Mercator Reports Enhanced Economics for Mineral Park Expansion Incorporating Recently Purchased Milling Equipment
Monday January 8, 8:32 am ET
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<< 51% IRR, Annual Production of 56 million lbs of Copper & 10 million lbs of Molybdenum (All currency amounts stated in US$) >>
KINGMAN, AZ, Jan. 8 /CNW/ - Mercator Minerals Ltd. (ML-TSX) today filed an updated independent pre feasibility Technical Report for the two stage expansion of its wholly owned Mineral Park copper mine to a 50,000 ton-per-day milling operation (increased from the previously announced 37,000 tpd). Mineral Park will produce copper-silver and molybdenum concentrates in addition to its current SX-EW copper production. The Technical Report demonstrates robust economics; the net present value of the project has increased by $20 million over the net present value disclosed in the Technical Report filed September 5, 2006. The recently announced purchase of larger SAG and ball mills allows Mercator to increase throughput with a production start-up planned for the second quarter of 2008. In the meantime, Mercator's current SX-EW copper production continues to generate impressive cash flows.
Highlights
Highlights of the Technical Report are set out below, with comparisons to the Technical Report previously filed by the Company in September 2006 in brackets:
- Two stage development with Stage 1 production at 25,000 tpd and a
Stage 2 expansion to 50,000 tpd after one year of operations (up from
37,000 tpd);
- $426 million after-tax net present value at an 8% discount rate (up
from $407 million);
- 51% internal rate of return (IRR), after-tax (down from 77% due to
timing of Stage 2);
- 1.8 year pay back, 25 year mine life (versus 1.4 years and 32 years);
- Production averaging 56.4 million pounds of copper, 10.3 million lbs
of molybdenum and 0.6 million ounces of silver per year over the
first 10 years of operation (28% higher than previously estimated);
- Total Stage I capital cost, including direct and indirect costs, are
estimated to be $128 million, including $16.8 million in
contingences;
- Strip ratio of only 0.18 to 1, waste to ore;
- Average of $55 million in operating cash flow per year, after taxes,
over the first 10 years of operations;
- Proven and probable mill reserves of 437 million tons at a copper
equivalent grade of 0.368%, of which 82% is proven, and an additional
proven leach reserve of 82.5 million tons at an average grade of
0.07% copper (no change from previous report - see attached Table);
- Life-of-mine production of 1.1 billion lbs of copper, 257.5 million
lbs of molybdenum and 13.7 million ounces of silver;
- Life-of-mine average metal prices used in the economic model:
$1.53 per pound of copper, $10.16 per pound of molybdenum,
$7.50 per oz of silver;
- Metal prices used in the reserve model were $1.40 per pound of
copper, $7.50 per pound of molybdenum and $7.50 per ounce of silver;
- Detailed engineering well underway for expansion of the mill to
50,000 tons per day, sag mills refurbishment complete in the fourth
quarter of 2007, ball mills delivery scheduled for first quarter 2008
and mill start up second quarter 2008;
- Development advancing rapidly, including recently completed purchase
of the critical SAG and ball mills;
- 50% of mining equipment for Stage 2 expansion of milling operations
already purchased and being utilized for on-going leach operations.
"The Mineral Park expansion project has some of the most attractive economics we have seen in any copper/moly project in recent years," said Mike Surratt, President & CEO of Mercator Minerals Ltd. "These robust economics are driven by a number of factors including lower capital (because of the used grinding mills recently purchased), significant infrastructure already in place (related to current and past operations), an exceptionally low waste to ore strip ratio (0.18 to 1), no net smelter royalties, short haulages, excellent mining conditions, and a very profitable SX-EW operation already shipping high quality cathode copper."
The risks associated with the Mineral Park mill development are anticipated to be low due to the current mining activity on the site and the long history of mining and milling at Mineral Park by previous operators, which provide the basis for real world performance estimates for the planned facilities.
Project Opportunities
If Mercator were able to achieve higher metal prices than those assumed in the base case of the Technical Report, project economics would be even more robust. For example, at $2.50 per pound copper and $20 per pound molybdenum, the after tax NPV and IRR at an 8% discount rate more than doubles and the pay back period is reduced to less than 15 months. In addition, there is potential for yet further expansions, beyond those addressed in the updated Technical Report, if Mercator is successful in converting the significant additional resources to reserves.
Development Schedule
Provided project funding is arranged, and permit amendments are obtained in a timely manner, Mercator anticipates commencing mill operations in the second quarter of 2008 and shipping its first concentrates shortly thereafter. In order to maintain this schedule, Mercator is continuing with detailed engineering, procurement of long lead time equipment and other development activities.
