El Morro copper-gold project to cost US$2.5 billion

A feasibility study on the El Morro copper-gold project in Mexico put average annual production at 195,000 tonnes of copper and 354,000 oz. gold over the first five years, say joint venture partners Metallica Resources (MR-T, MRB-N) and Xstrata (XSRAF-O, XTA-L) subsidiary Xstrata Copper.

The companies are still sifting through a mountain of information from the study, which is contained in 75 large binders, before they decide what their next course of action will be.

The study recommends that the companies do an environmental impact assessment, detailed infrastructure engineering as well as order long-lead items over 2008.

Capital costs for the project are projected at US$2.5 billion, which includes an allowance for prices to rise 13%, while the total life of mine capital expenditure, including sustaining capital is estimated at US$2.8 billion.

The project’s returns would be positive as long as copper is at or above US$1.92 per lb. and gold doesn’t fall below US$500 per oz.

Operating costs are estimated at US$10.56 per tonne of ore and a mine site cash cost of US74 per lb. copper, after gold credits at a long-term price of US$500 per oz., considered accurate within 15%.

The study was based on having 487 million tonnes of ore grading 0.56% copper and 0.44 gram gold per tonne with a waste to ore ratio of 3.4 to 1. Metallurgical recoveries are estimated at 88% for copper and 69% for gold.


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