VANCOUVER — With 10 drill holes, McEwen Mining (MUX-T, MUX-N) has boosted the copper resource at its Los Azules project in Argentina by 20% compared to the last estimate just eight months ago, and the huge deposit remains open in every direction.
The new resource estimate reduced the deposit’s indicated count slightly compared to a June estimate, leaving indicated resources at 310 million tonnes grading 0.65% copper. Inferred resources, however, jumped 29% to reach 1.3 billion tonnes grading 0.49% copper. Together the indicated and inferred resource tonnes contain 18.4 billion lb. copper.
Los Azules is a porphyry system in western San Juan province, which houses a belt of porphyry copper deposits that straddle the Chilean-Argentine border. Some of the copper deposits in this belt rank among the largest in the world, including Codelco’s El Teniente and Andina mines, Anglo American’s (AAL-L, AAUKY-Q) Los Bronces mine, Antofagasta’s Los Pelambres mine and Xstrata’s (XTA-L) El Pachon project.
Los Azules was already one of the world’s largest undeveloped open-pit copper projects before the latest resource boost, but until last year drills had not tested for mineralization below 650 metres depth. In 2012, McEwen changed that by drilling six deep holes.
The deep drill holes identify a parallel trend west of the Los Azules orebody, where mineralization occurs near-surface and at depth. Hole 1291 intersected 160 metres of 0.61% copper from 72 metres depth, and hit into 329 metres of 0.49% copper from 562 metres downhole.
The depth part is interesting, as most of the 173 holes drilled at Los Azules have been shallow, and haven’t tested the deposit’s deeper potential. The company will test its potential this year, with a 15,000-metre drill program underway. McEwen says the deep holes completed in 2012 illuminate “many new exploration targets.”
McEwen also plans to complete a new preliminary economic assessment (PEA), which is expected in the third quarter of the year. The new study will consider a larger operation, incorporate new resource tonnes and assess the potential to process low-grade material that was not considered in a heap-leach scenario.
McEwen will also continue with metallurgical studies on producing a copper cathode at Los Azules instead of a concentrate. Cathode production offers two advantages: it eliminates the need for a concentrate pipeline through Chile, and avoids Argentina’s concentrate export tax.
The company is free to forge ahead at Los Azules since settling a lingering lawsuit in November. The dispute dated back to 2009 and involved an option agreement between Xstrata and Minera Andes, which merged with U.S. Gold to form McEwen Mining in early 2012. By the time it reached court late last year Xstrata’s interest had also changed hands, and the dispute occurred between McEwen and TNR Gold (TNR-V).
In the settlement, McEwen gained clear title to the claim in question: the land is not home to any known mineralization, but it would be needed if McEwen advanced Los Azules to development. TNR retained its right to back-in for 25% ownership of certain claims in the northern half of the property, which are home to 62% of the current Los Azules resource. TNR can exercise this right after McEwen delivers a positive feasibility study. To earn its stake, the junior would have to pay two times the expenditures attributable to the back-in percentage, or 50% of the expenses on the claims to that point. TNR also received 1 million shares of McEwen.
McEwen’s share price was little changed on news of the expanded Los Azules resource estimate, gaining 2¢ to close at $3.08. The company has a 52-week share price range of $2.02 to $5.83, with 296 million shares outstanding.
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