Positive preliminary study for Petaquilla

— A preliminary feasibility study by Kilborn Engineering Pacific recommends the Petaquilla and Botija copper-gold deposits proceed to the final feasibility stage.

Adrian Resources (TSE), which can earn a 52% interest in the project, continues to explore the Panamanian property and is also continuing discussions with several majors interested in the bulk-tonnage project. The play still has considerable exploration potential, as the study does not include results from five other deposits discovered on, and adjacent to, the property.

The total geological resource is 1.6 billion tons grading 0.48% copper and 0.126 grams gold per tonne, plus silver and molybdenum values. But the preliminary study excludes the more recent discoveries (as these are yet to be fully defined) and focuses on the more advanced Petaquilla and Botija deposits.

“Essentially, the study portrays a very large, medium-grade, economically viable project with very competitive technical and financial characteristics,” says Robert Sibthorpe, mining analyst with Yorkton Securities.

Initial capital costs are estimated at US$452 million, including a contingency of US$59 million. However, Kilborn notes that capital costs associated with construction of a port facility could be reduced through further engineering studies.

Project economics were assessed at a base case that took into account only diluted, measured and indicated minable reserves. This base case was used to determine cash flow, net present value and the internal rate of return. Diluted minable reserves (measured and indicated only, at a 0.19% copper-equivalent cutoff grade) total 495 million tonnes grading 0.54% copper, 0.014% molybdenum, 0.12 grams gold and 1.36 grams silver. If reserves from the inferred category are included, the total minable reserve increases to 743.75 million tonnes grading 0.53% copper, 0.014% molybdenum, 0.12 grams gold and 1.31 grams silver (using a 0.19% copper-equivalent cutoff).

Adrian President Chet Idziszek says some of the minable reserves from the inferred category will likely be converted into measured and indicated reserves as infill drilling proceeds, thereby extending the minelife beyond current estimates. This category (inferred) amounts to some 41% of the total geological reserve at Petaquilla, and some 34% of the total reserves at Botija.

“The deposits are still both open for expansion,” Idziszek explains. “There is still plenty of blue sky.”

For the base case, the Kilborn study used copper and gold prices of US$1 per lb. and US$375 per oz., respectively. Pretax cash flow for the initial 22-year minelife is projected to have a net present value of US$170.6 million at a discount rate of 10%, an internal rate of return of 16.34% and a payback period of 4.7 years.

The study projects a 60,000-tonne-per-day operation generating more than US$3 billion in revenue. The on-site operating cost is projected at US34 cents per lb. of copper produced.

The average operating cost includes mining costs of US$1.30 per lb., processing costs (including power) of US$2.13 per lb. and general costs (including administration and infrastructure) of US20 cents per lb. Project economics are based solely on recoverable copper and gold, with no credit for contained silver and molybdenum.

Plans call for the Botija deposit to be mined first, with an initial stripping ratio of 0.79-to-1. The overall stripping ratio will be 1.36-to-1. Petaquilla will be pre-stripped as Botija nears completion and, in year 15 of the project, is expected to be operating at an average stripping ratio of 1.22-to-1.

Based on metallurgical test work, the concentrate grade will average 27% copper, 4.4 grams gold, 58.12 grams silver and 0.55% molybdenum. The work index averages 12.7 kWh per dry tonne for Petaquilla ore and 13.6 kWh for Botija.

Adrian is earning its interest in the project from Metall Mining (TSE) of Toronto.