Mercator Announces Excellent Returns in Mineral Park Copper-Moly Mine Mill Expansion Pre-Feasibility Study
Tuesday September 5, 7:18 am ET
ca.us.biz.yahoo.com
<< (All currency amounts stated in US$) >>
KINGMAN, AZ, Sept. 5 /CNW/ - September 5, 2006 - Mercator Minerals Ltd. (ML-TSX) today announced positive results from an independent pre-feasibility study for the expansion of its wholly owned Mineral Park copper mine to a 37,000 ton-per-day milling operation producing copper-silver and molybdenum concentrates in parallel with its current SX/EW copper production. The study demonstrates robust economics and is advanced to the point that Mercator has started the process of dismantling the Tucson mill purchased in 2005 in preparation for relocating it to Mineral Park and commencement of expanded operations in early 2008. In the meantime, Mercator's current SX/EW copper production is generating record cash flow.
Highlights
The following sets out highlights of the Pre-feasibility Study, including project economics, reserves and technical details of the project:
- $407.7 million after-tax net present value at an 8% discount rate;
- 77% internal rate of return (IRR), after-tax;
- 1.4 year payback, 33 year mine life at 37,000 tons per day;
- Production averaging 44.4 million pounds of copper, 7.9 million lbs
of molybdenum and 0.5 million ounces of silver over the first
10 years of operation;
- $0.72 per lb cash cost per pound of copper equivalent over the first
ten years and a life-of-mine (LOM) average cost of $0.77 per pound of
copper equivalent;
- Life-of-mine production of 1.1 billion lbs of copper,
257.5 Million lbs of molybdenum, and 13.7 million ounces of silver;
- Proven and probable mill reserves of 437 million tons at a copper
equivalent grade of 0.374%, of which 82% is proven, and an additional
proven leach reserve of 82.4 million tons at an average grade of
0.069% copper;
- Strip ratio of only 0.18 to 1, waste to ore;
- Total capital cost including direct and indirect cost are estimated
to be $128 million, which includes $16.7 million in contingences;
- Average of $62.0 million in operating cash flow per year, after
taxes, over the first 10 years of operations;
- LOM average metal prices used in the economic model: $1.50 per pound
of copper, $10 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
37,000 tons per day;
- Advanced development including disassembly of mill purchased in 2005;
- 50% of mining equipment for expansion already purchased and being
utilized for on going leach operations.
"The Mineral Park expansion has some of the most attractive economics we have seen in any copper 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 mill previously purchased), significant infrastructure already in place (related to current and past operations), an exceptionally low strip ratio of 0.18 to 1 waste to ore, no net smelter royalties, short haulages, excellent mining conditions, and a very profitable SX/EW operation already in operation."
The purchase of a used mill in 2005 will be instrumental in fast tracking the expansion of the Mineral Park Mine. If Mercator had to purchase all new equipment for a plant of this size, completion of the project would be two to three years instead of the 12 to 16 months currently estimated. "We have already started dismantling the mill and are well advanced on detailed engineering to expand the mill throughput from 20,000 to 37,000 tons per day," said Mr. Surratt.
The risks associated with the project development are anticipated to be low due to the long history of mining and milling at Mineral Park by previous operators, which provides the basis for real world performance estimates for the planned facilities. In addition, there is still potential for further expansions, beyond those addressed in the pre-feasibility study if the significant additional resources are converted to reserves. "Once we have the mill up and running, we expect to be conducting additional studies aimed at expanding the operations further," he said.
"With this detailed and very thorough pre-feasibility study in hand, which we believe has all the detail needed to support project financing, we are progressing our already advanced talks with several institutions for project financing," said Mr. Surratt.
Project Summary
The Mineral Park mine is located approximately 100 miles south of Las Vegas, Nevada in Mohave County, Arizona. The mine is located on the western flank of the Cerbat Mountains in the central part of the Wallapai mining district, 12 miles north of Kingman, Arizona. The property encompasses approximately 6,418 acres and is comprised of patented mining claims, unpatented mining claims, patented and unpatented mill site claims and fee lands, collectively know as "Mineral Park". All of the resource and current reserves lie within lands wholly owned by Mercator through its subsidiary Mineral Park Inc.
