Manhattan tables Tambo Grande economics

Manhattan Minerals (MAN-T) has released more details from an ongoing feasibility study of the TG-1 deposit on its Tambo Grande property in Peru.

The base case economics for the project includes: undiscounted cash flow of US$220 million; an internal rate of return (IRR) of 21.6% over a 12-year mine life; a net present value (at a 5% discount) of US$118.3 million.

The figures are based on base case metals prices of: US$320 per oz. of gold, US$5 per oz. silver, US90 per lb. copper, and US45 per lb. zinc.

Manhattan says the project is most sensitive to changes in the price of copper, followed by capital costs, gold price and operating costs. The project is relatively insensitive to fluctuations in silver and zinc prices.

The base case assumes a partial debt financing with Peruvian state-owned Centromin. That deal calls for Tambo Grande’s operating company, in which Manhattan has a 75% stake, to use a debt-to-equity ratio of 60:40. The after-tax economics also assume a tax stability agreement with government; the agreement remains to be negotiated. The Peruvian value added tax is excluded from the economics, as it is recoverable during operations.

As proposed, mining will begin with the TG-1 oxide gold-silver deposit and end with the underlying sulphide reserve. The first phase is now expected to cost US$180 million to complete, and the second, US$145 million.

On average, 7,500 tonnes of material will be sent to the mill daily in the first two years — 10,000 tonnes in the third year and 20,000 tonnes in the fourth, when the grinding line from the gold-silver circuit is converted.

Annual production from the oxide deposit, which will be depleted in 3.5 years, is forecast at 260,000 oz. gold and 3.2 million oz. silver. The base metal operation lasts nine years.

Manhattan believes the project’s economics may be improved by: additional test work to boost copper recovery; optimizing the gold-silver process plant’s design; and by expanding the TG-3 mineral resource.

Manhattan can earn a 75% stake in Tambo Grande, which consists of 10 concessions measuring 100 sq. km. The company has until May 2003 to complete the feasibility study and secure development financing.

Probable reserves in the oxide portion of the TG-1 desposit total 8.2 million tonnes grading 3.34 grams gold and 58.7 grams silver per tonne. The sulphide portion has probable reserves of 57.8 million tonnes running 1.5% copper and 0.9% zinc, plus 0.5 gram gold and 25 grams silver per tonne.