Project Risks
The expansion of the Mineral Park Mine is subject to a number of risks, common to all mining projects, that could affect the successful completion and/or the financial performance relative to the results set out in the pre-feasibility study. These risks include, but are not limited to, metal price fluctuation, operating and capital cost variances, permit amendments, and the ability to access construction financing. The Mineral Park Mine is an active mining operation with on going open pit mining and SX-EW leach operations producing cathode copper. In the past, Mineral Park has been operated as a milling operation producing copper and molybdenum concentrates. As a result, Mercator believes that there should be no material concerns with respect to obtaining the permit amendments to allow for a resumption of milling operations and reactivation of the historic tailings storage facility; however, Mercator does not currently have all required approvals.
Technical Report
As required by National Instrument 43-101, Mercator has filed a technical report detailing the results of this pre-feasibility study on SEDAR which is available at www.sedar.com and the Company's web site at www.mercatorminerals.com.
Jim Tompkins, P.Eng., Mercator's Engineering Manager, a Qualified Person as defined by NI43-101, supervised the preparation of and verified the technical information contained in this release.
Mercator Minerals Ltd.
Mercator Minerals is a copper producer that owns and operates the Mineral Park SX-EW Copper Mine in Arizona, with a corporate strategy focused on maximizing the production potential of the Mineral Park copper-molybdenum deposit. This could be achieved by resuming production of copper and molybdenum concentrates from the substantial resources at Mineral Park.
On Behalf of the Board of Directors
MERCATOR MINERALS LTD.
Per: "Michael L. Surratt"
Michael L. Surratt,
President
This press release contains certain forward-looking statements, which include estimates, forecasts, and statements as to management's expectations with respect to, among other things, the size and quality of the Company's mineral reserves and mineral resources, future production, capital and mine production costs, demand and market outlook for commodities, and the financial results of the Company. These forward-looking statements involve numerous assumptions, risks and uncertainties and actual results may vary.
Factors that may cause actual results to vary include, but are not limited to, changes in commodity and power prices, changes in interest and currency exchange rates, inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources), unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications, cost escalation, unavailability of materials and equipment, delays in the receipt of government approvals, industrial disturbances or other job action, and unanticipated events related to health, safety and environmental matters), political risk, social unrest, and changes in general economic conditions or conditions in the financial markets. These risks are described in more detail in the Company's Annual Information Form. The Company does not assume the obligation to revise or update these forward-looking statements after the date of this report or release or to revise them to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.
The Toronto Stock Exchange does not accept responsibility for the
adequacy or accuracy of this press release.
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Mineral Park Mill Mineral Reserves by Destination - Mill
-------------------------------------------------------------------------
Mineral Reserves By Destination - Mill
Moly Avg Cu Avg Avg Avg Ag
Destination Tons Factor Equiv % TCu% Mo% (oz/ton)
-------------------------------------------------------------------------
Proven Mill 348,198,000 5.93 0.380 0.15 0.040 0.079
Probable Mill 89,653,000 5.92 0.323 0.11 0.036 0.085
-------------------------------------------------------------------------
Total
Proven &
Probable 437,851,000 5.93 0.368 0.14 0.039 0.080
-------------------------------------------------------------------------
Waste 91,586,000
Stripping
Ratio 0.18
-------------------------------------------------------------------------
-----------------------------------------------------
Mineral Reserves By Destination - Mill
Gross Contained
Pounds Cu Pounds Mo Ozs Ag
Destination (1000s) (1000s) (1000s)
-----------------------------------------------------
Proven Mill 1,044,594 278,558 27,508
Probable Mill 197,237 64,550 7,621
-----------------------------------------------------
Total
Proven &
Probable 1,241,831 343,109 35,128
-----------------------------------------------------
Waste
Stripping
Ratio
-----------------------------------------------------
Notes:
1) Reserves calculated in accordance with CIM Guidelines
2) Metal Prices used for calculation of reserves were $1.40 Cu,
$7.50 Mo, and $7.50 Ag
3) Metallurgical recoveries are 82% for supergene Cu, 80% for
hypogene Cu, 75% for supergene Mo, 76% for hypogene Mo, and 70% for
leach Cu
4) Cut-off grades used were variable, but based on breakeven cut-offs of
0.283% CuEquiv for supergene & 0.237% CuEquiv for hypogene
mineralization
5) Moly Factor ("MF") (equal sign) [((Mo_Price-FS&R Cost) (x) Mo_Rec) /
((Cu_Price-FS&R Cost) (x) Cu_Rec)]
6) Copper Equivalent ("CuEquiv") (equal sign) Cu% + Mo%(x)[MF]
7) Some figures may not foot due to rounding
8) Mining recovery is estimated at 100% and dilution is nil.
9) The waste:ore ratio for the deposit is 0.18
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For further information
Marc LeBlanc, Corporate Secretary, Tel: (604) 981-9661 or (604) 716-5582, Fax: (604) 960-9661, Email: mleblanc@mercatorminerals.com
Source: Mercator Minerals, Ltd. |
