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A technical study by Hatch Associates proposes spending up to US$1.5 million on feasibility-related work over nine months. Recommendations include: further drilling to confirm the geology and grade; hydrological and geotechnical studies; and metallurgical testing on about 10 tonnes of material.
Earlier this month, Barytex signed an option to acquire
“It’s fairly rare to be presented with a drilled-off resource of good grade in an area of good infrastructure, so we’re quite excited about the potential,” says Barytex President Leo King. “We were looking for an advanced-stage project with minimal risk. This project represents a relatively low production cost and has the potential to contribute substantial cash flow.”
Under the option deal, Barytex would acquire Minera Mantua, a wholly owned subsidiary of Northern Orion. To exercise its option, Barytex must: assume and pay all carrying costs relating to Northern Orion’s operations in Cuba, including the Mantua project; complete a bankable feasibility study within 18 months; arrange all financing required to begin construction; and start construction within 120 days of a production decision.
Also, Barytex may acquire, by issuing 4.5 million shares, about US$28 million in Geominera subordinated debt owed to Northern Orion. The move would give Barytex 85% of the cash flow from the project until retirement of the debt.
From February 1998 to September 1999, Northern Orion and Geominera mined Mantua’s gold-enriched gossan cap. Under the original plan, an US$11.6-million heap-leach operation was to produce some 70,000 oz. gold over two years. The leach facility came in under budget at US$10 million, but gold production tallied just 31,389 oz., owing to higher-than-expected ore clay and fines, major rain delays and longer-than-expected leach times (70 days instead of the originally estimated 28 days). A string of losses by Northern Orion meant that planned mining of the underlying copper mineralization never began.
The original feasibility study for Mantua was completed by Davy International, an engineering consulting firm, in October 1995. The study proposed a 2-stage open-pit operation. Mining was initially to have targeted the gossan cap followed by mining of the underlying supergene-enriched copper zone.
Northern Orion acquired its half-interest in Mantua from parent company
In 1999, Northern Orion completed an internal prefeasibility study to evaluate the use of a ferric leach/solvent extraction process for copper recovery. The study established an overall resource of 11.9 million tonnes grading 2% copper, based on more than 300 holes. Additional evaluations led to an open-pit resource estimate of 7.5 million tonnes grading 2.74% copper, based on a long-term copper price of US85 per lb. and a cutoff grade of 0.7% copper.
Metallurgical tests confirmed that Mantua’s ore could yield London Metal Exchange grade A copper cathode. Recovery rates were 87.9%, and preliminary designs called for a plant capable of processing 750,000 tonnes per year.
Financial evaluations by Northern Orion indicated an average annual production rate of 39 million lbs. copper cathode at direct operating costs of US44.5 per lb. over a mine life of 11 years. Capital costs, including contingency, were pegged at US$48.5 million.
A review by Bateman Engineering estimated a direct capital cost of US$50 million and working capital of US$6 million. Average cash operating costs, including the costs to deliver the copper cathode to market, were estimated at US45 per lb. Annual production of 40 million lbs. copper cathode was projected, over an 10-year mine life. The review indicated a waste-to-ore stripping ratio of about 5.2-to-1.
Bateman estimated that the project’s undiscounted cash flow would be US$60.9 million after capital repayment and interest charges at US85 per lb. copper. The net present value, at a 10% discount, was pegged at US$22.5 million.
Hatch’s recent study indicated that the pit contains 7.5 million tonnes grading 3.03% copper, with a stripping ratio of 7.1-to-1, based on a cutoff grade of 1% copper. Hatch’s study confirms that, based on a 1% copper cutoff and a US85-per-lb., long-term copper price, previous open-pit reserve estimates of 6.1-7.5 million tonnes grading 2.8-3% copper are reasonable, as are stripping ratios in the order of 7-to-1 to 8-to-1. Hatch also confirmed total cash cost estimates of US45-50 per lb., along with capital costs of about US$45 million.
In the past month, copper prices have been hovering around the mid-US60-per-lb. level, but Barytex anticipates a rebound in the next two years, by which time the company intends to have advanced the project to production.
King notes, however, that “if copper were currently at US85-90 per lb., I doubt we would have had an opportunity to acquire this property for basically a work commitment and no cash consideration.”
In order to fund the feasibility study, Barytex will be able to draw upon a US$1.5-million loan facility from the South African Export Development Bank. The facility is subject to Bateman Engineering’s being selected to complete the feasibility study and a US$1.5-million guarantee. The facility would be repaid from production over three years. It expires in September.
The Mantua deposit is situated in western Cuba’s Pinar del Rio province. It is a secondarily enriched copper deposit produced by weathering of primary copper-gold mineralization. A gold-enriched gossan that extended to depths of 25-40 metres capped the deposit.
Massive and disseminated primary sulphide mineralization occurs in a sequence of inter-layered basic volcanic rocks, shale, siltstones and sandstones. Late Mesozoic folding and thrust faulting caused extensive shearing and brecciation of the volcanic and sedimentary sequence between the limestones.
Folding has created an interpreted broad syncline and anticline defining an open “S” shape. The eastern limb of the syncline contains most of the mineralization defined by drilling. The copper deposit strikes to the northeast and dips at 50-70 to the west. The lens has a strike length of 1.3 km and is truncated by a footwall fault. Widths range from 50 to 150 metres and mineralization extends to a vertical depth of 180 metres.
The secondary-enriched copper zone can be divided into three distinct ore types. They are: red oxidized material containing cuprite and native copper; grey clay-rich material containing chalcanthite, chalcocite, covelite and cuprite; and black sulphide-rich material containing chalcanthite, chalcocite and cuprite.
Situated 4 km from tidewater, Mantua has pre-existing infrastructure, including mine site office buildings, a gold plant and paved roads.
King says that, provided Mantua can be brought to production, there is opportunity to expand resources.
Barytex believes that Mantua can generate positive returns at low copper prices due to the high grade and low operating costs.
The company adds that the project could provide additional credits through the recovery of cobalt with indicated values of about 1 lb. per tonne and the recovery of copper from low-grade ore.
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