Filo sets stage for near-term copper production

VANCOUVER — Filo Mining (TSXV: FIL) is targeting production within five years at its flagship Filo del Sol copper-gold-silver project in the northern Chile-Argentina border region. The company was spun-out of Lukas Lundin’s NGEx Resources (TSX: NGQ; US-OTC: NGQRF) in mid-2016.

Filo released a preliminary economic assessment (PEA) in late November that models a 50,000-tonne-per-day operation with a 15-year mine life. The US$792-million, open-pit development would annually produce 50,000 tonnes copper, 115,000 oz. gold, and 5 million oz. silver. The study estimates average co-product cash costs over life-of-mine of around US$1.42 per lb. copper equivalent.

The wholly-owned property straddles the international border between Argentina’s San Juan province and Chile’s Region III. The site is a 140 km drive southeast of the city of Copiapo in the High Andes of the Atacama.

The company is focused on high-sulphidation epithermal copper-gold-silver mineralization at the Filo del Sol deposit, where weathering and supergene processes have created oxide copper, gold and silver zones.

The high-grade copper oxide zone at Filo Mining’s Filo del Sol project on the Chile-Argentina border. Credit: Filo Mining.

Filo released an updated resource estimate in August that incorporated a recent 10,000-metre drill program.

The project now globally hosts 373 million indicated tonnes of 0.34% copper, 0.33 gram gold per tonne and 9.2 grams silver per tonne. Additional inferred resources total 239 million tonnes at 0.27% copper, 0.33 gram gold and 7.8 grams silver.

The PEA mine plan includes: 170 million indicated tonnes at 0.44% copper, 0.35 gram gold and 16.6 grams silver per tonne; and 46 million inferred tonnes grading 0.35% copper, 0.35 gram gold and 16.7 grams silver.

“The industry has this vision of mega copper projects with huge price tags. That’s not necessarily the case here.”
Adam Lundin, CEO 
Filo Mining

“We think the oxide resources could be a company maker, but it’s definitely a company starter,” explains Filo Mining president and CEO Adam Lundin during an interview in Vancouver. “Our team had a great exploration program last year, and we really believe we could spend the next ten years successfully drilling this project, but we have the critical mass right now. The industry has this vision of mega copper projects with huge price tags. That’s not necessarily the case here.”

Filo envisions a combination of permanent cyanidation, permanent acid, and on/off acid heap-leach pads. Gold and silver would be recovered from solution via a Merrill-Crowe plant to produce doré bars, while copper will be recovered using solvent extraction and electro-winning to produce cathodes.

The company’s life-of-mine recovery assumptions are 74% for copper, 75% for gold and 62% for silver.

The PEA estimates a 23% after-tax internal rate of return, and a net present value of US$705 million at an 8% discount rate. Filo says the revenue split by metal over the 15-year mine life would be 56% copper, 26%  gold and 18% silver.

“It’s basically a copper mine with exceptional gold and silver credits,” Lundin says. “That gives us some optionality in terms of project financing. I’ve gone out and tried to find development scenarios that are comparable to Filo del Sol, and frankly they’re very hard to find. It’s been super beneficial to have the Lundin Group behind the asset because we’ve been effectively able to internally fund a lot of work when there was really a lack of investment in copper. I feel like we’re a bit ahead of the game here.”

Filo will require permits from  Chilean and Argentinean regulators.

Lundin explains that the permit process in Argentina can begin after filing a pre-feasibility study, while the process in Chile requires a bankable feasibility study.

Copper sulphate mineralization at Filo del Sol in Chile and Argentina. Credit: Filo Mining.

The company intends to stagger its development activities to accommodate any potential permitting gap.

Filo recently started another 10,000-metre drill program to lay the groundwork for the prefeasibility study. It hopes to have the higher-level scoping work complete by early 2019.

Filo shares have traded in a 52-week range of $1.70 and $3.00 per share, and closed at $2.42 at the time of writing.

The company has 62.3 million shares outstanding for a $151 million market capitalization, and reported US$5.5 million in working capital at the end of the third quarter.

“Our family had great success in Argentina in the 1990s and never really left. We have a strong team down there,” Lundin says. “You could say the Veladero mine was a similar heap-leach scenario and that was a Lundin Group discovery.

“We’ve definitely got lots of blue sky out there as well, and we’ll be punching some deeper holes in 2018 to see what we have in terms of copper porphyry opportunities. This is really just the beginning for Filo, and I think what’s really going to push copper higher is the under-investment we’ve seen across the industry.”