Metallica sizes up El Morro deposit (February 13, 2004)

Armed with data from 15 diamond- and reverse-circulation holes, Noranda (NRD-T) has tabled an inferred resource estimate for the El Morro area on Metallica Resources‘s (MR-TY) like-named copper-gold project in Chile.

Based on a cutoff grade of 0.4% copper, inferred resources are pegged at 45 million tonnes running 0.5% copper and 0.18 gram gold per tonne. Of the total, 35 million tonnes of 0.52% copper and 0.2 gram gold are contained in supergene-enriched mineralization. The remaining 10 million tonnes comprise primary sulphide mineralization grading 0.44% copper and 0.12 gram gold.

Metallica says the El Morro area is unique in that no central porphyry intrusions has been located. Instead, mineralization is contained by a series of pre-intrusive volcaniclastic sedimentary rocks. The deposit remains open to the west, northwest and the northeast.

The El Morro area is one of two principal zones of copper-gold mineralization on the project. Some 5 km to the southeast, the La Fortuna deposit is home to an inferred resource estimate of 465 million tonnes grading 0.61% copper and 0.5 grams gold, also at a 0.4% copper cutoff. Primary mineralization dominates the resource at La Fortuna.

Preliminary rougher-flotation tests on five composite samples of primary mineralization from La Fortuna returned recoveries of 89%-95% for copper and 69%-78% for gold. Results from four samples of supergene mineralization ranged between 80%-93% for copper and 66%-82% for gold. Cleaner flotation tests on the same samples produced a primary concentrate of 29% copper and a supergene concentrate running 35% copper.

Noranda can earn a 70% interest in El Morro by paying Metallica US$10 million in cash by September 2005; it has already fulfilled its commitment to fund US$10 million worth of development. The major is also responsible for completing a bankable feasibility study by September 2007. Metallica can also ask the company to provide 91% of the capital required to develop the project.

Looking ahead, Noranda has budgeted US$1.66 million for work at El Morro during 2004. Plans include an 8,000-metre drill program aimed at expanding resources and investigating the distribution of the gold and supergene copper mineralization at La Fortuna. Drilling will begin in the fourth quarter.

Noranda recently reported higher fourth-quarter earnings of US$64 million (or 21 a share) on revenue of US$1.3 billion, compared with a year-ago loss of US$442 million ($1.86 a share) on $887 million. For all of 2003, earnings came to US$34 million (4 a share) on US$4.7 billion, compared with a net loss of US$447 million ($1.93 a share) on US$3.9 billion. The turnaround is thanks to increased production from recently completed projects and higher metal prices, especially nickel, which jumped 32% during the third quarter of the year.Noranda’s mined metal volumes during the quarter amounted to 107,070 tonnes copper (versus 120,673 tonnes in the fourth quarter of 2002), 153,825 tonnes zinc (136,816 tonnes), 11,286 tonnes nickel (13,776 tonnes), 20,365 tonnes lead (18,982 tonnes), and 3.1 million oz. silver (3.3 million oz.). The company’s full-year output performed similarly.

Shares in Metallica were a dime, or 4.6%, higher at $2.29 in early trading in Toronto following the news on Feb. 13. For their art, Noranda shares were off 14 at $21.24.