Prefeasibility For Enexco’s Contact Copper Project

Despite drastic changes in the economy and copper prices, International Enexco’s (IEC-V, IEXCF-O) 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 that has “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 ft. at Contact.

The prefeasibility study showed that the project, in northeast Elko County, could produce 21.9 million lbs. per year of high-purity cathode copper from heap leaching and solvent extraction-electrowinning (SX-EW) over seven years at a cash cost of US97¢ 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 is estimated to 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 US$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 resource was estimated using a three-dimensional block model and ordinary kriging and used a 0.1% copper cutoff grade.

Contact contains 89.6 million measured and indicated tons grading 0.27% for 480.7 million lbs. of copper, plus 50.52 million inferred tons grading 0.3% copper for 304.8 million lbs.

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 ft. of core in 115 holes were added to the database.

Total proven and probable reserves tally 33.6 million tons of 0.29% copper for 197 million contained pounds 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 sulphuric acid with a net overall recovery of 76% at a minus-1-inch 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 to 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 lbs. of copper over a 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 and 50 toward the southeast. A large part of the copper mineralization occurs in quartz-filled fissure veins.

Vancouver-based explorer, International Enexco, is also working in other prospective areas of Nevada, and has a joint 30% interest in a venture with Cameco (CCO-T, CCJ-N) (52.5%) and Areva (ARVCF-O) (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¢ with 18.9 million shares outstanding.