Baja Mining updates progress at Boleo

Baja Mining (BAJ-T, BAJFF-O) has tested the first of three 2.5 megawatt power generators at its 70%-owned Boleo copper-cobalt-zinc-manganese project and says all three will be online in early January.

The generators at the project on the coast of Baja California Sur, Mexico, will supply electrical power for construction, initial mining operations and to the camp, the company announced on Jan. 3.

Increased power demand during the production phase will be met by three additional generators, each with 7.5 megawatts of capacity and from the cogeneration of power from the burning of sulphur in the acid plant.

Baja Mining also told shareholders that its US$2.3 million drill program is underway with 38 drill holes or 7,168.57 metres completed so far. The drill program is designed to extend mineralization around the limits of the planned mines at Boleo; define further potential high grade (or more than 2% copper) that is not in the mine plan; and to test parts of Manto 4, the deepest and less drilled manto, or mineralized layer, on the property.

In addition, the company unveiled that it has held discussions with several parties interested in off-take agreements if Boleo produces a high purity manganese carbonate from Boleo. Manganese production was not included in the economic evaluation of the Boleo project and Baja Mining is preparing to do test work and engineering studies to optimize the production of manganese carbonate and future electrolytic manganese metal.   

“Baja will combine the outcomes of the marketing and engineering studies into a manganese business case that will be presented in the third quarter of 2012 to the Manganese Action Committee, a committee comprised of representatives from Baja and the company’s Korean partners,” Baja Mining said a press release. (Baja owns 70% of Boleo and a syndicate of Korean industrial companies owns the remainder.)

During the fourth quarter of 2011, Baja also started talking with a third party about a potential off-take agreement for its zinc sulphate production.

The news release sent shares of Baja Mining up 9¢ or 11.25% to close at 89¢ apiece on Jan. 3. The stock ran 2.25% or 2¢ higher today, closing at 91¢ per share.  

Baja Mining expects to start copper commissioning in 2012 with copper production following in 2013.

Boleo is a permitted, fully funded project that will produce its first copper and cobalt cathode metal in the second quarter of 2013, with zinc sulphate monohydrate, and at a later stage, possibly manganese, as by-product credits.

The mine will have a lifespan of a minimum 23 years with net cash costs of negative US$0.29 per lb. copper.

In terms of revenue distribution, copper will make up about 66%, cobalt 25% and zinc 9%.

The sedimentary deposit is made up of seven flat-lying soft-rock ore beds that are close to surface. It was formed in a shallow marine basin, near the shore around volcanic islands.

At a 0.5% copper-equivalent cut-off, Boleo has measured and indicated resources of 265 million tonnes grading 0.76% copper, 0.06% cobalt, 0.64% zinc and 1.5% manganese. Of that, 85 million tonnes fall in the proven and probable reserve category grading 1.34% copper, 0.08% cobalt, 0.55% zinc and 2.91% manganese. Inferred resources add 160 million tonnes grading 0.47% copper, 0.045% cobalt, 0.70% zinc, and 1.15% manganese.

During its first six years of production, Boleo is scheduled to produce 125 million pounds of copper annually at a copper grade of above 2%, along with 3.7 million pounds of cobalt and 55.8 million pounds of zinc sulphide.

In years seven through twenty-three, Boleo will turn out about 84 million pounds of copper a year at an average grade of 1.33%, in addition to 3.6 million pounds of cobalt and 65 million pounds of zinc sulphide.

At a copper price of US$2.91 per lb., US$26.85 per lb. cobalt and 53¢ per lb. zinc, Boleo will have an after-tax net present value, at an 8% discount rate, of about US$1.3 billion, with an after-tax internal rate of return of 26%, according to an updated feasibility study completed in March 2010.