TORONTO (miningweekly.com) – With a preliminary economic assessment (PEA) for its flagship project in hand and Peru having made it a national goal to double its copper output by next year, Canadian copper explorer Panoro Minerals is positioned for growth.

The PEA published early last month on its Cotabambas porphyry copper/gold/silver deposit project, 48 km south-west of the city of Cuzco, in the Apurimac region in Southern Peru, was a significant milestone for the company and opened up a new constellation of nondilutive financing opportunities, Panoro president and CEO Luquman Shaheen said during a recent investor presentation in Toronto in which Mining Weekly Online participated.

Located within the productive Andahuaylas-Yauri copper/gold belt of southern Peru, Cotabambas counted as one of several significant copper deposits, including Glencore Xstrata’s Las Bambas and Antapaccay projects, Hudbay Minerals’ Constancia mine, which had last month achieved commercial production, and First Quantum Minerals’ Haquira deposit.

Already being a critically important mining country, the Peruvian government had bolstered this position by setting a national strategic goal to double its copper output by 2016. In the long term, the country wanted to challenge Chile as the top copper producer, but, to do that, would have to again double output, Shaheen explained.

Nevertheless, Peru had the advantage of having much more water available for copper processing, which added to significantly lower power costs.

“The area is the nexus for copper production in Peru and could produce 10% of the world’s copper in the future,” Shaheen said, adding that the region had good established infrastructures, some of which were privatised.

PEA RESULTS
The product of more than five years exploration work and prepared by Amec Foster Wheeler Perú, the $1.38-billion Cotabambas project attracted an after-tax net present value at a 7.5% discount rate of $627.5-million and an internal rate of return of 14.4%, with the payback period estimated at four years. The PEA assumed a base-case copper price of $3.25/lb.

The PEA envisioned an openpit mining and flotation process at a design throughput of 80 000 t/d, with a mine life of 19 years, potentially starting from 2020.

Over this time, the project would, on average, produce 143.4-million pounds of copper a year; 88 000 oz/y of gold and 967 200 oz/y of silver.

The average direct cash costs were estimated at $1.26/lb of copper, net of by-product credits, placing the project among the lowest-cost quartile of global copper producers.

At a cutoff grade of 0.2% copper, Cotabambas currently held an indicated resource of 117.1-million tonnes, grading 0.42% copper, 0.23 g/t gold, 2.74 g/t silver and 0.001% molybdenum. In the inferred category 605.3-million tonnes of resources, grading 0.31% copper, 0.17 g/t gold, 2.33 g/t silver and 0.002% molybdenum, were identified.

Starting in 2010, Panoro grew the project to 605.3-million tonnes, of which 500-million was included in the current mine plan.

Ores would be mined first from the larger Ccalla openpit and then from the Azulccaca pit, as the Ccalla pit was depleted. Mining would be by the conventional truck-and-shovel method to the processing plant that would be located 500 m to the north side of the Ccalla pit limits.

The life-of-mine waste/mill feed strip ratio was 1.03.

“The PEA was meant to answer two main questions: ‘Is there a technical flaw with the deposit that could make it nonviable?’ and ‘What are the technical areas that should be delved into in more detail to move the project through to a BFS [bankable feasibility study]?’

“There are no major technical issues and other elements were found to be par for the course for a project of this scale,” Shaheen retorted.

FINANCING
He noted that with $5-million in the company’s coffers as at early last month, the company would need to undertake financing, but stressed that it would only take place when the time was right.

However, Shaheen pointed out that with the Cotabambas PEA having confirmed several by-products present, it opened up a host of other nonequity financing avenues.

“The precious metals component of the resource lends itself to streaming-type transactions,” he advised, noting that the company would try as far as possible to avoid tapping the dilutive equity markets.

Shaheen pointed out that work at Cotabambas was progressing towards completing a feasibility study and possibly a bankable feasibility study BFS, at which time it would consider selling or partnering options for the projects. With a significant project in the region, base metals miner HudBay Minerals was a potential suitor, given that it already owned 11% of Panoro’s outstanding stock.

Shaheen pointed out that the potential to double the current resource was “very good”.

Further, the molybdenum component was not currently included in the mine plan, but represented a future opportunity. Neither was the oxide zone included in the mine plan, but Shaheen said further exploration would be required to lift the tonnage to justify building a heap leach pad.

Meanwhile, Panoro was also progressing with the second of its 13 projects in Peru, the much smaller Antilla project, for which it was currently completing a PEA. The project currently held an indicated resource of 188.5-million tonnes, grading 0.4% copper and 0.09% molybdenum. Shaheen said the company was hoping for a 200-million-tonne mine plan.

Antilla might move to the BFS sooner, because of its smaller size.

“We are pretty confident that around the corner there is going to be a stronger copper space and, therefore, a stronger space for copper explorers. We feel that our company and projects should be some of the first to attract some good attention when the market is ready to put that attention to the junior space,” Shaheen stated.

At C$0.16 apiece, Panoro's TSX-V-listed stock was trading more than 40% lower year to date. The copper price fell by about 30% during December and January, but had since regained most of those losses and the red metal was fetching about $2.90/lb on Friday.