CHART: First Quantum’s Peru project joins copper giants

First Quantum Minerals (TSX: FM) has outlined the La Granja project it holds with Rio Tinto (ASX. LSE, NYSE: RIO) in Peru as one of the copper sector’s largest undeveloped deposits, according to a resource update. 

La Granja’s (meaning “the farm”) orebody in the country’s northern Cajamarca region contains 4.8 billion measured and indicated tonnes grading 0.48% copper, equal to 23 million tonnes of contained copper, First Quantum said in a new NI 43-101 technical report. 

A further 5.2 billion tonnes grading 0.4% copper sits in the inferred category, containing another 20.7 million tonnes of copper, setting La Granja up as a tier one, multigenerational asset, in the words of the company. 

That places La Granja second among undeveloped copper projects in terms of measured and indicated resources behind only Northern Dynasty’s (TSX: NDM; NYSE-A: NAK) Pebble in Alaska and when including operating assets, also behind Kamoa-Kakula, the Ivanhoe Mines (TSX: IVN; US-OTC: IVPAF) complex in the Democratic Republic of Congo. 

Rio Tinto tapped First Quantum for a 55% stake in the project and to take over development and operate the mine in 2023, on what increasingly appears to be highly favourable terms.

First Quantum acquired the majority stake for only $105 million and has since spent $70 million out of a committed $546 million to advance the project. 

Engineering challenges

In an interview conducted last year, First Quantum CEO Tristan Pascall said while the La Granja deal “wasn’t up there in the deals in terms of dollars, in terms of copper in the ground is one of the largest deals done in the last 10, 20 years.”

“Rio Tinto saw in First Quantum a partner that could want a challenging project, because it’s challenging from an engineering perspective, and particularly around deleterious elements like arsenic,” Pascall said. “We had a development hypothesis that we went to Rio with, and really that revolved around dealing with the orebody in a different manner.”

First Quantum says the drillhole database for La Granja now consists of 832 diamond holes totalling a whopping 370,000 metres, with more planned. The deposit remains open at depth with further exploration targets, according to the company.

Last month, ahead of the latest resource estimate, Pascal told a group of reporters during a tour of its Zambian mines the company has spent the last three years of drilling validating this hypothesis: 

“Our view was that it [the arsenic] wasn’t disseminated, that it was discreet and we could package it. That means you have assayable concentrate through a conventional flow sheet, and you don’t need any exotics in order to deal with arsenic.”

Water and tailings

La Granja’s pit optimization was based on a copper-only cut-off using a $4 a lb. copper price (versus today’s price of $6.65 per lb., or $14,450 a tonne). Silver, gold and molybdenum should provide by-product upside, which may well lure streaming companies. 

Other challenges at La Granja (and most sites in the South American copper belt) include water and tailings management. Unlike many copper projects in the Andean belt, La Granja sits at a moderate elevation between 2,000 and 2,800 metres above sea level. 

First Quantum plans to carry out comminution near the pit, then move material by pipeline through a 7 km access tunnel to a flatter, arid Pacific coastal plain about 100 km from the mine where processing and tailings management would be located. 

Primary water supply would come from desalinated seawater, with site contact water captured and reused in processing to reduce impacts on local environmental flows, First Quantum said.

Next up for La Granja is permitting, and progressing baseline environmental and social studies and continuing community engagement – a process that would take several years under Peru’s strict Environmental and Social Impact Assessment (ESIA) regulations. 

A prior Peruvian government estimate put La Granja’s required investment at more than $2.4 billion. First Quantum is also advancing its Haquira project in the Apurímac region of southern Peru. 

First Quantum’s wholly owned Taca Taca project in Argentina, is itself one of the largest greenfield copper projects worldwide.

Annual output over the first 10 years at Taca Taca, which has qualified under Argentina’s fast-tracking program, is pegged at 291,000 tonnes of copper and 133,000 oz. of gold at cash costs of 97¢ per pound. Production over the mine’s life is projected at 209,000 tonnes of copper and 96,000 oz. gold at cash costs of $1.26 per pound.