Metallica licences renewed (September 06, 2004)

Minera San Xavier, a unit of Metallica Resources (MR-T), has had its contruction and operating licences renewed for the Cerro San Pedro project in Mexico’s San Luis Potosi state.

Construction of the Cerro San Pedro mine had been on hold since June because the initial explosives operating permit had not been granted and the renewal of the licences was uncertain. The explosives permit is still pending.

The municipality of San Pedro has issued the licences supporting mine development. The Secretaria de Defensa Nacional is responsible for issuing the explosives permit.

Cerro San Pedro has proven and probable reserves of 61.1 million tonnes grading 0.59 gram gold and 24 grams silver per tonne, or 1.1 million oz. gold and 47 million oz. silver. This was estimated using a gold price of US$325 per oz. and a silver price of US$4.62 per oz. The stripping ratio is estimated at 1.2-to-1.

The Cerro San Pedro will be a heap-leach gold and silver operation. Construction began earlier this year but was halted after three months because of permitting woes.

A group has been lobbying against the development, and recently a constitutional protection was filed against the environmental impact statement submitted to Minera San Xavier by the environmental authorities in 1999. The group alleges federal environmental laws and other legal provisions have been violated. Minera San Xavier is working to resolve these problems.

At the end of June, Metallica had US$42.5 million in cash and cash equivalents. It has 82.5 million shares issued and outstanding.