National Bank Financial and Dundee Securities brokered the placement, which saw investors scoop up 6 million special warrants at 90 apiece. Each special warrant entitles the holder to acquire, at no additional charge, one share and a half-warrant.
Manhattan will use the funds to complete a draft environmental impact statement (EIS) and to advance its community relations and consultation activities in Piura, Peru.
The company has become a rallying call in Peru for local activists and farming groups who are concerned about the negative implications a proposed open-pit mine will have on a community whose economy is largely dependent on commercial agriculture.
The Tambo Grande project centres on the town of Tambogrande (population 16,000), 865 km northwest of Lima and 40 km northeast of the regional city of Piura. The project comprises a package of concessions covering more than 890 sq. km in the Department of Piura. This package includes: the Tambo Grande concessions, totalling 100 sq. km; the Lancones concessions, comprising 737 sq. km; and the Papayo concessions, covering 32 sq. km.
A portion of the near-surface, 1-million-oz. TG-1 oxide gold deposit and underlying copper-zinc sulphide deposit is covered by part of the town of Tambogrande. Any development will entail moving a portion of the town’s population to a new site. The resettlement requires local agreements on terms and conditions.
The Piura River also flows through the project area, cutting the southern boundary of the TG-1 deposit. The neighbouring TG-3 deposit, 1 km to the south, partially sits beneath the Piura River and its flood plain.
In February, Manhattan’s exploration camp and demonstration housing units at Tambogrande were extensively damaged when a protest demonstration turned violent and lasted several days. Manhattan says the attack, which caused an estimated $1 million in damage, was instigated by a small politically motivated group. This was followed several weeks later by the murder of local mango producer and activist Godofredo Garcia.
In the wake of the protests, and with local community leaders and church officials denouncing the project and calling for Manhattan to leave, the Peruvian government granted the Vancouver-based junior a one-year extension to its option agreement, which now extends to May 2003. The key components of this agreement require that the company complete a feasibility study and financing plan as the first step toward earning a 75% interest in the Tambo Grande concessions, which host both the TG-1 and TG-3 deposits.
The feasibility study, originally scheduled for completion this past June, was rescheduled for completion by mid-2002. As part of the feasibility process, Manhattan is completing an EIS, which will be presented to the surrounding community in a public consultation process. The framework for this forum of dialogue was endorsed in May by the Peruvian minister of energy and mines, the Archbishop of the Diocese of Piura and Tumbes, the leaders of the Front of Defence of Tambogrande, and Manhattan Minerals. The consultation process will be led by the government to ensure that the people of Tambogrande and the surrounding area are able to make informed decisions regarding any development proposal.
In a prepared statement, Energy and Mines Minister Carlos Herrerea Descalzi noted that while the final decision will rest with the people, it was important for them to wait for the conclusion of all studies. He noted that the law does not oblige that the project be executed. “If the people do not accept it, it will not be done, because the law does not compel it,” he said. “However, the law does guarantee that the company shall be able to complete its studies.”
CIL processing
Feasibility work on the TG-1 deposit began in 2000. AMEC E&C Services (formerly AGRA Simons) is conducting the study, which covers reserves, mine development plans, processing options, hydrology, tailings disposal, environmental studies, transportation, power, town relocation and mine closure planning.
Manhattan envisions mining the near-surface TG-1 oxide gold deposit first, at the daily rate of 7,500 tonnes, utilizing a conventional cyanide-in-leach (CIL) processing plant. Based on expected recoveries of 90% for gold and 62% for silver, the operation is projected to produce 283,000 oz. gold and 3.8 million oz. silver annually over a mine life of 3.5 years. Cash operating costs, after silver credits, are pegged at US$40 per oz.
An option would be to build a stand-alone gold plant capable of processing 5,000 tonnes per day, resulting in a longer mine life and potentially enhancing the opportunity for gold loan financing.
The TG-1 oxide deposit contains a probable open-pit reserve of 8.1 million tonnes grading 3.5 grams gold and 67 grams silver per tonne, equivalent to 906,300 oz. gold and 17.3 million oz. silver, at a stripping ratio of 1.9-to-1. Prices of US$300 per oz. gold and US$5 per oz. silver were used in the calculations.
The underlying base metal sulphide deposit would be brought into production concurrently with the depletion of the gold cap at a rate of 15,000 tonnes per day, producing 70,000 tonnes of copper in concentrate and 40,000 tonnes of zinc in concentrate over a life of 10 years. Cash operating costs are forecast at US44 per lb. copper, net of zinc and precious metal credits.
An alternative production proposal of 20,000 tonnes per day is being considered for inclusion in the feasibility study.
Commercially acceptable
The sulphide portion of the TG-1 deposit contains a probable reserve of 49.2 million tonnes grading 1.6% copper and 1% zinc, plus 0.6 gram gold and 26 grams silver, at a stripping ratio of 1.2-to-1. The reserve estimate is based on a copper price of US90 per lb. and a zinc price of US55. An extensive metallurgical testing campaign determined that commercially acceptable copper and zinc concentrates could be achieved in each of the three ore types. However, precious metal recoveries in the sulphide deposit have yet to be optimized and are estimated at 12% for gold and 25% for silver.
The capital cost of building the gold and base metal mine is estimated at US$270 million. Costs to build the gold mine alone are US$170 million.
Feasibility work is not taking into account the impact of developing the TG-3 and B-5 deposits. TG-3 contains an inferred resource of 82 million tonnes grading 1% copper and 1.4% zinc, plus 0.8 gram gold and 25 grams silver. The B-5 deposit lies on the Papayo concessions, 11 km south of TG-1. Based on drilling to date, the B-5 deposit shows a partial gold-enriched cap, a thick high-grade copper keel zone, and a flanking copper-zinc zone. Early estimates suggest that the overall B-5 sulphide body may be similar in size to the TG-1 and TG-3 massive sulphide deposits. However, the company is focusing on delineating high-grade mineralization that has the potential to support an underground mine.
The option agreement between Manhattan and Peruvian government-owned Minero Peru relating to Tambo Grande contains certain conditions that have not yet been met. For example, before Manhattan can proceed with development, it must be the operator of a 10,000-tonne-per-day mining operation and have net assets valued in excess of US$100 million. These terms will be waived if another company that meets them owns 25% of Manhattan.
Manhattan, for its part, has been seeking partners to assist in developing the project.
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