Northern Peru Copper hopes to lure majors to Galeno

SITE VISIT

Cajamarca, Peru — In the shadows of South America’s largest gold mine, Minera Yanacocha, Northern Peru Copper (NOC-T, NPUCF-O) is aggressively pressing forward on exploration and development of its El Galeno copper-gold-molybdenum project, about 600 km north of Lima, Peru.

Although not a new deposit, Galeno is seeing major size potential added through a second-phase drill campaign of both infill and stepout holes, observed during a recent visit by The Northern Miner. The latest results have included some of the highest-grade and longest copper-mineralized intercepts yet found, in addition to significant values from initial drilling of the nearby Hilorico gold zone.

By increasing the number of holes and drill density, and increasing the tonnage at Galeno to meet the potential development size thresholds of the majors, Northern Peru Copper hopes to capitalize on the booming copper market by optioning or selling off the project. An updated resource calculation is anticipated by mid-2006 with the company hoping to review around 8-10 billion lbs. (3.5-4.5 million tonnes) contained copper and more than 3 million oz. gold.

Some of the latest drilling has been encouraging. Infill hole GND-05-30 returned 400 metres (from surface) grading 0.8% copper, 0.2 gram gold per tonne and 0.015% molybdenum (for a 1% copper equivalent), including the top 106 metres, which averaged 1% copper, 0.23 gram gold and 0.022% molybdenum (1.27% copper equivalent).

Stepout drilling has also cut significant mineralization with hole GND-05-38 intersecting 320 metres (from surface) of 0.69% copper, 0.16 gram gold and 0.012% molybdenum (0.86% copper equivalent). An upper 148-metre section of the hole averaged 0.85% copper, 0.14 gram gold and 0.011% molybdenum (1% copper equivalent).

Having completed 48 holes totalling about 20,000 metres, Northern Peru has demonstrated the strong continuity of the mineralizing system, and has extended the higher-grade copper core zone of the deposit north and southward. The drill program is now testing the eastern and northeastern extension of Galeno, including some blind geophysical anomalies within the area.

In early January, the company announced results from a pair of initial drill holes on the Hilorico gold prospect, confirming a significant epithermal system located just 1 km from Galeno. Hole HR-05-01 returned 201 metres (from 121 metres down-hole depth) of 1 gram gold and 5.6 grams silver per tonne, including 62 metres grading 1.5 grams gold. Mineralization was primarily hosted in brecciated or faulted quartzites and sandstones.

A second hole (HR-05-02), collared over 500 metres from the first, intersected 117.4 metres (from 188 metres) of 0.2 gram gold and 50.7 grams silver plus 1.3% zinc and 0.6% lead. Mineralization occurs as disseminated and both vein-controlled and semi-massive sulphides hosted in faulted siltstones. The top 16 metres of the mineralized sequence consisted of massive sulphides averaging 0.8 gram gold, 113 grams silver, 3.9% zinc and 1.4% lead.

Additional drilling is planned to test the continuity and extent of gold mineralization at Hilorico. Other similar rock assemblages exist in the area and will be surface sampled.

The geology

Copper-gold-molybdenum 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.

With mineralization encountered from surface, Galeno enjoys favourable deposit geometry that will likely bode well for low strip ratios in future orebody modelling. Metallurgical samples, for copper and molybdenum recoveries, have been extracted and testing is under way.

Conscious of the issues that have arisen at the neighbouring Yanacocha mine, community relations are paramount for the company. Northern Peru has started a local employment program where almost 50 jobs have been created around the exploration project; the community will select who will work at the site.

The camp’s medical facility has also become an emergency clinic for the immediate region, with over 1,000 individuals tended to by the camp nurse and medic over the past year.

One of the company’s Peruvian geologists wears a second hat as community relations officer. He works closely with local groups to address issues and concerns in the hopes of countering any potential conflict.

Galeno’s history

Newmont Mining (NMC-T, NEM-N), the main participant in the neighbouring Yanacocha mine complex, conducted the first exploration work on the Galeno property in the early 1990s through a joint venture with its partner, Compaia de Minas Buenaventura (BVN-N). The major conducted limited surface exploration and geophysics work followed by a 4-hole drill program, and then dropped the property in 1997 due to a predominance of copper mineralization over gold.

In 1997, Aussie-based North Limited, now part of Rio Tinto (RTP-N), optioned the project and conducted expanded surface exploration and geophysics, and completed a more extensive drilling effort. Based on its work, North developed an inferred resource at Galeno (classified as historic and predating National Instrument 43-101) of 486 million tonnes grading 0.57% copper and 0.14 gram gold (0.66% copper equivalent), using a 0.4% copper cutoff. The company modelled a potential open-pit scenario initially producing 16 million tonnes of copper-gold ore annually, and then ramping up to 32 million tonnes per year. A 360-km pipeline was envisaged to transport the conventional flotation concentrates to the port of Salaverry. Ultimately, Galeno fell shy of North’s development plans due to its tonnage and grade, as well as metal-price and power-supply concerns.

Northern Peru Copper’s 100% interest in Galeno is being acquired through an agreement initiated by its predecessor company, Lumina Copper, in 2002. The project is being purchased from a private Peruvian company for cash payments of US$2 million, staged over four years. Two additional payments of US$250,000 are due upon completion of a positive feasibility and with a final US$1.3-million payment due one year after the start of commercial production.

With about 24.4 million shares outstanding, Northern Peru Copper has a $73-million market capitalization based on its recent $3.00 trading level.