Los Calatos is all about optimisation Tuesday, 7 May 2013
METMINCO'S revised mineral resource and preferred mining scenario at Los Calatos is designed to optimise grade, capital spend and revenue. Metminco has continued to make excellent progress at its Los Calatos flagship project in the prolific copper-molybdenum mining district of Southern Peru.
Its nearest neighbours include substantial open pit mining operations such as Cuajone, Toquepala and Cerro Verde that have been operating for more than 30 years.
The mineralised porphyry system at Los Calatos is similar in many respects to other Andean type porphyry systems found in Chile and Peru, where there is a close association of copper and molybdenum mineralisation with both a porphyry system, as well as a younger diatreme complex.
In October 2012, the company completed a phase 4 drilling program, bringing the total number of metres drilled on the project to 125,393m (with 138 drillholes), which is no mean feat for a junior explorer the size of Metminco.
The drilling completed to date has successfully mapped out the geometry of the Los Calatos porphyry complex, both near surface and at depth.
It has advanced the associated mineral resource from an in situ contained copper content of 1.11 million tonnes in January 2009 to 6.75Mt in January 2013 (at a 0.2% copper cut-off).
On January 7, Metminco announced a further key development at Los Calatos – the release of a mineral resource estimate in support of a preferred mining option.
The preferred option, which provides for a smaller open pit followed by a large underground bulk mining operation, represents the interim results of a study that evaluated five different mining scenarios varying from a single large open pit operation to a combination of open pit and underground bulk mining operations, as well as a stand-alone underground operation.
The mining options study provided for a matrix of technical and financial criteria, with the objective of achieving a phased capital spend and optimal return on capital.
Of fundamental importance in attaining this objective was the construction of a reliable 3D geological model, which was completed towards the end of 2012 following the completion of the phase 4 drilling program and related follow-up work.
Metminco continues to use the services of an independent consultant to assist with the mining options study and in particular, the “fine tuning” of the preferred mining scenario.
It is scheduled to be completed towards the end of the 2013 first quarter and will form the reference base for the planned prefeasibility study following shortly thereafter.
The latest (January 2013) mineral resource estimate includes resources that are expected to be amenable to open pit and underground bulk mining.
Mineral resources amenable to open pit mining are identified as those occurring near surface to a vertical depth of 500m, while resources amenable to underground bulk mining are identified as those occurring below this depth.
The mineral resources amenable to open pit mining total 274Mt at a grade of 0.42% copper equivalent (at a cut-off grade of 0.15% copper equivalent), inclusive of inferred resources (21Mt).
By comparison, the mineral resource amenable to underground bulk mining totals 1068Mt at a grade of 0.61% copper equivalent (cut-off grade of 0.35% copper equivalent), inclusive of inferred resources (302Mt).
Significantly, 93% of resources amenable to open pit mining and 72% amenable to underground bulk mining have been advanced to the higher confidence measured and indicated mineral resource categories.
Hence the total mineral resource is 1.34 billion tonnes at a grade of 0.57% copper equivalent, of which 7.7Mt is available for extraction using metallurgical recoveries of 87% for copper and 68% for molybdenum.
It is worth noting that the January 2013 mineral resource estimate is substantially lower than the April 2012 estimate, although there has been an increase in the copper grade.
It is largely a product of the higher cut-off grade applied to estimate the underground, bulk mining, mineral resource.
In addition and with the benefit of the phase 4 drilling results (65,677m), grade estimates were conducted within clearly defined domains, resulting in the better definition of high grade and low grade zones developed within the Los Calatos porphyry complex.
The latter recent development will undoubtedly facilitate improved mine planning, particularly from an underground bulk mining (block cave) perspective.
To put the decision to “go underground” into perspective, underground block caving was first used in Chile in 1924 at the Potrerillos mine, followed by El Teniente in the late 1930s, Salvador in 1959 and Andina (Rio Blanco) in 1970.
It has become the large-scale underground mining method of choice, with most global copper majors planning to use large-scale underground caving in future projects as discoveries get deeper, head grades decline and strip ratios become excessive.
Operations employing block or panel caving are touted as having productivity and unit cost structures that rival large, deep open pit mining.
Furthermore, the environmental footprint in some instances is reduced by a factor of five, in comparison with large open pit operations.
However, underground block caving has a higher degree of risk than that of an open pit operation, as well as a high initial capital investment, usually in the form of pre-production development that occurs ahead of the generation of a positive cash flow.
In the case of the former, risks can be managed through the application of best practice designs and scheduling, whereas in the case of open pit mining, it can be addressed (for example, at a new project like Los Calatos) by the establishment of an open pit operation that generates cash flow while allowing for the requisite underground development to take place prior to the pit reaching its (final) targeted depth.
Metminco is well-poised to take that next key step in the development of its 100%-owned project as it advances closer to the initiation of a PFS in late Q1 2013, bearing in mind the company’s key achievements to date:
- Los Calatos was declared a project of national interest: Metminco deals directly with the Peruvian government in acquiring the freehold necessary for the establishment of the planned mining infrastructure; - Water and metallurgical facilities: seawater is to be used at the planned metallurgical facility for flotation purposes. Metallurgical testwork is to be conducted during the first half of 2013; - Pipeline to coast: preliminary cost estimates completed for the construction of a dual pipeline to the coast for pumping sea water to Los Calatos and concentrate to the coast; - Coastal loading facility: site has been selected and oceanographic studies are underway; - Infrastructure, power and road access: indicative site and offsite infrastructure requirements have been identified and detailed surveys are now underway; - Exploration programs: phase 4 drilling program was completed in October 2012, resulting in revised mineral resource estimate (January 2013); - Mineral resource estimate: January 2013 mineral resource estimate to form the reference base for the planned PFS; - Mining options study: in progress, with the optimisation of the identified, preferred mining option to be finalised in late Q1 2013. Indicative mine capital and operating costs, as well as mine production schedules are at an advanced stage; - Preferred mining scenario: comprises an initial open pit operation followed by an underground bulk mining operation. Life of the open pit and associated stockpiles is expected to span the time required to commence and ramp up underground production (with a minimum 7-year pit life); - Metallurgical flowsheet: preliminary flowsheet was completed using conventional flotation technology, with recovery rates of copper and molybdenum into separate copper and molybdenum concentrates expected to be 87% and 68% respectively; and - Funding: as at January 7, 2013, the company had $US17 million free cash. Funding strategies to complement this are currently under consideration. Hence, 2013 promises to be an interesting year for Metminco, both in terms of developments at Los Calatos, as well as certain of its smaller projects in Chile.
However, despite the quality of its underlying asset portfolio and the significant achievements to date, the Metminco share price continues to trade at an all-time low.
MNC Price at posting:
2.4¢ Sentiment: LT Buy Disclosure: Held
