Drilling expands La Fortuna (April 08, 2002)

Drilling on Metallica Resources‘ (MR-T) El Morro copper-gold project in Chile, has extended the main La Fortuna deposit to the north and northwest.

Extending the deposit to the north, hole 30 cut 111 metres (from 184 metres below surface) of secondary mineralization grading 0.8% copper and 0.4 gram gold per tonne, including 65 metres running 1.05% copper and 0.34 gram gold. Lower in the hole, 445 metres (from 294 m) of secondary mineralization runs 0.35% copper and 0.36 gram gold.

Hole 38, about 200 metres northeast of hole 30, returned 44 metres (from 192 m) of secondary mineralization grading 1.5% copper and 0.47 gram gold. Below that, 55 metres of primary mineralization runs 0.2% copper and 0.21 gram gold.

Hole RCF-19, a reverse circulation (RC) hole about 500 metres north of La Fortuna’s defined resource area, was highlighted by a 58-metre section of secondary mineralization grading 0.32% copper and 0.02 grams gold below 226 metres of overburden.

In the Northwest extension area, about 700 meters northwest of the main La Fortuna resource area, drilling has indicated a secondary copper zone averaging about 45 metres in thickness. Four holes returned copper grades ranging from 0.05 to 0.63% copper and gold grades between 0.05 and 0.21 gram from a zone of secondary mineralization. The holes also cut a lower zone of primary mineralization, which returned between 0.04 and 0.22% copper and 0.04 and 0.09 gram gold.

Assay results are pending for additional drilling aimed at better defining the mineralization.

Last September, Noranda (NRD-T) pegged La Fortuna’s inferred resource at 410 million tonnes grading 0.61% copper and 0.56 gram gold per tonne (5.5 billion lbs. contained copper and 7.4 million oz. contained gold).

The resource, based on cutoff grade of 0.4% copper, consists mostly of primary sulphides. About 60 million tonnes, running 0.76% copper and 0.27 gram gold, sit in a zone of supergene enrichment formed in the deposit’s core.

According to an independent scoping study, La Fortuna can churn out 4.5 billion lbs. copper and 332,000 oz. gold over 15 years to yield a net present value (NPV) of US$345 million and an internal rate of return (IRR) of 19.6%. At a copper price of US$1.25 per lb. and a gold price of US$325 per oz., the NPV balloons to US$694 million and the IRR to 27.6%. The study employed a 10% discount rate, a US$1-per-lb. copper price and a US$300-per-oz. gold price.

Cash operating costs are pegged at US33 per lb. copper (net of gold credits). Capital costs were put at US$800 million, to be covered solely on an equity basis.

In the El Morro area, RC hole 9, collared on the northeast portion of the projected mineralized area, encountered 50 meters of secondary mineralization grading 0.91% copper and 0.58 gram gold. The underlying primary mineralization returned 170 metres (from 118 m) of 0.45% copper and 0.27 gram gold. A lower 112-metre section runs 0.08% copper and 0.04 gold.

Geologic interpretation of two other holes is pending, though copper grades vary between 0.01% and 0.27% and gold values between 0.02 and 0.07 gram.

Based on drilling to date, the El Morro mineralized area is projected to measure about 400 metres by 1 km. At a cutoff grade of 0.35% copper, the zone is about 130 meters thick and averages 0.5% copper and 0.1 gram gold.

In the El Negro area, two diamond drill holes tested extensions of known mineralization and yielded up to 0.02% copper and 0.01 gram gold over 251 metres (from surface) in hole 18. Four RC holes tested some geophysical anomalies in the area and returned generally less than 0.07% copper and 0.05 gram gold.

Some 1.5 km northwest of the La Fortuna area, at North Camp, two RC holes collared on a coincident geophysical and geological target. Hole 17 was deepened with a core drill and surrendered 184 metres (from 216 m) of primary mineralization running 0.05% copper and 0.15 gram gold.

About 1.5 km south of La Fortuna, at the Rene Martin area, two RC holes on a geophysical target were highlighted by an 18-metre section (from 300 m) running 0.48% copper and 0.02 gold.

A single RC hole on the Cantarito Area, about 500 metres southeast of La Fortuna, cut 394 metres (from surface) grading 0.01% copper and 0.01 gram gold. Cantarito is a high-sulphidation, epithermal gold zone that is related to the La Fortuna system.

Two holes collared on a geophysical target in the Cerro Colorado area, about 2 km south of El Negro, returned up to 0.16% copper and 0.06 gram gold.

Noranda currently has four core drills and one RC drill working at El Morro. The major plans on wrapping up its current drill campaign, which includes 10,000 metres of core drilling and 5,000 meters of RC drilling, by mid-April. The drill program includes a 1,000-metre deep hole in the central part of the La Fortuna deposit aimed at testing the depth of the primary mineralized zone.

Noranda can earn a 70% stake in El Morro by spending $10 million and paying $10 million by Sept. 1, 2005. In addition, Noranda must complete a bankable feasibility study on the project by Sept. 1, 2007.

Investors were unimpressed with the results hammering Metallica’s shares down 29 or nearly 16% to $1.56 on the Toronto Stock Exchange in late-afternoon trading. Earlier in the day, the shares were off nearly 25%.