Mercator acquired the Mineral Park Mine from Equatorial Mining in June 2003. Mercator re-initiated open pit mining operations in May 2004 with a mining contractor and has improved the efficiencies and doubled the capacity and production of the SX-EW plant. In July of 2005, Mercator took over mining operations from the mining contractor. The mine currently operates four-days per week with two-ten hour shifts per day and the plant operates 24 hours per day, 7 days per week. Total production from the mine is currently 45,000 tons per day of ore and waste combined and the SX/EW plant is currently producing approximately 33,000 lbs per day of Grade A cathode copper. The operation has an excellent margin and is currently generating over $2 million per month of operating cash flow.
Study Basis
Eric Olson, MAusIMM, Managing Director of Range Consulting Group and Joseph M. Keane P.E., of KD Engineering are the "Qualified Persons" responsible for the contents of the Technical Report prepared in accordance with National Instrument 43-101. Specifically, Mr. Olson is responsible for the resource and reserve estimation, mining, mining operating costs, mining capital costs and financial sections of the report and Mr. Keane is responsible for the processing, metallurgical, process capital, and process operating costs. Their work entailed a summary and review of existing resource, environmental, permitting, metallurgical and cost data, the determination of capital and operating costs for the mine and processing plant, a determination of the metallurgical recoveries for Cu, Mo, and Ag, the calculation of resources and mineable reserves, the design of an economic open pit, a mine schedule and project economics.
Mineral Reserves and Resources
The mineral reserves and resources have been prepared in accordance with NI 43-101 Standards and CIM Standard definitions.
To date, there are over 1,100 drill holes in the Mineral Park deposit. The Mintec software package was used for all reserve and resource calculation. Copper, molybdenum, and silver grades were projected from composited drill hole assay data into a 3-dimensional matrix of blocks, i.e., the 3-D block model, which was sized appropriately for the anticipated mining method. Kriging, the industry accepted standard approach to open pit resource estimation, was used for the copper and molybdenum grade interpolations, while inverse distance weighting was used for the silver interpolation.
Mineral reserves and resources are reported based on copper equivalent (CuEq) cutoff grades. The CuEq grade is computed using a copper (Cu) price of $1.40 per lb, a molybdenum (Mo) price of $7.50 lb, adjusted for applicable mill recoveries (Rec) for each metal and marketing and transportation costs in accordance with the following formula:
CuEq (equal sign) Cu% + Mo% (x) (((Mo_Price-Cost) (x) Mo_Rec) / ((Cu_Price-Cost) (x) Cu_Rec)), or CuEq (equal sign) Cu% + Mo% (x) (5.980)(1)
--------------------
(1) Subsequent work by KD Engineering indicated that the hypogene
mineralization would have slightly different recoveries for copper
and molybdenum. The resulting MF for the hypogene material is 5.91.
This difference is negligible at this level of detail, and RCG
recommends using a MF for 5.98 for the resource.
Mineral resources at various cut-off grades are detailed in the tables at the end of this news release while the mineral reserves are tabulated below. The mineral reserve estimates use a design cut-off of 0.286% copper-equivalent, and a break even cut-off of 0.241% copper equivalent. These cut-offs were used to separate mill ore, leach ore, low grade stockpile and waste.
Mineral Park Mill Reserves
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Category
Tons Moly Avg. Cu Avg. Avg. Avg. Ag
(000's) Factor Equiv % Cu % Mo% (oz/t)
-------------------------------------------------------------------------
Proven 348,198 5.93 0.39 0.15 0.040 0.08
Probable 89,653 5.92 0.33 0.11 0.040 0.07
Total Proven
& Probable 437,851 5.93 0.38 0.14 0.040 0.08
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-------------------------------------------
Gross Contained Metal
Category Cu Mo Ag
(000's (000's (000's
lbs) lbs) oz)
-------------------------------------------
Proven 741,799 252,549 24,470
Probable 631,197 90,720 10,995
Total Proven
& Probable 1,372,996 343,269 35,355
-------------------------------------------
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 mineralization, 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 to be 100% and dilution is nil
Mineral Park Leach Reserves
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Avg. Cu
Tons Total (000's
Category (000's) Cu % lbs)
-------------------------------------------------------------------------
Proven 82,499 0.07 115,499
Probable - - -
Total Proven & Probable 82,499 0.07 115,499
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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) There are 91,586,000 tons of waste and 437,851,000 tons mill ore in
the pit with an overall stripping ratio of 0.18 to 1.00
5) Cut-off grades used were variable, but based on breakeven cut-off of
0.056% TCu for leach material
6) There is no probable leach ore do to density of drilling in supergene
zone
7) Some figures may not foot due to rounding
Metallurgical Recoveries
Metallurgical test work has been performed at Metcon Labs in Tucson with check work done at Dawson Laboratories in Salt Lake City. Recoveries used in the study are summarized in the table below.
