No Headline (March 11, 1996)

Adrian Resources (TSE) estimates that the Petaquilla project in Panama could produce substantial amounts of copper and gold for at least 38 years.

Assuming a daily throughput of 12,000 tonnes, the open-pit project will produce for a minimum of 33.4 years. However, an additional 220 million tonnes of inferred, minable reserves within the pit limits could add 4.6 years to the mine life.

Consultant Fluor Daniel Wright estimates the Botija, Petaquilla and Valle Grande copper-gold porphyry deposits, together with the Molejon epithermal gold deposit, contain a measured and indicated minable reserve of 1.5 billion tonnes grading 0.49% copper, 0.11 gram gold per tonne and 0.015% molybdenite, at a stripping ratio of 1.1-to-1. The estimate is based on a copper-equivalent cutoff grade of 0.35%.

Teck (TSE) can earn half of the 52% interest held by Adrian by delivering a bankable feasibility study by November and funding Adrian’s share of production costs. The remaining 48% interest in the Petaquilla property is owned by Inmet Mining (TSE).

Teck is carrying out an extensive program of infill diamond drilling on the Botija, Petaquilla and Valle Grande deposits as part of its final feasibility work on the project. The company has completed 35 drill holes since mid-January.

Recent results include 205 metres grading 0.63% copper, 0.08 gram gold and 0.041% molybdenite (including an interval grading 0.80% copper, 0.1 gram gold and 0.053% molybdenite over 91.6 metres) for hole 96-1 at Petaquilla, and 153.1 metres grading 0.88% copper, 0.3 gram gold and 0.019% molybdenite for hole 96-22 at Botija.

Adrian is confident the infill drilling completed by Teck will result in the upgrading of the inferred 220 million tonnes to the proven and probable category, in addition to the outlining of new reserves.

At Petaquilla, plans call for the processing of 175 million tonnes of high-grade material during the first four years of production. The ore will be mined from the Molejon deposit and from seven starter pits within the three copper-gold porphyry deposits. For the first four years, annual output is forecast at 569 million lb. copper, 227,000 oz. gold and 10.1 million lb. molybdenite.

>From the fifth through to the 11th year, annual production is projected at 486 million lb. copper, 101,000 oz. gold and 9.3 million lb. molybdenite. >From the 12th through to the 33rd year, these figures are expected to fall to 360 million lb., 70,000 oz. and 8.1 million lb., respectively.

Over the initial 33.4-year mine life, annual production will average 411 million lb. copper, 95,300 oz. gold and 8.6 million lb. molybdenite. An average on-site cash cost was previously estimated at US35 cents per lb. copper, or US$3.72 per tonne.

The capital cost is estimated at US$799 million; working capital, at US$25.7 million.

Fluor Daniel Wright concludes that, based on prices of US$1 per lb. copper, US$400 per oz. gold and US$4 per lb. molybdenum, the project will generate cash flow of US$4.2 billion from US$11.5 billion in revenue, over its entire mine life.

The net present value, using a 10% discount, is estimated at US$955 million, with an internal rate of return of 28.6% and a payback period of 2.6 years. A comparison study, using a copper price of US$1.20 per lb., estimates a net present value of US$1.54 billion, an internal rate of return of 38% and a payback period of two years.