- Published: 27 April 2009
- Written by Editor
Stingray Unveils Positive Feasibility Study for El Pilar Copper Project, Sonora, Mexico
Stingray Copper Inc. (TSX: SRY) ("Stingray" or the "Corporation") is pleased to announce the results of the definitive Feasibility Study (the "Study") on the Corporation's 100% owned El Pilar oxide copper project located in Sonora, Mexico. Based on the positive results of the Study, the Board of Directors of the Corporation has approved the project for development as a low cost, open pit mine with a solvent extraction and electro-winning plant to treat oxide mineral reserves, subject to financing. M3 Engineering & Technology Corporation ("M3") of Tucson, Arizona has prepared the Study and related NI 43-101 Technical Report.
Peter Mordaunt, Chairman and CEO of Stingray states: "Our objectives, milestones and time table established 2 years ago have been realized both on time and on budget. The results of this Feasibility Study are in line with our conceptual ideas both technically and economically from the start of this detailed work. Oxide copper projects of this size are indeed rare today and the positive conclusions from the Study demonstrate the economics of the project quite clearly. Specifically, low capital and operating costs are characteristic of oxide copper deposits and El Pilar is no exception. Although the financial landscape of the copper industry has changed significantly since the start of work at El Pilar, the demand for copper has remained strong. Stingray's ultimate objective of becoming a mid-tier copper producer in North America with excellent operating infrastructure at El Pilar has not changed."
The basis of the M3 Feasibility Study is the use of a mining contractor in the open pit and owner operated primary crushing, conveying and stacking of ore onto a heap leach pad, followed by solvent extraction and electro-winning (SX-EW) to produce cathode copper. As estimated by Independent Mining Consultants, Inc. of Tucson ("IMC"), Measured and Indicated Mineral Resources are calculated at 276.3 million tonnes ("Mt") averaging 0.31% total copper ("TCu") calculated at a cut off of 0.20% TCu or 344.9 Mt averaging 0.28% TCu calculated at a cut off of 0.15% TCu . Copper mineralization remains open and continues to the south. Within this Resource, Proven and Probable Mineral Reserves planned for mining over a period of 14 years are calculated by IMC to be 229.7 Mt averaging 0.31% TCu calculated at a cut off of 0.15% TCu. The mine-life waste to ore stripping ratio is estimated at 1.61:1.
For this Study, IMC developed a 14 year mine plan and schedule. At the process plant design criteria, the project is expected to produce 35,000 tonnes of copper cathode per year, or 77 million pounds of copper per year, which is achieved during the first 3 years of the project. For economic and practical reasons, the maximum mine and crushing/conveying ore capacity was designed at 17 Mt per year. At this capacity, the average copper cathode production would be 68.3 million pounds per year over 14 years. This production schedule forms the basis for the financial model.
The project's primary crushing plant reaches maximum design, able to deliver 17 million tonnes of ore per year to the heap leach facility designed by Golder Associates, Inc. ("Golder") or approximately 48,000 tonnes per day in year 3. The project is expected to produce 956 million pounds of copper cathode over the 14 year life of mine. The cathode product should meet LME Grade "A" copper cathode specifications (99.99+% copper).
Stingray determined that a copper price of $2.25 per pound was to be used by M3 for the Study. This price is less than the 60:40 formula price that was determined by M3 and was deemed more appropriate and conservative. (All dollar figures referenced are in United States dollars unless otherwise indicated).
Feasibility Study Summary:
The Initial Capital Cost (+/- 15%) for the base case at El Pilar is estimated to be $209 million. This includes a co-generation acid/power plant and the use of a mining contractor. Sustaining capital of $30.9 million is estimated over the life of mine. A cash reserve of $12.8 million is also included in the financial model. The operating cash cost for the project is calculated at $1.20 per pound of copper.
Before taxes, the El Pilar Project has an internal rate of return ("IRR") of 33.6% and the estimated payback of capital is 2.8 years. After taxes the IRR is 25.3% and payback is 3.7 years.
Table 1: Financial Summary El Pilar
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After Taxes Before Taxes
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Cash Unit Operating Cost $1.20/lb Copper $1.20 /lb Copper
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NPV @ 8% $230 M $348 M
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IRR 25.3% 33.6%
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Direct Payback 3.7 years 2.8 years
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Mineral Reserves and Resources, Mining and Production:
Table 2 below summarizes the Mineral Reserves. At a 0.15% total copper cutoff grade, the Proven and Probable Mineral Reserves are 229.7 Mt at 0.31% total copper for 1.55 billion pounds of contained copper. Table 3 summarizes additional Mineral Resource, exclusive of the Mineral Reserves. Measured and Indicated Mineral Resource adds 115.2 Mt at 0.24% total copper or 606 million pounds of contained copper. Inferred Mineral Resource adds an additional 72.8 Mt at 0.24% total copper or 385 million pounds of contained copper.
