Portuguese zinc-copper project viable

A prefeasibility study indicates that the Aljustrel mining complex in southern Portugal can be brought into production swiftly and economically.

Rescan Engineering performed the prefeasibility study which was modeled on a long-term zinc price of US55 cents per pound.

Partners Auspex Minerals (APJ-V) and International Vestor Resources (IVS-V) can each earn a 37.5% interest in the project from the Portuguese state mining company Empressa de Desenvolvimento Mineiro by bringing it into production.

Several minable deposits occur in the Aljustrel mining lease, though the prefeasibilty study is based on mining and processing primarily from the Feitais and Moinho deposits. The former contains 13 million tonnes with diluted grades averaging 5.94% zinc and 2.02% lead, plus 66 grams silver per tonne; the latter, 4.6 million tonnes with diluted grades of 5.44% zinc, 2.18% lead and 66 grams silver.

Auspex says current reserves can support a 12-year operation and that the potential to define additional high-grade reserves is excellent. Core drilling and channel sampling are under way in an attempt to define higher-grade minable zones at Feitais and Moinho.

The project is expected to yield an internal rate of return (IRR) of 43.9% on an after-tax basis. The net present value (NPV) of the project has been set at US$65.4 million using a 10% discount rate. For the joint-venture partners, the IRR was forecast to be 32.6% with a NPV of US$37.2 million using a discount rate of 10%. The project’s payback period is pegged at 2.4 years.

The capital cost of starting production is estimated at US$38 million, which includes the cost of a feasibility study, plant modifications, mine development and payments to creditors.

Production is forecast at 1.5 million tonnes per year, which would yield 153,000 tonnes of zinc concentrate grading 50% zinc, 30,000 tonnes of lead concentrate averaging 50% lead, and 50 oz. silver per tonne in concentrate.

Auspex says the mines exhibit excellent ground conditions for open-stoping, thus eliminating the need for backfilling and keeping mining costs to a minimum. Operating costs are projected at US$21 per tonne, which is equivalent to a net cost of US36 cents per lb. of payable zinc. This includes costs associated with mining, processing and marketing of the concentrates.

Metallurgical tests indicate zinc and lead recoveries of 85% and 50%. Auspex expects that half of the silver will be recovered to the lead concentrate. Also, conversion of the grinding circuit to semi-autogenous from autogenous is expected to improve recoveries. The circuit’s ultimate capacity will be 1.5 million tonnes per year. Modifications to the flotation circuit are planned as well.

During the initial 12-year production period, Auspex and International Vestor will mine and process only ore containing high zinc and low copper values. Higher-grade copper zones, which are spatially separated from the zinc-rich zones, would be mined and processed periodically, if copper prices warrant.

A full feasibility study, led by Steffen Robertson & Kirsten, is under way. Hallam Knight Piesold is responsible for all environmental studies.

Auspex recently released more results from a second phase of diamond drilling, which consisted of 2,160 metres and 12 holes. The program was designed to test the updip extent of the Feitais deposit, which lies 50 metres below surface. The deposit remains open in the up-plunge direction. Drill results continue to confirm the presence of high-grade mineralization, to which the following highlights testify:

• Hole 24 intersected 18.75 metres grading 4.69% zinc, 1.26% lead, 0.28% copper, 60.7 grams silver and 0.96 gram gold, starting at a down-hole depth of 173.8 metres. Included in this interval was a 7.5-metre intercept averaging 6.3% zinc, 1.67% lead, 0.29% copper, 88.09 grams silver and 1.14 grams gold.
• Hole 15 cut 22.77 metres of 2.16% zinc, 0.82% lead, 0.04% copper, 22.04 grams silver and 0.33 gram gold starting at a down-hole depth of 122 metres. Within this interval was a 3.25-metre intercept of 5.61% zinc, 2.62% lead, 0.05% copper, 43.84 grams silver and 0.59 gram gold. A 2.27-metre interval, farther down the hole, assayed 4.91% zinc, 1.71% lead, 0.07% copper, 43.8 grams silver and 0.49 gram gold.
• Hole 16 returned 26.14 metres of 3.48% zinc 1.07% lead, 0.08% copper, 29.59 grams silver and 0.35 gram gold starting at a down-hole depth of 92.5 metres. Included in this intersection was a 3.72-metre interval of 5.28% zinc, 1.37% lead, 0.11% copper, 40.57 grams silver and 0.3 gram gold. Another interval, farther down the hole, cut 4.7 metres averaging 4.64% zinc, 0.81% lead, 0.1% copper, 25.95 grams silver and 0.32 gram gold, and yet another interval intersected 3.76 metres of 5.4% zinc, 2.34% lead, 0.09% copper, 58.05 grams silver and 1.05 grams gold.
• Hole 17 hit 7.15 metres grading 5.19% zinc, 1.65% lead, 0.11% copper, 44.29 grams silver and 0.6 gram gold starting at a down-hole depth of 83.1 metres. Included within this interval was a 4-metre intercept that assayed 7.3% zinc, 2.03% lead, 0.11% copper, 46.4 grams silver and 0.64 gram gold.
• Hole 19 intersected 13.56 metres of 2.11% zinc, 0.51% lead, 0.1% copper, 35.3 grams silver and 0.45 gram gold starting at a down-hole depth of 82.5 metres. Included in this intersection was a 1.66-metre interval of 4.59% zinc, 0.5% lead, 0.23% copper, 40.9 grams silver and 0.48 gram gold.
• Hole 21 cut 13.07 metres averaging 4.23% zinc, 1.38% lead, 0.25% copper, 33.15 grams silver and 0.62 gram gold starting at a down-hole depth of 207.4 metres. Included in this interval was a 6.7-metre intercept of 5.94% zinc, 2.43% lead, 0.21% copper, 55.47 grams silver and 0.67 gram gold.
• Hole 23 intersected 12.2 metres of 4.2% zinc, 2.01% lead, 0.26% copper, 77.43% silver and 1.3 grams gold starting at a down-hole depth of 167.4 metres. Within this intersection was an 8.2-metre intercept of 5.02% zinc, 2.03% lead, 0.28% copper, 65.15 grams silver and 1.46 grams gold.

Drilling is to resume in the new year, when the objective will be to define reserves in the high-grade portion of the Feitais deposit. Also, metallurgical tests will soon be performed on a 3-tonne bulk sample recently collected from underground workings.

In related news, International Vestor announced a non-brokered private placement of 680,000 units priced at 40 cents each. A unit consists of one share and half of a non-transferable share purchase warrant. Each whole warrant entitles the owner to buy an additional share over a 2-year period, at 40 cents per warrant in the first year and 50 cents in the second. The proceeds will contribute to working capital.