BUENOS AIRES, ARGENTINA — Argentina’s recent elimination of an export retention tax on copper concentrate exports improves the economics of NGEx Resources’ (TSX: NGQ; US-OTC: NGQRF) Constellation copper-gold-silver project, the company says.
The junior explorer, part of the Lundin Group of Companies, says that under the new tax regime, Constellation’s after-tax net present value rises to US$2.6 billion from US$2.1 billion, and its after-tax internal rate of return increases from 14.5% to 16.6%.
The project — which consists of two deposits, one in Chile and one in Argentina’s San Juan province — would have a central processing facility that would produce 150,000 tonnes copper, 180,000 oz. gold and 1.18 million oz. silver a year over a 48-year mine life.
The company says that if the project becomes a mine, it would start as an open-pit at the Josemaria copper-gold porphyry in Argentina and later move underground as a block-caving operation at the Los Helados copper-gold porphyry deposit in Chile. The two deposits are 10 km apart.
According to a preliminary economic assessment released in January and revised in February, after eliminating the export retention tax, Josemaria would have a 15-year mine life and the block cave at Los Helados would operate for 41 years.
Initial development would target the highest-grade portion of the Josemaria deposit, which is a near-surface zone of supergene enriched mineralization. As the high-grade material at Josemaria depletes, production would transition to the high-grade core of Los Helados.
“We have two good projects and we can combine both, and the numbers are very good,” Alfredo Vitaller, NGEx’s general manager for South America, says in an interview at his office in Buenos Aires. “We think we can have the best of both countries — the best of Argentina and the best of Chile — and it will be a very good project.”
NGEx owns 60% of both deposits. Pan Pacific Copper owns the remaining 40% of Los Helados, and Japan Oil, Gas and Metals National Corp. holds the remaining 40% of Josemaria.
The PEA estimated initial capital expenses of US$3.1 billion, with life-of-mine sustaining capital expenses of US$4.4 billion. Life-of-mine C1 cash costs, net of by-product credits, would come to US$1.05 per lb. payable copper. Metallurgical work has demonstrated a clean, 29% copper concentrate with high precious metal content.
NGEx expects that development costs for the Los Helados block cave would be paid for through operating cash flow from Josemarie’s open pit.
The company describes both deposits as relatively “easy” discoveries. At Josemaria, the first drill hole returned 280 metres of 0.6% copper and 0.51 gram gold per tonne, while at Los Helados, the first hole cut 290 metres of 0.2% copper and 0.23 gram gold per tonne.
In addition to the Constellation project, NGEx has discovered the Filo del Sol deposit, a wholly owned high-sulphidation epithermal copper-gold-silver deposit associated with a large porphyry copper-gold system that straddles both Argentina and Chile. The property is accessible by road from Copiapo in Chile, or from San Juan province in Argentina.
That project’s total inferred resource (combined oxide and sulphide) measures 381 million tonnes grading 0.4% copper; 0.33 gram gold per tonne; 12.2 grams silver per tonne, for contained metal of 3.3 billion lb. copper; 4 million oz. gold; and 149.8 million oz. silver. The resource calculation is based on 30,900 metres of drilling in 114 drill holes.
Like Barrick Gold’s (TSX: ABX; NYSE: ABX) Pascua Lama gold project, it is included within the “Vicuna Additional Protocol” under the Mining Integration and Complementation Treaty between Argentina and Chile.
Vitaller, who has worked as an exploration geologist with the Lundin Group for the last 25 years, describes Argentina’s geological potential as “huge,” and the country as under-explored.
While it shares the same mountain range as Chile, Argentina’s mining sector got off to a slow start.
“One hundred years ago Chile decided to be a mining country and Argentina decided to be an agricultural country,” he says. “We went to cows and wheat, we didn’t have that mining culture. In Chile, everyone is involved in mining. You talk to a taxi driver — anybody — and they all know mining.
“Our main job right now is to try to convince people that mining can coexist with agriculture,” he continues. “Some environmentalists say that it is agriculture or mining. We need to change that belief to agriculture and mining.”
In fact, modern mining only took off in Argentina in the 1990s.
But it was short-lived. A change in government brought more than a decade of populist rule, along with new taxes on metal exports and a range of capital controls and import restrictions that made it difficult for foreign mining companies to operate in the country.
At mining’s peak in the 1990s, Vitaller says there were 120 companies carrying out exploration in the country. Today this number has shrivelled to 12 or 15, he says.
This puts NGEx in a good strategic position, as it has been exploring in the region for a quarter of a century.
Vitaller says that “our group understands Argentina and we strongly believe that in one or two years, it will be in a very good position to develop its mining sector.”