News release: economic study. Stock is moving.
Dan
Metallica completes economic study for La Fortuna area
Metallica Resources Inc MR
Shares issued 27,077,735 Jan 4 close $1.40
Mon 7 Jan 2002 News Release
Also Noranda Inc (NRD)
Mr. Ritch Hall reports
METALLICA RESOURCES REPORTS RESULTS FROM ORDER OF MAGNITUDE S ...
Knight Piesold Consulting has completed an all-equity, order-of-magnitude,
economic study for the La Fortuna area of the El Morro property located in
III Region, Chile. The results of the study show the following after-tax
internal rates of return (IRR) and net present values (NPV), when applying
a discount factor of 10 per cent. Based on 30 per cent of the project,
these NPVs have the potential to equate to approximately $3.65 and $7.30
per share of Metallica when using the currently optimistic metal prices of
$1.00 per pound copper and $300 per ounce gold, and $1.25 per pound copper
and $325 per ounce gold. Noranda is currently earning a 70-per-cent
interest in the property. All dollar amounts are in United States dollars
unless otherwise indicated.
TOTAL PROJECT
Copper Gold NPV @ 10% IRR
($/lb) ($/ounce) ($ millions) (%)
$1.00 $300 $345 19.6
1.25 325 694 27.6
30% OF PROJECT
Copper Gold NPV @ 10% IRR
($/lb) ($/ounce) ($ millions) (%)
$1.00 $300 $104 19.6
1.25 325 208 27.6
The average annual production is estimated to be 298 million pounds of
copper and 332,000 ounces of gold. Over the 15-year life, total production
amounts to 4.5 billion pounds of copper and five million ounces of gold.
The cash operating cost is estimated at 33 cents per pound of copper, net
of byproduct gold credits, and $4.35 per tonne of ore mined.
As previously reported, the El Morro property contains three separate zones
of copper-gold porphyry-style mineralization referred to as El Morro, La
Fortuna and El Negro. Noranda calculated that the La Fortuna zone contains
an inferred mineral resource estimated at 410 million tonnes grading 0.61
per cent copper and 0.56 of a gram per tonne gold at a cutoff grade of 0.4
per cent copper. The next phase of drilling, scheduled to begin in January,
will test for an expansion of the inferred resource at the La Fortuna area
to the north, northwest and at depth.
The order of magnitude study analyzed a conceptual mining plan, which would
process a total of 375 million tonnes of material with an average grade of
0.6 per cent copper and 0.55 g/t gold at a waste-to-ore ratio of 1.25:1.
The conceptual mining plan uses a smaller tonnage and lower copper and gold
grades than the inferred resource at a cutoff grade of 0.4 per cent copper.
The conceptual plan proposes open-pit mining, conventional milling and
flotation to produce a single concentrate containing both copper and gold
values with the smelting and refining in Chile. The study did not take into
consideration any potential for additional revenue from molybdenum credits.
Capital costs for the 75,000-tonne-per-day project were estimated to be
approximately $800-million. The order of magnitude study prepared by Knight
Piesold Consulting is preliminary in nature and includes inferred mineral
resources at La Fortuna. The inferred mineral resources are considered too
speculative geologically to have the economic considerations applied to
them that would enable them to be categorized as mineral reserves. There is
no certainty that the preliminary assessment will be realized. Further
delineation of the mineralization is needed at La Fortuna to upgrade the
resource from the inferred category to that of an indicated resource.
The independent qualified persons for the required technical report
covering this disclosure are Barbara A. Filas, PE, and Roxana Romero,
mining engineer, both of Knight Piesold Consulting. Fred Lightner, PE,
Metallica's in-house qualified person, assisted with the report.
The El Morro property is subject to a joint venture agreement between
Noranda and Metallica. Under the terms of the agreement, Noranda can earn a
70-per-cent interest in the property by making total exploration and
development expenditures of $10-million over a six-year period beginning
September, 1999, and a payment to Metallica of $10-million in September,
2005. In addition, Noranda is obligated to complete a bankable feasibility
study on the project by September, 2007. After Noranda has earned its
70-per-cent interest, Metallica has a one-time election to have Noranda
provide 70-per-cent of Metallica's 30-per-cent share of the development
costs. Effectively, Noranda will provide 91 per cent of the capital and
Metallica 9 per cent.
Ritch Hall, president and chief executive officer of Metallica, stated
that: "This study helps both Metallica, and the market, better understand
the tremendous economic impact that the El Morro deposit can have on
Metallica and its shareholders. This is a very exciting deposit and we look
forward to the results of this year's drilling program."
WARNING: The company relies upon litigation protection for
"forward-looking" statements. |