Metallurgical Recoveries
------------------------------------------------------
Ore Type Recovery
------------------------------------------------------
Supergene Copper 80%
Hypogene Copper 82%
Supergene Molybdenum 75%
Hypogene Molybdenum 76%
Silver (All Ores) 42%
Heap Leach Copper 70%
------------------------------------------------------
Notes:
1) Heap leach recoveries from Mercator production records
Capital Cost Estimates
The capital costs have been estimated by KD Engineering. In 2005, Mercator purchased a mill from Asarco that is suitable for use at Mineral Park and allows for the development of the new milling facility at Mineral Park for a capital cost significantly lower than a similar green field development project. The mill capital is therefore confined to the relocation of the mill, for which Mercator has received firm bids from contractors. As a result, the level of certainty on the mill capital costs is believed to be more on the level of a final feasibility estimate.
Mercator will also be incorporating their existing mining fleet, existing SX/EW facility and other assets and infrastructure into the expanded operation, resulting in substantial synergies and capital cost savings as compared to a similar green field development project.
The following table summarizes the preproduction costs. Costs include direct, indirect, owners cost and a 17% contingency.
Pre-Production Capital Costs (US$)
------------------------------------------------------
Area Cost,$
------------------------------------------------------
Mining Equipment 10,431,380
Milling Equipment 108,647,700
Pre-Production Stripping -
Water Development (wells & distribution) 7,500,000
Power Distribution (lines & substations) 1,415,800
Information System Software 250,000
Permitting & Surface Water Retention 350,000
Subtotal 111,215,424
Owner's Cost 625,000
Contingency 16,754,456
Total Capital Cost 128,594,880
------------------------------------------------------
Notes:
1) There is no pre-production stripping as the pit is currently in
production
Operating Cost Estimates
Life of mine operating costs are a combination of current operating and G&A cost, historic milling reagent consumptions modified to today's unit cost, current power and fuel cost, current labor and burden cost, and engineering estimates where actual numbers are not available.
Summary Life-of-Mine Costs
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Area Units Value Source
-------------------------------------------------------------------------
LOM Mining Cost $/ton 0.83 RCG
LOM Supergene milling Cost $/ton 3.59 Keane
LOM Hypogene milling Cost $/ton 3.09 Keane
LOM Leaching Cost $/ton 0.61 ML/RCG
LOM G&A Cost $/ton 0.26 ML/RCG
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These costs yield a cash operating cost of $0.72 per pound of copper equivalent over the first ten years and a life-of-mine average cost of $0.77 per pound of copper equivalent.
Financial Analysis
Based on the information prepared in the pre-feasibility study, a life-of-mine economic model was prepared using the assumptions set out below and resulted in the economic returns summarized in the same table.
Economic Analysis Base Case Highlights
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Highlight
-------------------------------------------------------------------------
Tons Milled Per Day 37,000 tpd
Cut-Off Grade Variable
Average Grade 0.14% Cu
0.038% Mo
0.371% CuEquivalent
0.08 opt Ag
Average Annual Metal Production 33,220,000 lbs Cu
7,800,000 lbs Mo
415,000 ounces Ag
Average Metal Prices $1.50/lb Cu
$10.00/lb Mo
$7.50/oz Ag
LOM Capital Cost $168M
Total Operating Cost $4.72/ton milled
After-Tax IRR 77%
Pay-back (Years) 1.4
After-Tax Net Present Value $408M (at) 8% Discount Rate
$345M (at) 10% Discount Rate
$242M (at) 15% Discount Rate
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The project generates average operating cash flow (after taxes) of $62.0 million per year over the first 10 years of mining.
Sensitivity Analysis
Sensitivity analysis was completed on key variables, including copper price, molybdenum price, silver price, capital cost, and operating cost. The results of this analysis are summarized in the chart in the link below:
files.newswire.ca
Project Opportunities
If Mercator were able to achieve higher metal prices than those assumed in the pre-feasibility study, project economics would be even more robust. For example, at current metal prices, the NPV and IRR more than double and the pay back on investment is reduced to less than 9 months. In addition there remains a large resource that has the potential to become a reserve at higher metal prices and with an expanded mill capacity. Once the mill is operating, a study will commence to determine economics of expanding to approximately 60,000 tons per day.
