Exeter completes Caspiche prefeasibility

The Caspiche project in northern Chile’s Maricunga gold district has a pre-tax net present value at a 5% discount rate of US$2.8 billion and a pre-tax internal rate of return of 11.5%, according to Exeter Resource‘s (XRC-T, XRA-X) prefeasibility study released on Jan. 17.

The prefeasibility study estimates project capex of US$4.8 billion and total revenue of US$27.4 billion. Average production each year over a nineteen-year mine life will come in at 696,000 ounces of gold, 244 million pounds of copper and 844,000 ounces of silver.

Average operating costs work out to US$606 per oz. gold equivalent. When copper and silver byproduct credits are considered, the cost of production falls to US$18 per oz. Recoveries for gold are 67.6% and 85.6% for copper.

The economic evaluation of Caspiche was based on metal prices of US$1,430 per oz. gold for the first four years of mine life and US$1,200 per oz. gold for the remainder. It used US$2.75 per lb. copper for the full mine life and US$31.20 per oz. silver in the first four years followed by US$22.50 per oz. silver during the remaining life of the mine.

Caspiche lies 10 km north of Cerro Casale, a gold-copper deposit owned by Barrick Gold (ABX-T, ABX-N) and Kinross Gold (K-T, KGC-N), 15 km south of Kinross’ Maricunga mine, and 35 km to the south of Andina Minerals‘ (ADM-V) new Volcan gold deposit.

Exeter noted that it was recognized early on in the prefeasibility study process that by including high-tonnage in-pit crushing and conveying (IPCC) systems, greater efficiencies in moving waste rock could be achieved, which would significantly lower capital and operating costs. Exeter’s mining consultant NCL estimated that using the IPCC system instead of a large truck fleet could result in cost savings of about US$0.25 per tonne of total material moved or about US$0.80 per tonne ore mined.  

Exeter anticipates that by building the tailings dam wall largely from a conveyor-stacker system instead of   conventional truck haulage for moving material, it can add up to initial and sustainable capital savings of roughly US$1 billion.  

All of the options considered in the prefeasibility study involve an open pit to mine the near-surface heap leachable ore. The preferred development plan is an open-pit mining operation that would process 150,000 tonnes a day of sulphide ore and a heap leach operation with an initial design production rate of 72,000 tonnes per day.

Total proven and probable ore reserves for the Super Pit currently stand at 1.09 billion tonnes containing 19.3 million ounces of gold, 4.62 billion pounds of copper and 41.5 million ounces of silver.  

Adam Graf of Dahlman Rose & Co. has a buy rating on the stock with a price target of US$20.52 per share on the American Stock Exchange. On Jan. 18 Exeter closed at US$3.08 per share, up 7.32% or 21¢. Over the last year the company has traded within a range of US$3.24 and US$5.84 per share.

In Toronto Exeter shares closed at $3.14 apiece, up 18¢ on the day or 6.08%.

Looking ahead, Exeter plans to advance the heap leach part of the Caspiche project to feasibility study level starting in the second quarter of 2012 and complete it by the fourth quarter. An updated full prefeasibility study should be completed in the fourth quarter, which will incorporate the results of the heap leach component.

The company also expects to wrap-up baseline studies to support an environmental impact study submission to the government of Chile in the second quarter.