La Fortuna grows again (September 30, 2002)

A new resource estimate by Noranda (NRD-T) has expanded by 72% the tonnage of secondary mineralization at the El Morro copper-gold deposit in Chile.

Noranda can earn a 70% stake in El Morro from Metallica Resources (MR-T). To do so, it must spend $10 million on exploration and pay $10 million by September 2005, and then complete a bankable feasibility study over the next two years.

Using a cutoff grade of 0.4% copper, inferred resources in the supergene zone now stand at 103 million tonnes grading 0.71% copper plus 0.35 gram gold per tonne.

Combined supergene and primary resources are now pegged at 465 million tonnes running 0.61% copper and 0.5 gram gold, at a cutoff of 0.4% copper — translating into 2.8 million contained tonnes copper and 7.4 million contained ounces gold.

These resource figures are highly dependent on the assumed cutoff grade: reducing the cutoff to 0.3% swells the total resource to 590,000 tonnes grading 0.56% copper and 0.46 gram gold; at a 0.5% cutoff, the resource tumbles to 340,000 tonnes grading 0.67% copper and 0.51 gram gold.

The La Fortuna resource now extends 100 metres deeper than before. Most of the extra secondary mineraliztion is found north and northwest of the primary zone, in a hilly area which is likely amenable to low-cost open-pit mining.

In September 2001, Noranda estimated La Fortuna’s total inferred resource at 410 million tonnes grading 0.61% copper and 0.56 gram gold per tonne.

At the time, consultant Knight Piesold concluded that the resource could churn out 2 million tonnes copper and 332,000 oz. gold over 15 years to yield a net present value of US$345 million and an internal rate of return of 19.6%. The financial projections are based on a 10% discount rate and metal prices of US$1 per lb. for copper and US$300 per oz. for gold.

Cash operating costs were pegged at US33 per lb. copper (net of gold credits), or US$4.35 per tonne of ore mined. Capital costs rang in at US$800 million.

The partners say ongoing drilling and geological analysis suggest the presence of another deposit beneath the known one. Preliminary estimates put its volume at 100 million tonnes grading 0.55% copper and 0.46 gram gold.

Meawhile, Metallica has wrapped up a 6-hole, 1,554-metre drilling program at its 32.-sq.-km, wholly owned Los Colorados property, 35 km west of El Morro in Chile’s Region III.

Anomalous copper mineralization was encountered in all of the drill holes. The highlight was hole LC-5, which cut 215 metres averaging 0.17% copper, beginning at a down-hole depth of 244 metres. The hole was drilled in a granodioritic porphyry near the centre of the intrusive system.

Unfortuntately, gold values in all the holes were below 0.1 gram per tonne.