Location favorable to Minera’s Ivan copper project

Analyst Electa Aust, of S.G. Warburg Securities’ Bunting Warburg in Toronto, recently visited the Ivan project of Minera Rayrock in Chile and reviewed the exploration program planned by the company for its Sierra Valenzuela property.

Compared with the vast majority of properties we have visited in Chile, what struck us initially about the Ivan project of Minera Rayrock (TSE) was its ideal location. Only 35-40 km from the main port of Antofagasta, the Ivan property is readily accessible by a short drive.

As this area of Chile forms part of the Atacama desert, reputed to be the driest place on the face of the earth, the lack of precipitation of any form is ideal for acid leaching of copper ores and also means that road maintenance is minimal. Given the proximity of the town of Antofagasta, skilled labor is plentiful and there is no need to build on-site accommodation for the workforce (often necessary in operations in the high Andes).

The low altitude (about 800 metres) at which the Ivan property is located means that the severe temperatures often experienced in the high Andes are also not an issue at Ivan. Warmer temperatures will facilitate the bacterially assisted leaching process.

The electrical grid system in place to support the large Escondida copper mine is easily accessible. A fresh water supply is being contracted with the local pipeline company which supplies the Antofagasta area.

The ideal location of the property is the reason for the low capital cost (estimated at US$27 million, excluding working capital of US$3 million) of the project. It also enhances the likelihood of a successful startup of this project.

The stated minable reserves on the Ivan property are 4.7 million tonnes grading 2.5% copper. These reserves are contained in three zones: Ivan, Zar and Emperatriz. They combine both close-to-surface oxide ores and deeper sulphide ores. These will be extracted by a combination of open-pit and underground methods.

The current reserves are sufficient to support an annual production rate of 22 million lb. copper for a 10-year period. An audit of the property, however, has revealed the potential to expand this reserve base substantially. The sources of potential reserve expansion include: * depth extension of the Ivan zone (58% of the project’s current reserves are contained in the Ivan zone which remains open at depth)

* the top part of the Ivan zone which was cut off by a major fault, but remains as yet undiscovered

* the sulphide root of the Zar deposit (the Zar zone so far contains only oxide reserves, but the sulphide root has yet to be discovered) * a possible extension to the west of the Zar deposit, which has also been cut off by faulting

* depth extension of the Emperatriz zone (generally this is the least explored of the three zones and specifically little drilling has been done at depth on this zone; what drilling has been done indicates the presence of good sulphide mineralization)

* there is the potential for further deposits in between the Emperatriz and the Ivan/Zar areas, which is a distance of some 7 km (Zar itself had no expression on surface and other below-surface-cover deposits may be in the area).

The additions to reserves from any of these sources could significantly enhance the value of this project.

According to the feasibility study, cash costs during the life of the Ivan project are forecast to average US55 cents per lb. Roughly US6 cents per lb. of these costs relate to the consumption of sulphuric acid. In the feasibility study, the assumed cost per tonne of sulphuric acid is in the range of US$35-40 per tonne.

On the basis of more recent costs, operating costs at the Ivan project could be reduced to US52 cents per lb. (a 7% reduction). Plant capacity could be pushed up an additional 10%, which would have the benefit of reducing unit fixed costs. (If additional reserves can be located, an expansion of 10% or more would become a probability).

Furthermore, production costs for the Ivan project are based on an assumed recovery rate of 80%. Tests still under way indicate that this rate may prove conservative, particularly as the ore will be under leach for over a year. Having achieved 75% recovery rates after 190 days of active leaching, recoveries are still increasing by up to 1% per week. Any increase beyond the 80% recovery rate assumed will significantly enhance the profitability of the Ivan project.

The Sierra Valenzuela property is 40 km from the Ivan district. Geology on this property is similar to that of the Ivan district, with numerous visual expressions of oxide copper mineralization.

To date, five core holes and 16 rotary holes have been drilled on the property. The first core hole yielded an intersect of 76.5 metres, grading 2.81% copper. The second intersected ore-grade material over several intervals, the best being 40.7 metres grading 2.23% copper. The third core hole intersected 56 metres of 1.52% copper and the best intersect of the fourth hole was 55.6 metres grading 1.52% copper. All four of these holes were drilled in an area known as the Rosario zone.

A second zone of mineralization called the Provenir zone was identified in the most recent phase of drilling. A rotary hole intersected ore-grade material in this new zone, with an intersect of 68 metres grading 1.49%. The mineralization encountered in the Rosario and Provenir zones has been oxided. Drilling to date has not yet been deep enough to intersect sulphide material. (At the Ivan deposit, the highest grades were found in the sulphide ores).

During the next two months, the company plans to drill 10 additional core holes and 35 more rotary holes.