BASE METALS SPECIAL — SX-EW technology could trigger startup at Tiomin’s Cerro Colorado deposit

Straddling the continental divide in western Panama, the Cerro Colorado deposit has been the perpetual bridesmaid of the copper world. Twenty-six years after Canadian Javelin (under promoter John Doyle) first acquired the mineral rights to the deposit, Tiomin Resources (TIO-T) is looking to succeed where others failed. It has two advantages over its predecessors: solvent extraction-electrowinning (SX-EW) technology, and a better deal from the Panamanian government.

First drilled off in 1970, Cerro Colorado passed from Canadian Javelin back to the Panamanian government, which then shopped the property to Texasgulf, offering a 20% equity interest and a management fee to bring the deposit into production. When Texasgulf ultimately backed away, RTZ took up a 49% interest, completed a feasibility study and put the project on hold. About three years ago, RTZ released its share back to the government.

The big porphyry copper deposit has a reserve of 1.4 billion tonnes of mineralization in sulphide form, grading 0.78% copper. Oxide and supergene-sulphide mineralization account for an additional reserve of 136 million tonnes grading 0.56% copper. Molybdenum grades are mainly between 0.005% and 0.01%, and the deposit has minor gold and silver credits.

Previous feasibility work on Cerro Colorado always hit the same wall — at any realistic copper price, conventional milling had too high a capital cost for the deposit to be profitable. But at Cerro Colorado, small may turn out to be beautiful.

Tiomin plans a feasibility study to determine if the smaller oxide and supergene reserve could be mined and processed profitably using SX-EW rather than conventional milling. Two options will be studied: developing the oxide and supergene mineralization by open-pit methods with a stripping ratio of about 1-to-1, or developing the higher-grade supergene body only at a higher stripping ratio of 2.6-to-1.

SX-EW would deprive the project of any precious-metal or molybdenum credits, but has the virtue of bringing a bite-size piece into production for early cash flow that could help finance a larger conventional operation.

One concern in the Panamanian rain forest is that the high rate of rainfall may dilute the leaching acids, and reduce recovery.

This may dictate that the leaching pads will have to be tarped. The large, flat areas needed for the leach pads aren’t nearby — ores would be moved by conveyor about 20 km to flatlands nearer the coast.

Another consideration that affected Cerro Colorado’s economics in the past was the Panamanian government’s large carried interest in the project. Tiomin will earn 100% of net profits until the capital expenditure is paid back; after that, its interest falls to 71% and declines by 1% per year for the next 20 years. The effective tax rate, 50% at the time of previous feasibility studies, will be around 26%.

Tiomin, newly listed on the Toronto Stock Exchange, has raised $23 million for work on Cerro Colorado.