Candente working to both advance and sell Canariaco Norte

Vancouver – Having sharply cut back operations during the downturn, Candente Copper (DNT-T) is coming back to life with a completed prefeasibility study, an updated resource and a new financing.

Back in December 2008 the company released a preliminary economic assessment on its sizable Canariaco Norte copper-gold-silver project in the Peruvian Andes just as metal prices were collapsing.

Joanne Freeze, Candente’s chief executive, was actively looking for a buyer at the time, but said “we will make sure we don’t lose this asset or give it away at a price that doesn’t make sense.”

As buyers became generally scarce, the company’s goal became survival as it cut staff to three full-time Vancouver employees and a very small group in Peru.

“We reduced drastically during the downturn, and we have still kept a lean and mean team,” said Freeze in a recent conference call.

After downsizing, activities in 2009 largely consisted of Candente spinning out its and Canaco Resources‘ (CAN-V) Latin American precious metal properties into Candente Gold (CDG-T) with a $9 million listing, while progress on Canariaco was limited.

2010 saw Candente reviving its Canariaco project, though little was done in-house. Instead, the company completed a $6.2 million financing and contracted Amec Americas to complete a prefeasibility study on the project.

In November Candente was then able to announce a 21% increase in the measured and indicated resource at Canariaco after Amec re-modelled and re-classified the mineral content. The measured and indicated resource, using a 0.3% copper cut-off, now stands at 752.4 million tonnes grading 0.45% copper, 0.07 gram gold per tonne and 1.9 grams silver per tonne for contained volumes of 7.5 billion lbs. copper, 1.7 million oz. gold and 45.2 million oz. silver.  Inferred resources add an addition 157.7 million tonnes grading 0.41% copper, 0.06 gram gold and 1.8 gram silver.

Using the new resource, Amec produced a prefeasibility progress report on Canariaco that outlined an open pit mine with annual production of 262 million lbs. copper, 39,000 oz. gold and 911,000 oz. silver for 22 years. The waste to ore strip ratio was estimated at 0.98 to 1.

The after-tax net present value, using an 8% discount, came in at US$960 million and the after-tax internal rate of return was 17.7%. The study used US$2.25 per lb. copper, US$1,015 per oz. gold and US$15.85 per oz. silver. Total capital costs were estimated at US$1.57 billion with a payback in 3.1 years, helped by higher production of 306 million lbs. of copper per year for the first three years.

Sitting in the Andes in northwest Peru, capital costs could have been higher, but the mine site is reasonably accessible. The processing plant will sit at about 3,000 metres in elevation, while the national power grid is 57 km away and the nearest paved road is 42 km away.  

Sean Waller, Candente’s president, described the project as relatively simple in a recent conference call.

“This project, from a technical standpoint, is fairly straightforward,” said Waller. “It’s a vanilla copper porphyry with the exception that we’re going to build a roaster at site.”

The company is building a roaster to deal with the arsenic in the ore, which is at high enough levels to trigger smelter penalties. Testing on the effectiveness of roasting has so far been positive, said Waller.

With the latest study in, Candente then completed a $26.9 million bought-deal financing and a $3.2 million non-brokered private placement to advance Canariaco further. In the financing, the company issued a total of 14.7 million shares at $2.05 and now has 117.9 million shares outstanding or 133.4 million fully diluted.

The company plans to use the money to initiate a definite feasibility study on Canariaco Norte, including the environmental impact assessment it has been working on since 2007.

Candente also plans to use some funds to explore the potential at the nearby Canariaco Sur and Quebrada Verde prospects.

While the company continues to advance the project, Freeze continues to make it known that Candente is open to offers for Canariaco Norte, at the right price. In late January the project was being valued a US3.1¢ per lb. of in situ copper, while Freeze wants to make a deal of at least US5¢ per lb.

Candente’s share price has ramped up from around 30¢ last August to a brief trading high of $2.63 in January, while more recently closing just under $2.