Metallica, Xstrata upgrade El Morro copper-gold resource (November 13, 2006)

Metallica Resources (MR-T, MRB-X) has announced a substantial upgrading of its La Fortuna copper-gold deposit at its El Morro project in Chile.

The updated estimate on the La Fortuna deposit was completed by Metallica’s joint venture partner Xstrata (XTA-L), which owns 70% of the El Morro project.

Measured and indicated resources now stand at 488 million tonnes grading 0.59% copper and 0.52 gram gold per tonne, using a lower cutoff grade of 0.3% copper.

With all measured, indicated and inferred resources combined, the latest estimate represents a 7% increase in total tonnes, a 7% increase in copper and a 15% increase in contained gold over the 2005 resource estimate.

About 70% of the La Fortuna resource is now classified in the measured and indicated categories compared to 2005 when only 38% was indicated and the remainder inferred.

The new resource estimate is part of Xstrata’s $40-million prefeasibility study, to be completed by early 2007.

The resource classification is based partially on a simulated mine pit and metal prices of US$1.20 per lb. copper and US$400 per oz. gold.

A 1,150-metre underground decline is also in progress for geotechnical characterization and bulk metallurgical sampling as a part of a final feasibility study due by mid-September next year.

This news comes as Metallica gets construction back on track at its Cerro San Pedro silver and gold project in Mexico, where a suspension of its explosives permit held up construction of the haul road, pre-stripping in the pit area and the placement of ore and leach pads, delaying its ability to produce and sell gold and silver from the mine.

According to its third quarter results, Metallica will have to get working capital financing until the mine generates sufficient cash flow from operations.

Completion of the Cerro San Pedro project is expected this December.

Most of the company’s expenditures are being made on Cerro San Pedro, all of which have been capitalized. Financial results consist of interest income, general and administrative expenses, exploration expenses, foreign exchange gains and losses and other non-cash expenses.

Metallica reported a loss of $600,000 (1 per share) for the third quarter compared to a net income of $9.66 million (12 per share) for the third quarter in 2005. The company blamed the decrease in net income on a one-time $10 million earn-in payment from Xstrata in 2005 for El Morro. The payment resulted in an $8.35 million income and a $1.4 million decrease in foreign exchange gains on cash balances held in Canadian dollars.

For the first nine months of 2006, Metallica was $960,000 in the red (1 per share) compared to a net income of $7.94 million (10 per share) for the nine months ended Sept. 30, 2005.