Large porphyry copper deposit — Tiomin to acquire Cerro

Montreal-listed Tiomin Resources has an agreement-in-principle to acquire a private Panamanian company and earn a majority interest in the Cerro Colorado copper deposit in Panama’s Chiriqui province.

Tiomin was one of several North American mining groups which had tendered bids to acquire control of Cerro Colorado, one of the world’s largest undeveloped copper deposits.

Tiomin President Oliver Lennox-King said the company’s success in securing rights to the deposit reflects efforts to ensure the proposed mine will benefit the local population. “The government will also recover its original investment, and have an interest in the project,” he said.

Based on a cutoff grade of 0.4% copper, the deposit is estimated to contain 1.4 billion tonnes averaging 0.78% copper, as well as silver and gold values. More than US$79 million has been spent on exploration and development, including drilling, underground bulk sampling and driving an adit. Most of this work has been focused on the primary sulphide mineralization and Tiomin will now concentrate on evaluating the near-surface supergene mineralization. The study will examine a proposal for initial production using leaching and solvent-extraction-electrowinning (SX-EW) processing. The supergene and oxide resource is estimated at 127.8 million tonnes at 0.54% copper, which may be mined over a 12-year period.

Within five years of commercial mining by SX-EW technology, Tiomin will initiate a second-phase feasibility study related to the exploitation of the underlying sulphide reserves using conventional milling and flotation methods. To acquire the majority holding in Cerro Colorado, Tiomin must buy a private Panamanian company (Panacobre) that holds the interest; it can do so by issuing 2.5 million shares and 2.5 million warrants. As well, Tiomin must complete the first-phase feasibility study (for a SX-EW operation) within two years, pay US$10 million to a state-owned corporation and arrange production financing.

Prior to payback, Tiomin will be entitled to 95% of net profits generated from leaching of the supergene ores. Following payback, Tiomin’s interest will drop to 76% and decrease at an annual rate of 1% for the next 25 years. And once commercial production of the sulphide resource is achieved, Tiomin would be required to pay state-owned Codemin $32 million. It would then receive 95% of net profits, decreasing after payback until 51% is reached. The transaction to acquire a majority interest in the project is subject to both regulatory and shareholder approval. Final signing of the contract will be by the Panamanian government.

Cerro Colorado is located on the Continental Divide, about 40 km from the Pacific Coast and 45 km from the Atlantic Ocean. The project is located at an altitude of up to 1,500 metres above sea level, and the terrain is rugged. Access is by a 40-km gravel road which is 2 km north of the paved Interamerican Highway. The nearest port is roughly 70 km from the property.