Magma expands with purchase of Peruvian mine

Arizona-based Magma Copper (NYSE) has outbid six international competitors for control of newly privatized Empresa Minera Especial Tintaya, Peru’s second-largest copper producer.

Magma paid the Peruvian government a reported US$218 million in cash (US$4 million more than its nearest competitor) and delivered US$55 million in Peruvian debt obligations, for a 100% interest in the company, which operates the Tintaya copper mine in southern Peru. As well as the cash and debt, Magma agreed to spend at least US$85 million on capital expenditures during the first five years of ownership.

Currently, the Peruvian company mines 8,000 tonnes of ore daily at an average grade of 1.75% copper, to yield 110 million lb. (50,000 tonnes) copper annually. Tintaya has minable open-pit reserves of 58 million tonnes averaging 1.78% sulphide copper ore, equivalent to almost 2 billion lb. (909,090 tonnes) of recoverable copper.

Over the next two years, Magma plans to increase production from sulphide ores to 10,000 tonnes per day and complete a feasibility study on a proven and probable resource of 21.7 million tonnes averaging 1.57% oxide copper ore. The increased sulphide mining rate should increase production to 135 million lb. (61,364 tonnes) annually. The feasibility study of the oxide resource should add 70 million lb. (31,818 tonnes) to the sulphide copper production.

In addition to the Tintaya acquisition in Peru, Magma intends to earn a half interest in the Cerro Verde copper property in Mexico’s Sonora state. The vendor is a Mexican-based subsidiary of Corner Bay Minerals (TSE). In 1993, Magma produced 779 million lb. (354,090 tonnes) of copper cathode at a net cash operating cost of US66 cents per lb. Copper was produced from three mining divisions: San Manuel, Pinto Valley and Superior, all in Arizona. Magma is also anticipating that its new operations — the Robinson copper-gold property in Nevada, the Florence copper property in Arizona and the Kalamazoo project, also in Arizona — will come on stream during the next three years.