BASE METALS — Laminco moves ahead with San Antonio development — Copper production from northern Mexican deposit could begin by late 1998

The Luz del Cobre hydrothermal copper deposit in northern Mexico is moving closer to production.

Reno, Nev.-based Laminco Resources (LMR-T) has just signed a letter of intent with a private U.S. investment firm for project financing.

Laminco is developing an open-pit, heap-leach operation with a solvent extraction-electrowinning recovery plant for the project, which is on the eastern side of its wholly owned San Antonio property in Sonora state.

Luz del Cobre is essentially a copper deposit, according to Laminco’s executive vice-president, Peter Maynes. “There may be gold and silver credits, but we haven’t built them into the cost.”

Due diligence is expected to be completed by mid-July, at which time the investment firm will pay Laminco US$1 million, to be followed by another US$1 million upon closing of financing.

Minable reserves at Luz del Cobre stand at 10.2 million tons grading 0.86% copper at a cutoff grade of 0.22% copper. The average stripping ratio is less than 1-To-1.

The deposit is on the eastern end of an east-west-Trending, mineralized belt of sedimentary rocks.

Next door at the San Antonio property, the company has made the final property payment of US$1.2 million to the original owners, a consortium of Mexican and American investors.

Laminco has decided to develop the project alone, rather than form a joint venture with a major, Maynes says.

“One of our corporate priorities is to develop cash flow. Building the project alone enables us to do so faster than if we were to form a joint venture. In this market it’s critical for companies to develop cash flow, and not rely on equity.”

Laminco already is involved in a joint venture, with Placer Dome (PDG-T), on the western third of San Antonio.

It is also in discussions with several majors about forming partnerships on three other gold deposits on the same property. The deposits — Cerro Sapuchi, Golfo de Oro and California — would be developed as part of a combined open-pit, heap-leach project. Combined, they represent San Antonio’s established open-pit reserves of 5.8 million tonnes grading 2.8 grams gold per tonne.

“The grade on all three deposits is about the same,” Maynes says. “There’s also an underground resource at Golfo de Oro. Between those open-pit targets and the underground resource, there are a little more than 1 million oz. in drill-indicated and geological reserves.”

San Antonio is well-situated for mining development. Water will come from the nearby Yaqui River. Also, a 33,000-Volt power line with a total capacity of 3,556 kilovolt-Amperes crosses the property.

Maynes says the San Antonio property consists of roughly 60% oxides and 40% sulphides and that metallurgical work indicates recoveries of 85% to 90%.

San Antonio is underlain by a structurally complex section of Paleozoic and Mesozoic sedimentary rocks, which are marked by at least two types of intrusives. Surface outcrops and drill-hole data indicate that the sediments have undergone thermal metamorphism on a regional scale, forming skarn bodies that contain copper mineralization.

Gold was formed later, when fluids deficient in copper and other base metals deposited pyrite, silica and magnesium-Calcium-Carbonate minerals in brecciated zones that have open spaces and high permeability.

Based on a confirmatory feasibility study conducted by Bateman Engineering of Tucson, Ariz., Laminco believes it can produce cathode copper at an operating cost of US49.4 cents per lb.

The total capital cost of Luz del Cobre is estimated at US$19.3 million.

The Bateman study gave the deposit a net present value of US$32 million, based on a copper price of US$1 per lb. Laminco says that represents $1.40 per share, or $1.30 fully diluted.

Production is expected to begin by the fourth quarter of 1998 or the first quarter of 1999.

Laminco holds the San Antonio property through wholly owned Mexican subsidiary Minerales Libertad, subject to a net smelter royalty of 2% to a maximum of US$3 million.

Meanwhile, Laminco is proceeding with exploration on other parts of the property.

The Placer Dome joint venture on the western third of the property excludes all known reserves and resources. Placer has already carried out an airborne geophysical survey over the area, results from which are pending.

Placer will pay Laminco US$600,000 and commit to a minimum work program of $2 million over two years. The Canadian major will also pay Laminco US$800,000 and US$1.6 million at the end of the first and second years, respectively.

Once the obligations are fulfilled and its option is exercised, Placer will earn a 70% interest in a portion of the western area.

Placer’s Mexican affiliate, Empresa Minera Can Mex, will operate the project and has committed itself to carrying Laminco through to completion of feasibility.