royalty provided the average monthly copper price doesn’t fall below US$2 per lb.

The deal includes all of the mining concessions on a 140-sq.-km parcel of land, a 2,000-tonne-per-day mill and flotation plant, all equipment and a database consisting of 590 drill holes along 2.2 km of strike length.

Downey says the strike length actually extends for 6 km, giving the company plenty of potential exploration ground.

“It’s a small mine at this stage but we see it growing considerably and fairly quickly over the next 18 months to two years,” Downey says.

All current production at Arroyos Azules is from underground, though in the past the deposit was mined via open pit.

Downey says the company will mine up to another 300,000 tonnes of ore from the pit at some point but the focus is on underground mining using long-hole stoping. The method allows the company to backfill tailings underground, a benefit as Aura is dealing with a rugged landscape and space estrictions.

“We see it as more environmentally sound from a practical point of view to return most of the waste back underground,” he says.

As of 2007, the deposit had an indicated resource of 25.7 million tonnes grading 1.02% copper and an inferred resource of 8.8 million tonnes grading 0.81% copper. A cutoff of 0.5% copper was used.

Although the deposit contains both gold and silver mineralization, neither were accounted for in the last resource estimate. Aura says that historical production records show the copper concentrate averaged 10.38 grams gold per tonne and 370.45 grams silver. The company plans to complete a new technical report soon, including an upgraded resource and studying the distribution and recovery of precious metals.

Aura plans to spend $4-6 million on exploration over the next year, following up on the work completed over the last year on a continuous high-grade copper zone that also contains precious metals.

Results from recent drilling include 95 metres grading 1.8% copper, 2.02 grams gold per tonne and 14.9 grams silver, 54 metres grading 1.55% copper, 0.37 gram gold and 15.1 grams silver, as well as a 20.1-metre intersection grading 3.49% copper, 1.08 grams gold and 31.8 grams silver.

The Arroyos Azules deposit is a subvertical skarn deposit hosted in Cretaceous-agelimestones thathave been intruded by a Tertiary-age intrusive complex. Mineralization is comprised of chalcopyrite, bornite, chalcocite, tetrahedrite, tennantite, sphalerite, and molybdenite.

Aura plans to test the potential to recover zinc and molybdenum, which occur in the deposit, but have never been produced commercially.

Aura, a company whose focus has been on exploration in Brazil, is also actively advancing its Serrotje da Laje deposit — part of the Arapiraca copper-gold project in northeastern Brazil. Five drills are in operation and the company has completed 14,000 metres of infill and stepout drilling since the beginning of the year but has not received any results yet due to a backlog at a main lab in the country.

Aura plans to advance the project to feasibility study level by the end of the year.