TORONTO (miningweekly.com) – TSX-listed Inmet Mining has signed an option agreement with Korea's LS-Nikko, which will have the right to buy 20% of Inmet's Cobre Panama (formerly Petaquilla) copper project, the firm announced late on Wednesday.

LS-Nikko, through its subsidiary Korea Panama Mining (KPMC), can also opt to increase the option interest to 30% before January 31, 2010.

Inmet took over sole ownership of the copper/gold/molybdenum asset last year, after it bought Petaquilla Copper and a third partner, Teck Resources, sold its 26% holding to Inmet for about $30-million.

The company has said for some time it is looking for a partner in the project.

During the option period, KPMC and Inmet will fund their respective proportionate shares of project development costs to a maximum of $150-million, and Inmet will fund costs beyond that.

Assuming $150-million is spent on the project during the option period, KPMC's non-refundable share would be $30-million, with a 20% option interest or $45-million with a 30% option interest.

The option will be exercisable for a 60-day period after Inmet has publicly announced a decision to proceed with construction and development of the project, the firm said.

ON SCHEDULE

Earlier on Wednesday, Inmet COO Jochen Tilk said the company was on schedule to have the final social and environmental impact study ready and finalise the front-end engineering and design (Feed) for the project by the first quarter of 2010.

The company has completed a drilling programme on the project, and is compiling the data it will need for mineral resource and reserve statements.

A reserve estimate for Cobre Panama will have to wait for final pit designs, a mine plan and the completion of the Feed study, but Tilk said that the results of the latest drilling programme have been “very consistent” with Inmet's expectations.

“And we are confident that the final mineral reserve will align with our objective of a minimum 30-year mine life at 150 000-t/d throughput rate,” he said on a conference call.

The company plans to begin detailed engineering on the project no later than the middle of 2010, Tilk said.

Assuming all goes to plan, and permits are not delayed, the company still believes it can have construction completed by the end of 2014.

In February 2008, initial results from a Feed study under way at the time indicated that the project could cost a whopping C$3,5-billion to build – up from an earlier estimate of $1,7-billion.

POWER PLANT

Inmet has signed a joint development agreement with Suez Energy, to develop a coal-fired power plant in parallel with the development of the Cobre Panama mine.

The plant will supply power to the plant, as well as about 50 MW to be fed into the Panamanian grid.

Tilk said the proposed plant is expected to have a positive effect on both capital and operating costs for the project.

The agreement is “a significant step forward”, he commented.

However, he emphasised that the final capital requirements will depend on the outcome of the Feed study, which has incorporated both scope changes and a much higher level of detail than earlier studies.

On the operating cost side, the initial plan had been to power the mine with oil-fired generators, which would have implied power costs of some 12c or 13c/kWh.

Given that the coal for the proposed plant will be sourced from nearby Colombia, the costs will be much lower, probably at about 9 kWh, Tilk said.

Inmet and Suez Energy will work together over the next few months to finalise a plant design.

The agreement signed between the two also includes a term sheet governing a future power purchase agreement, which could be signed by mid-2010 (ahead of the detailed design, procurement and construction of the power plant).

Inmet has base metals and gold mines in Spain, Turkey, Finland and Canada, as well as a stake in the Ok Tedi mine, in Papua New Guinea.

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