Vancouver – Preliminary economic assessment of Terrane Metals‘ (TRX-V, TRXOF-O) Mt. Milligan copper-gold project northwest of Prince George in central B.C. paints a rosy picture for putting the large deposit into production.
Completed as part of Terranes ongoing $20-million feasibility program, the study projects annual metal output of 97 million lbs. (44,000 tonnes) copper and 273,300 oz. gold annually over the first 6 years of a 14.5-year mine life. Average annual metal production over life-of-mine is 90 million lbs. (40,800 tonnes) copper and 221,530 oz. gold.
With projected revenue coming mostly from the copper, life-of-mine average annual cost of production is estimated at US65 per lb. copper (net of gold credits) or minus-US$190 per oz. gold (net of copper credit).
Initial capital expenditure to build the mine is estimated at $827 million with payback (pre-tax) projected in 3.9 years. A 20.6% pre-tax internal rate of return (IRR) is calculated with an 8%-discounted pre-tax net present value (NPV) of $580 million.
Three-year backward-rolling average metal prices of US$550 per oz. gold and US$2.50 per lb. copper are used in the base case engineering study. Payback, IRR and NPV all improve significantly on 2-year average and current metal price scenarios.
The preliminary economic assessment (PEA) looked at mining a measured and indicated resource of 317.3 million tonnes grading 0.22% copper and 0.43 gram gold per tonne. The modeled open pit has a relatively low 0.74-to-1 strip ratio modeled on an NSR cut-off of US$4.00 per tonne.
A 60,000-tonne-per-day milling circuit would see annual throughput of 21.9 million tonnes of ore. Metal recoveries are looking like 84.9% for copper and 73.8% for gold to produce a concentrate grading 27.3% copper.
Terrane appears pleased with Mt. Milligans potential economic viability under the base case scenario. The engineering firm recommends upgrading of the PEA to a feasibility-level report. With a positive economic viability outcome it also recommends detailed engineering, procurement, construction and commissioning proceed for the deposit. With feasibility completed by early-2008 and necessary permits in hands by mid-2009, commercial operations could come by mid-2011.
The company purchased Mt. Milligan in 2006 from Goldcorp (G-T, GG-N) that in turn acquired it through a strategic agreement with Barrick Gold (ABX-T, ABX-N) in the takeover of Placer Dome.
Terrane issued 240 million series A preferred shares (at a deemed value of 50 apiece) to Goldcorp for the project portfolio comprised of Mt. Milligan, Berg, Maze Lake and Howards Pass properties.
Porphyry copper and gold mineralization at Mt. Milligan is principally hosted in volcanic and volcaniclastic rocks adjacent to intrusive stocks and dykes.
Shares of Terrane notched up 8% on the October 16th PEA news, gaining 4 to 54 apiece. The stock has a 52-week trading range of 32-95.
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