No more broken promises: Constellation Copper

Constellation Copper wants to stop the embarrassment it has felt about production forecasts for its Lisbon Valley mine in Utah.

The feasibility study put full production at 4.5 million lbs. cathode copper per month, but the company has never been able to meet that goal since production started in 2005 due to material handling and leaching problems.

The planning we did based on the info we had led us into promising things we couldnt deliver on, says Patrick James, Constellation president. Weve been embarrassed by that and we just cant do that anymore.

In hindsight, James says Its not unusual that heap leaching doesnt occur as fast in the real world as in the lab.

To improve the situation, Constellation has commissioned a fleet of three 100-ton trucks and so it can haul and stack at least 6 million lbs. of primary crushed ore onto an 800,000-ton capacity section of the leach pad per month instead of passing all ore through a secondary crushing system first.

Its a fine-grain sandstone and it tends to plug the chutes in the system, particularly when its wet, James says. So weve increased the tonnage as much as we can and weve added the truck material.

The company has also started construction of an intermediate leach solution (ILS) system, which wont be ready until mid-spring 2008. Once the ILS system is in place, Constellation will know what could be considered full production at Lisbon Valley.

But a media release on Sept. 18 highlighting the production enhancements didnt help the companys share price that day — it plunged nearly 22% in Toronto, or 18, to 65 on a trading volume of 1.6 million shares.

James says the release doesnt make any future projections and focuses more on the things the company is doing at the moment

Production shortfalls are costing the company. Settling its forward sales contracts has been setting Constellation back an average of US$1.8 million per month at current market prices. The average settlement price has been US$1.90 per lb.

Over the first half of the year, Constellation had delivered about 7 million lbs. of copper out of a total 16 million lbs. in hedging contracts for the entire year.

While the companys capital costs for the improvements have been in line with the estimates, they have put a dent in the cash balance, which was US$15.2 million at the end of August, compared to US$25.8 million two months earlier.

Things have been improving though. About 13 million lbs. of contained copper was placed on the leach pad in July and August the monthly average of 6.5 million lbs. is 100% higher than the average during the first six months of the year.

Now the company is mining higher-grade ore but with a higher percentage of sulfide ore, which is harder to leach.

But James is looking up.

Even though theres more sulphides on a percentage basis theres also more oxides as well.

The ore is 27% sulfide compared to 7% for all of 2006. That percentage is expected to increase for the duration of the mine life, which could end in 2012 or 2013, depending on whether the company can expand reserves.

To save cash, exploration work is being delayed for the time being at Lisbon Valley but continues at the companys Mexico project.