Eureka! Positive study on Miheevskoye

London-listed developer Eureka Mining (ERKMF-O, EKA-L) will go to a final feasibility study on its Miheevskoye copper-gold deposit in Russia following a prefeasibility study that concluded a 25-million-tonne-per-year mine and mill would be profitable.

Miheevskoye, abut 250 km south of Chelyabinsk near the Kazakh border, has an indicated resource of 374 million tonnes grading 0.38% copper and 0.1 gram gold per tonne. An additional inferred resource totals 52 million tonnes at 0.31% copper and 0.07 gram gold.

The study, with Wardrop Engineers as principal consultant and Snowden Mining Industry consultants as resource estimators, assumed production of 25 million tonnes of ore annually from an open pit, with a 12-year mine life. Average annual production would be 81,000 tonnes copper and 55,000 oz. gold.

The study estimated the capital cost of the mine and mill at US$450 million, with US$146 million of that going into crushers and the mill and US$100 million into a mining fleet. Construction is expected to take just over two years, with commissioning in the last half of 2009. The mill would be a conventional flotation plant producing a 25%-copper concentrate; recoveries, based on earlier metallurgical testing, were assumed to be 85% for copper and 65% for gold.

The study put total cash production costs at US$1,700 per tonne copper (US77 per lb.), with gold credited as a byproduct at US$550 per oz. The study assumed a copper price of US$2,860 per tonne (US$1.30 per lb.).

A discounted cash flow model put the project’s internal rate of return at 20% and its net present value, based on a 10% discount rate, at US$179 million. Those figures are pretax numbers (though operating and value-added taxes were worked into the operating costs); Russian income tax rates are currently 24%.

Eureka plans to have a definitive feasibility study on the project by mid-2007.

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