Positive feasibility for Stingray’s El Pilar copper project

Stingray Copper (SRY-T) has decided to develop its El Pilar oxide copper project in north-central Sonora, Mexico as a low cost, open-pit mine with a solvent extraction and electro-winning plant.

A just-released feasibility study indicates that Stingray’s 100%-owned El Pilar deposit, about 15 km south of Mexico’s border with the United States, can produce 35,000 tonnes of copper cathode or 77 million pounds of copper per year. That rate can be reached during the first three years of the project.

El Pilar also lies 45 km northwest of the Cananea copper mine of Grupo Mexico, the largest porphyry copper deposit in Mexico and one of the largest in the world.

In a prepared statement, Peter Mordaunt, Stingray’s chairman and chief executive, said oxide copper projects of El Pilar’s size are “quite rare” today. He also noted that while the financial landscape of the copper industry has “changed significantly” since work began at El Pillar, copper demand has remained strong.

El Pilar is expected to produce 956 million pounds of LME Grade A copper cathode over the course of its 14-year mine life.

Copper mineralization remains open and continues to the south.

At a capacity of 17 million tonnes per year, average copper cathode production will be about 68.3 million pounds per year over 14 years.

The Toronto-based junior says it has decided to use a contract miner and eliminate additional capital costs.

The initial capital cost, plus or minus 15% for the base case, is estimated to be about US$209 million.

That includes a co-generation acid/power plant and the use of a mining contractor. A copper price of US$2.25 per lb. was used for the feasibility study.

Before taxes, the study indicates El Pilar’s internal rate of return will be about 33.6% and the proejct will have an estimated payback period of 2.8 years.

After taxes the IRR drops to 25.3% and payback increases to 3.7 years.

The waste to ore stripping ratio over the mine life is estimated at 1.61:1.

At a 0.15% total copper cutoff grade, proven and probable reserves total 229.7 million tonnes at 0.31% total copper for 1.55 billion pounds of contained copper.

Measured and indicated resources, exclusive of reserves, add 115.2 million tonnes at 0.24% total copper, or 606 million pounds of contained copper. Inferred resources add an extra 72.8 million tonnes at 0.24% total copper, or 385 million pounds of contained copper.

The resource exceeds the mining reserve scheduled for mining in the study and additional mineral resources and mining reserves may be available at El Pilar subject to appropriate programs of drilling and confirmation.

The study estimates that copper recovery will be about 62.9% in the first year, including the preproduction period, 68.4% for the second year, 60.4% for the third year, 59.8% for years 4-6, 60.9% for years 7-9, 60.9% for years 10-12, and 61.5% for years 13 and 14.

News of the positive feasibility study sent Stingray’s shares up 10.8% or 4¢ apiece to 41¢ in mid-day trading in Toronto.

The company has a 52-week trading range of 13¢-82¢ per share and has 58.7 million shares outstanding.