Table 2: El Pilar Mineral Reserve
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0.15 % Total Copper Cutoff
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Ore Total Cu Cu
Mineral Reserve Class kt (%) (million lbs)
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Proven Mineral Reserve 88,434 0.32 629.7
Probable Mineral Reserve 141,290 0.30 927.3
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Proven/Probable Reserve 229,724 0.31 1,557.0
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Total Pit Material 599,455 kt Waste: Ore 1.61
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Table 3: El Pilar Mineral Resource (Exclusive of Reserve)
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0.15 % Total Copper Cutoff
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Ore Total Cu Cu
Mineral Resource Class kt (%) (million lbs)
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Measured Mineral Resource 15,385 0.24 82.1
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Indicated Mineral Resource 99,798 0.24 523.7
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Measured/Indicated Resource 115,183 0.24 605.8
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Inferred Mineral Resource 72,848 0.24 385.4
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The copper mineralization remains open at its southern limit. The Mineral Resource at El Pilar 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.
IMC performed a trade-off study of owner operation of the mining equipment versus contract mining. Table 4 shows the results of the Study. Based on this information, it was decided to use a contract miner and eliminate additional capital costs.
Table 4: Mining Trade-Off Study
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Owner Mining Contract Mining
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Capital Cost $150.9 M $2.5 M
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Operating Cost $0.870/t $1.109/t
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Metallurgy and Recovery Estimates:
M3 estimated the recoveries and acid consumptions for ore crushed at minus 6 inches that will be placed on the leach heap based on test results from METCON Research, Inc. The estimates were based on locked cycle columns with material at 19 mm and 37.5 mm, after 120 days of leaching. The size distribution for the minus 6 inch ore was calculated by one of the main vendors of crushing equipment. The results show that copper recovery will be 62.9% for year 1, including the preproduction period, 68.4% for year 2, 60.4% for year 3, 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. These estimated recoveries and acid consumptions are shown in Table 5.
Table 5: El Pilar Copper Recovery and Acid Consumption Summary
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El Pilar Copper Recovery Summary(i) Acid Consumption
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kg/t kg/kg Cu
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Year 1 62.9% 19.7 7.3
----------------------------------------------------------------------------Year 2 68.4% 20.6 8.2
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Year 3 60.4% 21.7 11.6
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Years 4 to 6 59.8% 16.2 8.7
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Years 7 to 9 60.9% 17.9 10.1
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Years 10 to 12 60.9% 14.8 8.7
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Years 13 and 14 61.5% 15.2 8.8
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(i) As determined by M3 and extrapolated from column leach test results.
Initial Capital Costs:
The initial capital cost for the El Pilar Project is estimated to be $209 million, including a co-generation acid/power plant and the use of a mining contractor. See Table 6 for detailed information. Sustaining Capital of $30.9 million is estimated over the life of mine plus a cash reserve of $12.8 million. These are all included in the financial model.
Table 6: Initial Capital Cost Estimate
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GENERAL SITE PLAN $3,860,118
MINE $20,499,509
CRUSHING $9,843,309
HEAP LEACHING $34,792,621
SOLVENT EXTRACTION $11,629,528
TANK FARM $3,995,576
ELECTRO WINNING $18,016,427
WATER SYSTEMS $2,169,964
POWER SUBSTATION AND POWER DISTRIBUTION $2,416,447
115KV TRANSMISSION LINE $3,293,224
ACID PLANT, TURBINE, STORAGE AND REAGENTS $58,253,780
ANCILLARIES AND BUILDINGS $5,405,234
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$174,175,736
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TOTAL DIRECT FIELD COST $174,175,736
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MANAGEMENT & ACCOUNTING $715,700
ENGINEERING $4,485,600
PROJECT SERVICES $954,200
PROJECT CONTROL $715,700
CONSTRUCTION MANAGEMENT $4,771,100
EPCM FEE $582,115
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EPCM SUBTOTAL $12,224,415
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TOTAL CONTRACTED COST $186,400,151
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COMMISSIONING AND CAPITAL SPARE PARTS $2,111,670
ADDED OWNER'S COST $4,283,456
CONTINGENCY (15%)(i) $16,463,780
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TOTAL CONTRACTED AND OWNER'S COST $209,259,057
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TOTAL $209,259,057
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(i) Excludes acid plant, turbine, storage and reagents
Operating Costs:
The El Pilar project base case operating and maintenance costs are shown in Table 7. These costs include the use of a mining contractor and all other cost areas that include mine department, crushing, conveying, stacking, heap leach and the SX-EW Plant.
