International Enexco (TSXV: IEC) is taking a measured approach to building its wholly owned Contact copper project in Nevada, with a recent prefeasibility study showing the deposit could be economically mined as a small and relatively cheap open-pit operation. Located in Nevada’s mining-friendly Elko County, Contact could cost US$189 million to build, with another US$331 million in total sustaining costs.
Production is anticipated at 49.2 million lb. copper per year over 9.4 years. Total operating costs are pegged at US$1.73 per lb. copper for heap leaching and a solvent-extraction and electrowinning plant.
Ore production would begin at a rate of 30,000 tons per day, before ramping up to 57,000 tons per day by the sixth year.
“We were very pleased with the prefeasibility study and it did meet our expectations,” says Spiros Cacos, the company’s corporate development manager.
This is the company’s third prefeasibility study at Contact since 2009, with each study improving the project’s design and economics.
“We had a large change in scope,” explains Enexco CEO Bill Willoughby. “We’ve doubled our plant size and relocated our leach pad. And we did a couple of things design-wise in the mine that required a change, which is why we wanted to do the prefeasibility study instead of going on to the feasibility first.”
Last year the company drilled 43,000 feet (13,000 metres) after acquiring adjoining mining claims from Allied Nevada Gold (TSX: ANV; NYSE-MKT: ANV) in 2011. Those drill results led the junior to update the project’s resource estimate in October 2012, which boosted the study’s economics.
Using a US$3.20 per lb. copper price and an 8% discount rate, Contact has an after -tax net present value of US$107 million and a 25.9% internal rate of return. After-tax payback should occur at 3.4 years.
The Vancouver-based junior intends to advance the Contact copper project, with a feasibility study due in late 2014.
The study would look at opportunities to extend the mine life by defining more copper-oxide resources on the 7,000-acre property.
Enexco has located two copper targets named New York and Copper Ridge that it plans to drill next year, depending on its 2014 budget.
Total production at Contact is projected at 462 million lb. copper cathode from reserves of 141 million tons grading 0.22% copper for 612 million lb. copper, using a 0.07% copper cut-off grade. Miners could extract the reserves from the constrained pit at an overall waste-to-ore stripping ratio of 2.3 to 1, Enexco says. Copper recoveries are estimated at 76%.
The Contact project hosts 213 million measured and indicated tons grading 0.20% copper for 832 million lb. copper. It has another 13 million inferred tons of 0.20% copper for 52 million lb. in the pit shell.
Contact is the company’s only copper project. It has two uranium projects — Mann Lake and Bachman Lake — in Saskatchewan’s Athabasca basin. Major uranium players Cameco (TSX: CCO; NYSE: CCJ) and AREVA have a 52.5% and 17.5% interest in Mann Lake, with Enexco holding the remaining 30%. Denison Mines (TSX: DML; NYSE-MKT: DNN) has an 80% interest in Bachmann Lake, while Enexco holds the rest.
On Oct. 8, a week after the prefeasibility study was released, shares closed down 5% at 35¢. The company has US$1 million in its treasury.
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