Grades confirmed at Magistral project

Vancouver — The first eight holes of this year’s drill program over the Magistral copper porphyry-skarn property in Peru have returned encouraging grades for partners Inca Pacific Resources (IP-V) and Anaconda Peru, a wholly owned subsidiary of London-based Antofagasta Minerals (ANFGF-O).

Part of a US$3-million exploration program launched by Anaconda earlier this year, the drilling is aimed at defining a high-grade core. The latest results are as follows:

– Hole 28 — 162 metres grading 0.75% copper and 0.03% molybdenum;

– Hole 29 — 272 metres grading 0.72% copper and 0.05% moly;

– Hole 30 — 78 metres grading 1.06% copper and 0.11% moly;

– Hole 31 — 204 metres grading 0.89% copper and 0.05% moly;

– Hole 32 — 78 metres grading 0.54% copper and 0.11% moly;

– Hole 33 — 130 metres grading 0.52% copper and 0.09% moly;

– Hole 34 — 98 metres grading 0.76% copper and 0.09% moly;

– Hole 35 — 54 metres grading 0.56% copper and 0.06% moly.

Most of the intercepts included higher-grade sections running greater than 1% copper over 30-80 metres.

This year’s activities involve a 14,000-metre drill program (using four diamond rigs), as well as metallurgical, engineering and environmental studies. The aim of the program is to bring the project to the prefeasibility stage.

Through Anaconda, Antofagasta can earn a 51% interest in the project by spending US$2.9 million this year, including 14,000 metres of diamond drilling. Once this is complete, the company can increase its ownership to 65% by bringing the property to the feasibility stage within two years.

The recently completed scoping study defined a drill-inferred mining resource of 130 million tonnes grading 0.81% copper and 0.06% moly. It indicates potential for an open-pit operation producing 25,000 tonnes per day over a 16-year mine life.

The stripping ratio is a moderate 2.6-to-1; operating costs are pegged at US54 per lb. copper; and the pretax net present value of the project, using a 10% discount rate, is US$130 million.

The company has outlined a saddle-shaped body of mineralization that measures 1.2 km long by 125 metres wide. Drill-tested with 27 holes totalling 8,500 metres, the mineralization has been defined to 350 metres below the surface and remains open at depth.

Anaconda’s objectives include: keeping capital costs under US$280 million; lowering the operating costs to less than US50 per lb. copper; and upgrading the geological resource (190 million tonnes grading 0.83% copper and 0.06% molybdenum) to the drill-indicated category.

Structural and stratigraphic mapping and analysis of drill core and skarn outcrops at Magistral indicate similarities with other large copper skarns in Peru, particularly Antamina, 160 km to the southeast (proven reserves: 313 million tonnes averaging 1.3% copper, 1.06% zinc, 0.03% moly and 14.13 grams silver per tonne).

In December 1998, the government of Peru auctioned Magistral. Inca Pacific won the bid by agreeing to spend US$2.1 million and pay US$750,000 by January 2002.

Once vested, Inca Pacific will have seven years to complete a feasibility study and develop the project. The government will retain a net profits royalty, estimated to equate to a 0.5-3% net smelter return royalty, depending on metal prices.