Pre-feasibility for International Enexco’s Contact copper deposit

Despite “drastic changes” in the economy and copper prices, International Enexco‘s (IEC-V) president and chief executive says a prefeasibility study on the company’s Contact copper property in Nevada has laid the groundwork for a “viable” project and “room to improve” with further work.

We plan to begin the recommended drilling program this fall and continue with the permitting and engineering studies that will lead us to production,” Arnold Armstrong said in a statement announcing the study results. Enexco is planning to drill an additional 36,000 feet at Contact.

The prefeasibility study outlined that the Contact copper project in northeast Elko County could produce 21.9 million pounds per year of high-purity cathode copper from heap leaching and solvent extraction-electrowinning over a seven-year period at a cash cost of 97¢ per lb.

Initial capital costs including a contingency of 20% are estimated to be in the $83 million range. If developed, Enexco’s 100%-owned project will have an after-tax net present value at a 10% discount rate of $9.7 million, an internal rate of return of 13.2%, and a payback period of 4.6 years at a copper price of $2.25 per lb.

The prefeasibility study concluded that the project is economically feasible but recommended additional drilling to improve its economics and advance the project to the feasibility level.

The updated mineral resource was estimated using a three dimensional block model and ordinary kriging and used a 0.10% copper cut-off grade.

In the measured and indicated category, Contact contains 89.6 million tons grading 0.27% for 480.7 million pounds of copper and an inferred resource of 50.52 million tons grading 0.30% copper for 304.8 million pounds of copper.

The figures in the measured and indicated category updated a previous report in 2006 and represented a 136% increase in copper. The latest estimate was based on two additional years of drilling in which 106,000 feet of core in 115 holes were added to the project’s data base.

Total proven and probable reserves tally 33.6 million tons of 0.29% copper for 197 million pounds of contained copper.

According to Enexco’s management, analysis has shown that a 50% increase in Contact’s reserves — or 16 million additional measured and indicated tons — would add four years to the project’s lifespan and boost its internal rate of return to 20.6%.

In the study, a seven-year mine plan and production schedule was used based on an open-pit mine producing 4.6 million tons of ore per year at an overall stripping ratio of 2.4:1.

Column tests confirmed the copper, which is primarily in oxide form, is amenable to leaching with sulfuric acid with a net overall recovery of 76% at a minus-1″ crush size.

The study examined alternatives for mining and crushing and concluded that in-pit crushing and conveying offered the best advantages in capital and operating costs in handling ore to the leach pad.

The SX/EW plant would be designed on a capacity of 60 tons per day of cathodes, which are expected to meet specifications for marketing as high purity copper.

Net production from the operation is estimated at 150 million pounds of copper over the seven-year life of mine.

The Contact deposit, also known as the Banner zone, is made up of three principal vein systems that strike east-northeast and dip between 40 degrees and 50 degrees toward the southeast. A large part of the copper mineralization occurs in quartz filled fissure veins.

The Vancouver-based advanced exploration company is also exploring other prospective areas of Nevada, and has a joint venture with Cameco Corp. (CCO-T, CCJ-N) (52.5%), International Enexco (30%) and AREVA (17.5%) to develop the high-grade Mann Lake Uranium project in Saskatchewan’s Athabasca Basin.

At presstime Enexco was trading at 39¢ per share. It has a 52-week trading range of 20¢-86¢ per share with 18.9 million shares outstanding.