Positive study for Andacollo

Management of Canada Tungsten (TSE) plans to develop the Andacollo copper property in Chile, with the red metal to be recovered by solvent-extraction electrowinning.

The Vancouver-based company (now held 48.3% by Toronto-listed Aur Resources) hopes to begin development early next year, leading to initial cathode copper production in the second half of 1996. These plans, based on the results of an independent feasibility study, are still subject to financing of capital costs estimated at US$68.9 million.

Canada Tungsten intends first to exercise its option to acquire the project from a Chilean government entity. An initial payment of $500,000 will be followed by additional payments, over a 10-year period, totaling US$4 million. Andacollo will be owned 70% by Canada Tungsten and 30% by a Chilean company, with the government entity retaining the equivalent of a 10% net profits interest after payback.

Plans call for the production of 44 million lb. copper annually over an 11-year mine life, based on a minable reserve of 34.6 million tonnes averaging 0.87% copper. These reserves consist of oxide and supergene material, to be mined by open-pit methods. Metallurgical recoveries are forecast at 75% of total copper.

Cash operating costs over the life of the mine are expected to average US54 cents per lb., although unit costs will be lower in the early years when higher-than-average-grade ore will be mined.

Revenue over the 11 years (at US$1 per lb. copper) is projected at US$484 million. A financial analysis indicates the project has a net present value (at a discount rate of 8%) of US$35 million — assuming 100% equity financing and no repatriation of cash flow, after payback, outside of Chile. On this basis, payback is expected to be achieved in fewer than four years. Canada Tungsten expects Andacollo to be a “highly profitable” mining operation, with an indicated internal rate of return of about 20% on a full-equity basis.

The potential exists to extend the mine life through the development of a 240-million-tonne porphyry-copper sulphide deposit, which underlies the oxide and supergene sulphides to be mined in the current plan. The property is also considered to have potential for the discovery of both gold and copper reserves.

Aur and Canada Tungsten previously announced plans to merge into a larger, single company that would have advanced projects in both North and South America.