Amerigo churns out moly at MVC (May 09, 2005)

Vancouver — Amerigo Resources (ARG-T) reports that the molybdenum flotation circuit at its Minera Valle Central (MVC) plant in Chile is up and running.

The circuit extracts molybdenum from copper concentrate, which generally contains about 0.8% moly. Previously the company received no credit for the moly contained in the concentrate.

The cost about US$3.5 million to build, and it should deliver a high rate of return given that the price of moly now exceeds US$33 per pound. In late April Amerigo made an initial shipment of 25 tonnes of moly concentrate containing 25,000 lbs. of the metal.

MVC is expected to produce more than 500,000 lbs. molybdenum this year and double that amount in 2006 — all at a production cost under US$3 per lb.

Amerigo has entered into a sales agreement with Molybdenos y Metales (MolyMet), one of the world’s largest molybdenum producers, which has a conversion plant 75 km north of MVC. The 3-year agreement has a US60-per-lb. base treatment charge plus a participation factor for MolyMet indexed to the metal price.

State-owned Corporacion Nacional del Cobre de Chile (Codelco) receives a flat 10% royalty on moly concentrate sales. An additional royalty is paid to a company associated with Steven Dean and Klaus Zeitler, Amerigo’s chairman and president, respectively. The pair initially negotiated the royalty, in lieu of 7.5 million shares, upon assigning Amerigo the option to acquire MVC in 2003.

MVC has been producing copper concentrate for several years through the reprocessing of tailings from Codelco’s El Teniente mine in central Chile. The operation is forecast to produce 18,000 tonnes (40 million lbs.) copper and 500,000 lbs. moly in 2005.

With 69.5 million shares outstanding, Amerigo has a market capitalization of $140 million. The stock recently traded at $2.