BASE METALS — Cobre Mining has shares listed on TSE, expands mill at Continental copper operation

After three years of operations as a private company, Cobre Mining, owner of the Continental copper mine in southern New Mexico (CBU-T), has decided to go public.

So far, this year has been a busy one for the company: it completed a reverse takeover of Aurex Resources in March, became listed on the Toronto Stock Exchange, and, with the proceeds of a US$45-Million special warrants issue, has announced plans to expand production at the Continental mine.

In December 1992 the company acquired the Continental, which had been shut down for more than a decade, and returned it to production. Production grew steadily to 71.5 million lb. in 1996 from 17 million lb. copper in 1993. Cash costs last year were US80 cents per lb. The copper concentrates produced by Cobre are sent to smelters in the southwestern U.S.

Cobre hopes to expand production at the Continental by increasing milling capacity and installing a solvent extraction-electrowinning (SX-EW) circuit.

Production is expected to reach 75 million lb. copper this year, rising to 140 million lb. by 2000.

In order to increase milling capacity, the company will expand the flotation circuit and upgrade the crushing and grinding circuits to handle 15,000 tons of ore per day, up from 12,000 tons. Those improvements are also expected to increase overall copper recovery to 88% from 82%.

“We’ll get more rock going through the mill at greater recovery,” explains John Bokich, Cobre’s vice-president of corporate affairs.

Once the proposed mill expansion is complete, production should reach 90 million lb. copper per year. The company expects to pay for the US$8-Million project through operating cashflow.

In another cost-saving measure, Cobre discontinued, in January, the use of contract miners at the operation, choosing instead to do its own work. At a cost of US$11 million, Cobre also bought larger shovels and trucks. Bokich believes that purchase could trim operating costs by US$2 million to US$3 million per year.

Cobre is currently producing copper from underground as well as open-pit operations. Underground ores are extracted from three main areas — Shaft 2, Shaft 3 and Western Extension. Those orebodies remain open.

The Shaft 3 area, the heart of the historic operation, is being mined at a rate of 2,600 tons of ore grading 1.9% copper per day. The shaft has been completed to a depth of 1,500 ft., though production occurs only as deep as 1,300 ft. The ore is brought to surface in skips and trucked to the mill.

.SCost-Cutting

The Shaft 2 area, situated at the northern end of the open pit, is under development through a decline which produces 1,000 tons per day. Cobre hopes to double that rate to 2,000 tons per day by the end of the year. The newly purchased rubber-Tired equipment will allow the company greater operating flexibility there, as well as cut handling costs.

Mining activity at the Western Extension is in the pre-planning phase.

Mineralization there has yet to be included in reserve figures.

Although Cobre currently employs room-And-pillar mining methods in its underground operation, it plans to switch to less costly sub-level open-stoping in thicker zones.

The company will also attempt to increase production by adding a heap-leach/SX-EW plant. At that point, says Bokich, the company will have permits to construct a heap-leach pad on private land. An environmental impact statement (EIS), expected in July 1998, is under way for expansion of the pad onto federal lands. Should the EIS be delayed, the company can modify existing permits for a second pad.

.SConstruction imminent

Construction on the leach pad and the accompanying SX-EW plant is anticipated for the fourth quarter of 1997. Cobre is still arranging financing for the US$78-Million cost of construction.

The material that will supply the proposed SX-EW plant is found at Hanover Mountain, where the company has outlined a leachable reserve of 103 million tons grading 0.34% copper in a chalcocite blanket, plus additional reserves of 2.1 million tons grading 0.36% copper. The company also has permits for mining at those locations and can begin once construction plans have been given the green light.

Not only will the expansion of the mill and installation of the SX-EW circuit enable the company to increase production; cash costs are expected to fall to about 60 cents per lb.

Proven and probable reserves (including the current open-pit and underground mines, the Union Hill deposit and the expansion project) stand at 166 million tons grading 0.59% copper, equivalent to 1.9 billion lb. copper.

Four areas — the Western Extension, Hugo, Jim Fair and Contact Skarn — contain an additional resource of 58 million tons grading 1.1% copper, equivalent to 1.3 billion lb. copper.

The company recently completed 31 reverse-Circulation drill holes east of the existing operations. “We haven’t added it all up, but it will mean more tons and pounds of minable copper,” says Bokich.

Mineralization at the Continental, situated a few miles north of Phelps Dodge’s (PD-N) Chino copper mine, is associated with elongated skarn deposits adjacent to the Hanover Fiero granitic intrusive. The principal mineral at the Continental is chalcopyrite, whereas chalcocite is found at Hanover Mountain.

Cobre is also evaluating the feasibility of producing magnetite at the Continental. Ore there has contained, historically, 20% to 30% magnetite. To date, the company has recovered nearly 3 million tons of magnetite from tailings.

When Cobre took control of Aurex in March, it also acquired a 40% carried interest in the San Esteban copper-gold mine, near Copiapo, Chile, as well as a sliding net smelter return royalty on a silver-Copper mine near Las Serenas, also in Chile. San Esteban, which is operated by a private company, produces 24,000 oz. gold and 7 million lb. copper per year.