LATIN AMERICA — Southern Peru expands reserves at Toquepala

Southern Peru Copper (PCU-N) has outlined additional copper at its Toquepala mine, near Arequipa.

The company, which is 54% held by Asarco (AR-N), has spent the past two years exploring beneath the bottom of the existing pit.

Gaining access to the new material would require removing a considerable amount of waste. However, much of the material contains leachable copper, which would reduce stripping costs.

Recent drilling enabled the company to add 474 million tons of sulphide ore and 1.2 billion tons of leachable ore, equivalent to an increase of 161% to sulphide reserves and 166% to leachable reserves.

Proven and probable reserves now stand at 770 million tons of sulphide ore grading 0.74% copper and 0.04% molybdenum, plus 1.9 billion tons of leachable reserves at 0.2% copper. As a result, both the concentrator and the solution extraction-electrowinning plant will have to be expanded. In addition to the new reserves, the mine has a resource of 247 million tons grading 0.68% copper.

The new reserve estimate makes Southern Peru, and consequently Asarco, even more valuable at a time when the two companies are competing to merge with Asarco.

Asarco started the consolidation process in May when it asked Cyprus Amax Minerals (CYM-N) to join forces in a “merger of equals.” Phelps Dodge (PD-N) stepped in as a second suitor and tried to acquire both companies in a 3-way deal.

Grupo Mexico then offered to buy Asarco for cash, putting an end to the original Asarco-Cyprus merger proposal, which had already been weakened by the Phelps Dodge proposal. Cyprus turned to Phelps Dodge, leaving Asarco at the mercy of Grupo Mexico. After short deliberation, Asarco followed Cyprus into the arms of Phelps Dodge. However, Grupo Mexico has not backed down now that Asarco has accepted Phelps Dodge’s merger proposal. The Mexican has upped its bid to US$29.50 per share in cash, from US$26 per share.

The company that acquires Asarco will also gain control of Southern Peru. Phelps Dodge already owns a 14% interest in Southern Peru.