Development Schedule
Mercator has begun the process of disassembling the mill in Tucson with a view to commencing relocation to Mineral Park in the forth quarter of 2006. Provided project funding is arranged in a timely manner, Mercator anticipates commencing mill operations in the first quarter of 2008 and shipping its first concentrates shortly thereafter.
Project Risks
The expansion of the Mineral Park Mine is subject to a number of risks that could affect the successful completion and/or the financial performance relative to the results set out in the feasibility study. Some of these risks are common to all mining projects, including: drops in metal prices, adverse changes in exchange rates and concentrate treatment costs, and the ability to access construction financing. With respect to development, Mercator has attempted to mitigate possible risks by purchasing the Asarco mill and ordering mining equipment in advance. 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 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 and is available at www.sedar.com and the Company's web site at www.mercatorminerals.com.
Jim Tompkins, P.Eng., the 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. The Company has filed a pre-feasibility study for an expansion of increased copper production plus molybdenum, and silver production. This could be achieved by resuming production of copper and molybdenum concentrates from the substantial resources at Mineral Park using the recently purchased 20-30,000 ton per day process plant, as detailed in a news release dated July 20, 2005.
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.
<<
Mineral Park Mine Mineral Resource Estimates (Including Reserve)
(with CuEq estimated using Cu:Mo ratio of 5.98)
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Measured
Insitu
Cu Equiv Tons Avg Cu Avg Avg Avg Ag
Cutoff (1000's) Equiv% TCu % Mo % (Oz/Ton)
-------------------------------------------------------------------------
0.00 699,328 0.310 0.125 0.031 0.071
0.10 669,792 0.312 0.127 0.031 0.071
0.20 553,099 0.338 0.135 0.034 0.074
0.30 320,188 0.397 0.158 0.040 0.076
0.40 113,040 0.495 0.214 0.047 0.079
0.50 35,860 0.614 0.309 0.051 0.079
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-----------------------------------------------------
Measured
Pounds Pounds Ounces
Cu Equiv Cu Mo Ag
Cutoff (1000's) (1000's) (1000's)
-----------------------------------------------------
0.00 1,748,319 433,583 49,652
0.10 1,701,271 415,271 47,747
0.20 1,493,368 376,107 40,787
0.30 1,011,795 256,151 24,200
0.40 483,812 106,258 8,893
0.50 221,617 36,578 2,835
-----------------------------------------------------
-------------------------------------------------------------------------
Indicated
Insitu
Cu Equiv Tons Avg Cu Avg Avg Avg Ag
Cutoff (1000's) Equiv% TCu % Mo % (Oz/Ton)
-------------------------------------------------------------------------
0.00 460,725 0.287 0.102 0.031 0.076
0.10 412,582 0.310 0.107 0.034 0.079
0.20 311,400 0.334 0.107 0.038 0.079
0.30 169,954 0.383 0.108 0.046 0.077
0.40 47,565 0.476 0.141 0.056 0.080
0.50 11,093 0.581 0.192 0.065 0.076
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Indicated
Pounds Pounds Ounces
Cu Equiv Cu Mo Ag
Cutoff (1000's) (1000's) (1000's)
-----------------------------------------------------
0.00 939,880 285,650 35,015
0.10 882,925 280,556 32,661
0.20 666,395 236,664 24,728
0.30 367,101 156,358 13,090
0.40 134,132 53,272 3,807
0.50 42,599 14,421 840
-----------------------------------------------------
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Measured + Indicated
Insitu
Cu Equiv Tons Avg Cu Avg Avg Avg Ag
Cutoff (1000's) Equiv% TCu % Mo % (Oz/Ton)
-------------------------------------------------------------------------
0.00 1,160,053 0.301 0.116 0.031 0.073
0.10 1,082,374 0.310 0.119 0.032 0.074
0.20 864,499 0.340 0.125 0.036 0.076
0.30 490,142 0.392 0.141 0.042 0.076
0.40 160,605 0.485 0.192 0.049 0.079
0.50 46,954 0.605 0.282 0.054 0.078
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Measured + Indicated
Pounds Pounds Ounces
Cu Equiv Cu Mo Ag
Cutoff (1000's) (1000's) (1000's)
-----------------------------------------------------
0.00 2,691,323 719,233 84,684
0.10 2,576,049 692,719 80,407
0.20 2,161,247 622,439 65,514
0.30 1,382,202 411,720 37,290
0.40 616,722 157,393 12,700
0.50 264,819 50,710 3,674
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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 |