Table 7: Operating Cash Cost - Contract Mine Site Cost Summary ------------------------------------------------------------------- Operating Cost Component LOM $/Cu Lb. ------------------------------------------------------------------- Mining Operations ------------------------------------------------------------------- Contract Mining $0.65 ------------------------------------------------------------------- ------------------------------------------------------------------- Subtotal Mining $0.65 ------------------------------------------------------------------- ------------------------------------------------------------------- SXEW Operations ------------------------------------------------------------------- Crushing $0.02 ------------------------------------------------------------------- Heap Leach $0.30 ------------------------------------------------------------------- SXEW Plant $0.14 ------------------------------------------------------------------- Ancillary Services $0.02 ------------------------------------------------------------------- ------------------------------------------------------------------- Subtotal Processing $0.48 ------------------------------------------------------------------- ------------------------------------------------------------------- Supporting Facilities ------------------------------------------------------------------- General, Administrative and Laboratory $0.07 ------------------------------------------------------------------- Subtotal Supporting Facilities $0.07 ------------------------------------------------------------------- Total Operating Cost $1.20 -------------------------------------------------------------------
Acid Plant Trade-Off Study:
An internal comparative study indicated that a "captive" co-generation sulfur-burning acid plant with a turbine waste-heat electric power generating unit installed at El Pillar would reduce sulfuric acid costs and power costs. It is estimated that the 600 tonne per day acid plant will generate 8 MW of power, of which 1.8 MW will be required to run the acid plant. A final net production cost of sulfuric acid, using sulfur at $40/t as the base case, and including the power credit, is sulfuric acid at a cost of $24.63/t or $0.10 cents per pound copper. The acid component operating costs for the El Pilar Project if an acid plant was not included would be based on the purchase of all sulfuric acid at the study base case price for sulfuric acid at $100/t and results in an average operating component per pound of copper of 42 cents as shown in Table 8.
Table 8: Acid Cost Comparison
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Acid Plant(i) No Acid Plant
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Sulfuric Acid Cost $24.63 per tonne $100 per tonne
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Sulfuric Acid Operating
Cost Component $0.10 per pound copper $0.42 per pound copper
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(i) Based on a "captive" acid plant producing 80% of the project sulfuric
acid requirement with the balance of acid purchased at $100 per tonne
Assumes a base case cost of sulfur for feed to the acid plant of $40
per tonne
Assumes a 1.8 MW power credit to operate the acid plant
Stingray intends to continue with basic engineering on the co-generation plant and review additional capacity to 700-800 t/d to avoid any make up acid requirement and improve the economics of the project. Specific early goals of defining items that could be procured and constructed in Mexico for cost savings will also be determined during this work.
Environmental:
Patricia Aguayo ("AGUAYO"), an expert independent environmental consultant based in Hermosillo, Sonora, was engaged to conduct the Environmental Baseline Study ("EBS") at the El Pilar Project site, including an extensive socioeconomic study in the area. AGUAYO will be assisting Stingray with its submissions and applications to the appropriate government authorities for the requisite approvals and permits. The EBS will serve as the foundation for and will form part of the environmental documents to be presented to the Secretaria de Medio Ambiente y Recursos Naturales ("SEMARNAT") (Natural Resources and Environment Ministry) in order to obtain the permits required to develop this project. An Environmental Impact Study (MIA) is in preparation and will be presented to the Mexican authorities by AGUAYO on Stingray's behalf.
The Socioeconomic Report concludes that the project will have welcomed benefits to the local community. The socioeconomic influence area of the El Pilar project was considered to be a 20 km radius, in which a total of 16 communities were canvassed, consisting of 3,314 inhabitants; the closest one to the project is Miguel Hidalgo (San Lazaro) with a population of 520 people. The general opinion of all people living in the area of influence is in favor of the El Pilar Project. Within the local community 95% of the people in Miguel Hidalgo (San Lazaro) were in favor of the project. The main concerns of the people locally are lack of employment, education and services. The El Pilar Mine once constructed will help the local community address these concerns. Financial Highlights:
The financial evaluation presents the determination of the Net Present Value (NPV), Payback Period (time in years to recapture the initial capital investment), and the IRR for the project as presented earlier. Annual cash flow projections were estimated over the life of the mine based on the estimates of capital expenditures and production cost and sales revenue. The sales revenue is based on the production of copper cathode. The estimates of capital expenditures and site production costs have been developed specifically for this project.
