Northern Peru Copper Gets Positive Prefeasibility for Galeno

Vancouver — A positive prefeasibility study for Northern Peru Copper’s (NOC-T, NPUCF-O) Galeno project in Peru’s Yanacocha district indicates good preliminary economics for an open-pit operation on the copper-gold-molybdenum-silver deposit.

“The prefeasibility study shows Galeno is an economically robust project and one of the best undeveloped copper projects in the world,” said Northern Peru Copper president and CEO Marshall Koval.

The company plans to complete a bankable feasibility study this year, so it can make a construction decision in early 2008.

Initial capital spending of US$975.6 million is estimated for mine construction and infrastructure at the project, expected to produce about 144,000 tonnes (317 million lbs.) of copper-in-concentrate annually over a mine life of over 20 years. The cost estimate includes a US$121.6-million contingency not included in the mid-2006 preliminary economic assessment.

A net present value (NPV) of US$560 million after tax has been assigned in the study using an 8% discount rate. The after-tax internal rate of return (IRR) comes in at 18.2%.

Operating cost estimates show Galeno as a low-cost producer. C-1 cash costs (including at-mine cash operating costs, concentrate transportation and freight costs and all treatment and refining charges) are projected at US51 per lb. of copper (net of byproducts) over the life of mine.

Annual byproduct output at Galeno is estimated at 82,300 oz. gold, 2 million oz. silver and 2,300 tonnes (5 million lbs.) of molybdenum-in-concentrate. Gold production in the first eight years is anticipated to average over 103,000 oz. per year.

Based on probable reserves of 661 million tonnes grading 0.5% copper, 0.12 gram gold per tonne, 0.013% molybdenum and 2.51 grams silver per tonne reviewed in the study, the modelled Galeno open pit would have a very low life-of-mine stripping ratio of 0.28:1. However, if the 55 million tonnes of in-pit inferred resources, classified as waste under National Instrument 43-101 requirements, were upgraded to a reserve classification, the stripping ratio would drop even further to an exceptionally low 0.18:1. Pit modelling and reserve estimates were based on metal prices of US90-per-lb. copper, US$360-per-oz. gold, US$5.85-per-oz. silver and US$5.40-per-lb. molybdenum.

With a higher-grade starter-pit scenario, capital payback is expected in about 3.6 years, shortening to 1.1 years if a US$2-per-lb. copper price is used.

Northern Peru Copper has completed all surface and groundwater, archaeological, socioeconomic, biological, meteorological and re-vegetation studies required for the project. It expects Galeno to generate about 3,600 temporary jobs during a 2.5-year construction period and 657 permanent jobs, and $1.4 billion in taxes, government royalties and employee profit sharing payments.

Mineralization at Galeno is associated with “Andean-style” dacitic intrusives and Lower Cretaceous sedimentary rocks thrust over an Upper Cretaceous sequence.

The deposit is not a “classic” porphyry-type, in that a large portion is hosted in sandstone-quartzite units adjacent to the intrusives. Mineralizing solutions essentially “hit” the sediments and branched out as sills within the unit. Some enrichment, typically consisting of covellite and chalcocite, tends to be associated with the phyllic alteration.

The deposit is located about 16 km east of Newmont Mining’s (NMC-T, NEM-N) 51.35%-owned Minera Yanacocha open-pit complex, where the major is actively developing and exploring new deposits to extend the operating life of South America’s largest gold mine. Its Conga deposit, situated just 5 km from Galeno, hosts several million ounces of gold reserves.

Meanwhile, the company also recently released an initial resource estimate for its Hilorico gold project, located about 1 km from Galeno.

The epithermal deposit hosts an inferred oxide resource of 19.4 million tonnes grading 0.65 gram gold per tonne and 3.3 grams silver (about 407,000 contained ounces gold and 2.1 million contained ounces silver) using a 0.3-gram gold cutoff grade. An additional inferred sulphide resource of 21.3 million tonnes at 0.93 gram gold and 4.8 grams silver (about 641,000 contained ounces gold and 3.3 million contained ounces silver) was estimated using a 0.5-gram gold cutoff.

The company is undertaking metallurgical studies on drill core samples to test both the oxide and sulphide gold mineralization.

Shares of Northern Peru Copper have rallied about 10% since the beginning of the year and recently closed at the $6.50-level, in a 52-week range of $2.50-$7.38.