Higher copper prices are creating a rush in the American southwest, with junior explorers eyeing various historic mining districts and past-producing operations.
One such project is Lisbon Valley, about 45 miles southeast of Moab, Utah. The property is currently held by
The Lisbon Valley region was first explored for copper and uranium in the 1890s. The first copper was discovered at a location known as the Big Indian mine, at the northern end of the district. A short time later, exploration at the southern end led to the discovery of the Blackbird (or Lisbon) mine. By 1913, the Lisbon Valley property had been developed with a 100-ft. inclined shaft and several surface trenches. However, the production was quite small, and prior to the 1950s, the mine produced only a few hundred tons of hand-sorted ore. In the 1950s, several thousand tons of ore, probably averaging about 2% copper, was shipped to Kennecott’s smelter in Salt Lake City, though these operations were suspended in 1958.
In 1993, after several failed attempts at starting small-scale leaching operations between the 1960s and 1980s, Kennecott Exploration optioned the property and drilled five widely spaced holes, most of which were sunk away from the known resources. The drilling was designed to locate large, deep sulphide deposits. One hole, drilled in the Centennial deposit area to a depth of 700 ft., cut 530 ft. of 0.33% copper in the bottom of the hole and indicated the potential for large accumulations of low-grade sulphide ore lower in the geological section. Kennecott failed to find its minimum target size and withdrew later that year.
Constellation’s predecessor, Summo Minerals, completed 150 reverse-circulation and core drill holes on the property, bringing the total amount drilled to more than 208,000 ft. within 1,069 holes. Of these, 597 holes tested the Centennial deposit, 340 evaluated the Sentinel deposit, and 132 were placed within the GTO deposit.
In 1969, Summo tabled a positive feasibility study which defined a reserve of 46.5 million tons grading 0.43% copper, minable by open-pit methods with a stripping ratio of 2.36-to-1. By January 1997, all permits from the state of Utah and the U.S. Bureau of Land Management (BLM) had been obtained, and in April, Summo arranged US$50 million in debt financing for construction of the Lisbon Valley copper project.
Then trouble struck.
In May 1997, a group of environmentalists filed an appeal of the record of decision issued by the BLM, and construction and mining were stayed until the appeal was resolved. For the next 22 months, the project was in limbo as Summo, the BLM, and the environmentalists litigated. The matter was resolved in Summo’s favour, but not before the copper price had fallen to US60 from US$1.25 per lb. and Summo had lost $50 million in loan commitments. With no financing, Summo was out of luck, having spent in excess of US$9.5 million evaluating the Lisbon Valley copper deposits, engineering the project for development, permitting the project for construction, and defending the permits in the appeal process.
With rising copper prices and a corporate reorganization, Constellation was able to acquire the leaseholds controlling the Lisbon Valley project in 2002.
The project covers 5,940 acres and, according to the 2000 feasibility study, consists of three deposits suitable for open-pit mining, acid-leaching and solvent extraction-electrowinning (SX-EW). The study projects an average cash operating cost of US45 per lb. copper for the life of the mine. Initial and ongoing capital costs are projected to average US20 per lb., including closure costs, and additional “non-cash” items are projected to average US80 per lb., for a projected total production cost of US$73 per lb. The amount of initial capital required to proceed with construction is pegged at US$57 million.
Current reserves are sufficient for seven years, with projected net cash flow (pretax) of US$133 million and a net present value (discounted at 7.5%) of US$78 million at an average copper price of US$1.10 per lb. At a copper price of US90 per lb., which is the average price over the past 10 years, base-case projected net cash flow (again, pretax) is US$83 million with a net present value (again, discounted at 7.5%) of US$43 million.
Copper deposits
Three separate copper deposits comprise the Lisbon Valley copper project. These include, from north to south, the Sentinel, Centennial and GTO deposits. All three deposits occur in sandstones of the Cretaceous Burro Canyon formation and the overlying Dakota Sandstone formation.
Centennial is the largest of the three deposits, with lateral dimensions of 4,500 by 1,200 ft. The copper occurs over a 300-ft. stratigraphic interval in three stacked, near-horizontal layers.
The Sentinel deposit is 1 mile northwest of the centre of the Centennial property, on the northeastern side of Lisbon Valley. It is 3,000 ft. long by 1,000 ft. wide with a waste gap in the central portion. The copper grade in the Sentinel deposit is reasonably uniform but increases slightly in the downdip direction.
GTO is about a mile south of the Centennial deposit. It is smaller and higher-grade than either Centennial or Sentinel. The GTO deposit was discovered in 1970 by exploration drilling beneath overburden and leached outcrops of the host Dakota Sandstone. The deposit is long and narrow, with dimensions of more than 3,500 by 500 ft. It averages 50 ft. in thickness.
With robust economics and higher-than-anticipated copper prices, Constellation has made great strides in its attempt to reopen Lisbon Valley. The company expects full construction of the project to begin in the third quarter of 2004, pending receipt of construction financing. This would enable Constellation to capitalize on the current high price of copper, assuming the project achieves initial copper production in the second half of 2005.
Toward this end, Constellation is moving and recommissioning its newly acquired crushing and SX-EW processing facilities, which were purchased from the Tonopah mine. San Juan Cty. has begun paving the road to the Lisbon Valley project area from Monticello, and at no expense to the company. The road will improve access to the project area.
A pump and water tank have been installed in one of the previously drilled water wells at Lisbon Valley, to provide water for dust suppression during construction. Also, several additional wells will be drilled to allow for an initial well capacity of 550-800 gallons per minute.
Meanwhile, Constellation has submitted a notice of intent to construct to the Utah government and requested re-instatement of the approval order that granted the company an air quality permit in 1997 but which lapsed because the project had not been built. The submission to the state of Utah includes the results of air-dispersion modelling, which demonstrate projected compliance with the permit requirements.
Constellation has also entered into a technical services agreement for construction management on the Lisbon Valley project, as well as separate contracts to upgrade the power corridor to the project site and engineer and construct the foundation for the eventual re-installation of the equipment at the Lisbon Valley project.
Management has entered into discussions with commercial banks and other lenders for a US$40-million construction loan. So far, the company has received six separate expressions of interest, with others pending.
Exploration
Constellation is eyeing other targets at Lisbon Valley in the hope of expanding the life of the operation. Confirmation drilling at the GTO extension deposit was completed in April 2004. In the 2004 program, the average intercept from 11 drill holes was 21.82 ft. grading 2.11% copper, which is close to the expected grade of 26.8 ft. at 1.88% copper, as indicated by the average from 20 previous drill intercepts in the deposit.
The company also completed drilling on the Cashin satellite deposit, and has delivered all drill-hole survey and assay data to SRK Consulting in Denver, Colo., for mineral resource modelling, pit design work, and reserve calculations. Management believes the Cashin deposit has the potential to extend the operating life of the Lisbon Valley project by two years.
Once all assay data from the two deposits have been received, SRK Consulting will determine mineral resource estimates, possible approaches to mining, and potential reserve additions to the Lisbon Valley project. Together, these two deposits are expected to add 2-3 years of mine life and roughly $30 million to the net cash flow (pretax) of the Lisbon Valley project at an average copper price of US$1.10 per lb.
— The author is a Toronto-based geologist and freelance writer, as well as a frequent contributor to Canadian Mining Journal.
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