Marimaca Copper (TSX: MARI) last night released the results of a feasibility study conducted on their Marimaca Oxide Deposit, outlining a post-tax net present value of US$709 million alongside an internal rate of return of 31%, which is based on US$4.30 a pound copper and an 8% discount rate.
The study itself outlines an operation that would produce on average 43,000 tonnes per annum of copper cathode over a 13 year reserve life from an open pit mine with a strip ratio of just 0.8:1, which includes pre-stripped material. The first five years of operation would see a higher rate of production at 50,000 tonnes per annum of copper cathode, a result of higher recoveries of 77%, versus the life of mine estimate of 72%, due to slightly higher head grades of 0.52% copper being processed versus the life of mine average of 0.42% copper.
Initial capital under the proposed scenario is estimated at US$587 million, with initial designs said to include oversized key equipment and infrastructure to allow for the cost effective scaling of future expansions. Oversized equipment includes the primary crusher, conveyors, water pipeline and infrastructure, power connections, footprints of the heap leach and the ripios dump. The current study is said to represent a “starting point” in a growth strategy that would see the Oxides operation underpin a hub and spoke strategy within the region.
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Outside of initial capital, expansion capital estimates sit at US$77 million, while sustaining capital is estimated and $529 million and closure costs are pegged at US$47 million.
As for costing on a per pound basis once operational, cash costs over the first five years of steady state production are estimated at US$1.45 a pound, alongside AISC of US$1.97 per pound. Over the life of mine, cash costs are expected to average out to US$1.84 a pound, while AISC is estimated at US$2.29 a pound.
Project payback under the base case scenario is estimated at 2.5 years.
“The DFS confirms the MOD’s position as one of the most attractive copper development opportunities globally, especially when compared to those with a production capacity greater than 50ktpa. There are very few copper projects with lower capital intensity, and our competitive operating cost profile, positioned in the second quartile of Wood Mackenzie-benchmarked copper projects globally on an all-in-cost basis, drives superior return on invested capital metrics at virtually any copper price. Cashflows are robust, even at copper prices well below today’s long term consensus copper price, which will support our well progressed debt financing discussions,” commented Hayden Locke, CEO of Marimaca Copper.
Project permitting is said to already be underway, with the receipt of environmental approvals expected to occur before year end. Sectoral permits will then be required to proceed with full construction of the operation.
On the funding side, debt financing workstreams are also underway, with advisory already engaged. Expressions of interest are said to have been received for up to US$500 million, which is based on initial pre-DFS financial models that were prepared by Marimaca. Credit approved term sheets are expected to be announced by year end.
As far as next steps, early works activities are expected to begin, including detailed design and engineering, metallurgical programs, deposits on key equipment, and site preparation works that includes the construction of access roads and buildings. While at the same time strategic alternatives are also being pursued for the development of the project, including engagement with strategic mining companies and copper producers, traders and offtakers and other alternative financing sources.
Marimaca Copper last traded at $11.44 on the TSX.
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