Baja Mining updates progress at Boleo

Baja Mining (BAJ-T) has tested the first of three 2.5-megawatt power generators at its 70%-owned Boleo copper-cobalt-zinc-manganese project, and says that all three will be online before the month’s end. 

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

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 sulphur burning in the acid plant. 

Baja Mining is telling shareholders that its US$2.3-million drill program is underway with 38 drill holes, or 7,200 metres, completed so far. The drill program is designed to extend mineralization around the limits of the planned mines at Boleo, define potential high grade (or more than 2% copper) that is not in the mine plan and test parts of Manto 4, the deepest and least-drilled mineralized manto layer on the property.

The company has held discussions with several parties interested in offtake 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,” the company states in a press release. Baja owns 70% of Boleo, and a syndicate of Korean industrial companies owns the remainder.

During 2011’s fourth quarter, Baja also spoke with a third party about a potential offtake agreement for its zinc sulphate production.

The news release sent shares of Baja Mining up 9¢, or 11%, to close at 89¢ apiece on Jan. 3. The stock eased  2¢ higher on Jan. 4 and closed at 91¢. 

Baja Mining expects to begin 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 by mid-2013, with zinc sulphate monohydrate and, at a later stage, possibly manganese, as by-product credits.

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

In terms of revenue distribution, copper is anticipated at 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 near-shore in a shallow marine basin 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 lbs. copper annually at a copper grade above 2%, along with 3.7 million lbs. cobalt and 55.8 million lbs. zinc sulphide.

In years seven through 23, Boleo expects to turn out 84 million lbs. copper a year at an average grade of 1.33%, in addition to 3.6 million lbs. cobalt and 65 million lbs. zinc sulphide.

At US$2.91 per lb. copper, 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 and a 26% after-tax internal rate of return, according to an updated feasibility study completed in March 2010.