The economic analysis for the base case which evaluates a contract mining option indicates that the project has an IRR of 25.3% after tax with a payback period of 3.7 years after tax, or 33.6% IRR before tax with a payback of 2.8 years before tax. Tables 9 and 10 reflect sensitivities for copper price and owner verses contract miner both before and after tax.
To view the Table 9: IRR Before Taxes graph, please visit the following link: http://media3.marketwire.com/docs/srytable9.jpg.
To view the Table 10: IRR After Taxes graph, please visit the following link: http://media3.marketwire.com/docs/srytable10.jpg.
Project Execution:
The overall project execution program as determined in the Study will take 20 months from detail engineering to commissioning.
Corporate Strategy:
Stingray had a working capital position of $17.2 million as presented in the Corporation's Audited Consolidated Financial Statements for the year ended January 31, 2009.
The Corporation will be working towards project financing while continuing with basic and detail engineering on specific areas of the project. Costs associated with many of the capital cost items included in the Study have been declining in recent months. Stingray and M3 feel there is the potential to reduce the capital cost of the project.
Qualified Persons:
Qualified Persons responsible for the technical content of this news release are Doug Austin, P.E., of M3 and Mike Hester, F Aus IMM of IMC, and David Kidd, P. E., of Golder, and Peter Mordaunt, P.Geo , of Stingray who is also responsible for the corporate content of this release.
Filing of 43-101:
The Corporation intends on filing the corresponding NI 43-101 Technical Report, "El Pilar Project, Executive Summary, Sonora, Mexico" on the SEDAR database and on the Corporation's website.
Stingray Website: www.stingraycopper.com.
TSX Symbol: Common Shares - "SRY" Issued: 58,725,982 common shares
Forward Looking Statements:
Certain statements contained in this news release, including those regarding production, costs, timing of permitting, construction or production, future financial or operating performance and other statements that express management's expectations or estimates of future performance constitute "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. Information concerning the interpretation of mineral resource and reserve estimates and capital cost estimates may also be deemed as forward-looking statements as such information constitutes a prediction of what mineralization might be found to be present and how much capital will be required if and when a project is actually developed. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Corporation cautions the reader that these statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to: general business and economic conditions; the supply and demand for, deliveries of, and the level and volatility of prices of copper as well as petroleum products; the timing of the receipt of regulatory and governmental approvals for the Corporation's development project and other operations; the availability of financing for the Corporation's development project on reasonable terms; Stingray's estimation of its costs of production, its expected production and its productivity levels, as well as those of its competitors; power prices; the ability to procure equipment and operating supplies in sufficient quantities and on a timely basis; the ability to attract and retain skilled staff; engineering and construction timetables and capital costs for Stingray's development project; market competition; the accuracy of our resource estimate (including, with respect to size, grade and recoverability) and the geological, operational and price assumptions on which it is based; tax benefits and tax rates; the Corporation's ongoing relations with its employees, its business partners and joint venture partners and the local communities.
These forward-looking statements involve risks and uncertainties relating to, among other things, changes in commodity prices and, particularly, copper prices, access to skilled mining development and mill production personnel, results of exploration and development activities, the Corporation's limited experience with production and development stage mining operations, uninsured risks, regulatory changes, defects in title, availability of materials and equipment, timeliness of government approvals, actual performance of facilities, equipment and processes relative to specifications and expectations and unanticipated environmental impacts on operations. These factors are discussed in greater detail in the Corporation's most recent Annual Information Form filed on SEDAR. Other assumptions are also more fully described in the Study. The Corporation cautions that the foregoing list of important factors is not exhaustive. Investors and others who base their decisions on the Corporation's forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. The Corporation believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release. Moreover, these forward-looking statements may not be suitable for establishing strategic priorities and objectives, future strategies or actions, financial objectives and projections other than those mentioned above.
Contacts: Stingray Copper Inc. Steve Brunelle Vice President (416) 368-6240 Stingray Copper Inc. Peter Mordaunt CEO & Chairman (416) 368-6240
