Exeter completes prefeasibility on Caspiche

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

The study estimates capital expenditure of US$4.8 billion and total revenue of US$27.4 billion. Average  annual production over a 19-year mine life will come in at 696,000 oz. gold, 244 million lbs. copper and 844,000 oz. silver. 

Average operating costs work out to US$606 per oz. gold equivalent. When copper and silver by-product credits are considered, the cost of production falls to US$18 per oz. Recoveries are 68% for gold and 86% 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 mine’s remaining life.

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 south of Andina Minerals‘ (ADM-V) new Volcan gold deposit.

Exeter  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 US25¢ per tonne of total material moved, or US80¢ 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 US$1 billion in initial and sustainable capital savings. 

All of the options considered in the prefeasibility study involve an open pit to mine the near-surface, heap-leachable resource. 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 a 72,000-tonne-per-day design production rate.

“Proven and probable” material is divided into 124 million oxide tonnes at 0.38 gram gold and 1.6 grams silver; 78 million leachable sulphide tonnes at 0.51 gram gold, 1.05 gram silver and 0.07% copper; and 889 million tonnes at 0.58 gram gold, 1.13 grams silver and 0.24% copper.

Adam Graf, an analyst at Dahlman Rose, has a “buy” rating on the stock with a price target of US$20.52 per share on the NYSE-Amex. 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%.

Looking ahead, Exeter plans to advance the heap-leach part of the Caspiche project to feasibility study level starting in 2012’s second quarter, 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 Chilean government in the second quarter.