THEMAC Resources Group Limited
TSX VENTURE : MAC.H

July 08, 2010 20:25 ET

THEMAC Files Completed Preliminary Economic Assessment for Copper Flat Project, New Mexico

THEMAC Returned to Trading July 8, 2010 Under the Symbol MAC.H

VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 8, 2010) - THEMAC Resources Group Limited ("THEMAC" or "the Company") (TSX VENTURE:MAC.H) (MAC.H) is pleased to announce that the preliminary economic assessment ("PEA") entitled "NI 43-101 Preliminary Assessment, THEMAC Resources Group Limited, Copper Flat Project, Sierra County, New Mexico" and dated June 30th, 2010, commissioned by the Company from SRK Consulting (US), Inc ("SRK") for the Copper Flat copper-molybdenum-gold-silver project ("Copper Flat") in New Mexico, USA has been submitted to the TSX Venture Exchange and filed on SEDAR on July 8, 2010.

As announced on June 30, 2010 THEMAC has entered into a definitive transaction agreement to acquire an exclusive option over a 100% interest in Copper Flat (the "Transaction") from New Mexico Copper Corporation (now renamed Copper Flat Corporation), a subsidiary of Mercator Gold plc.

Highlights:

  • PEA completed by SRK with robust results:
    • Payback within 2 years from start of production.
    • Mine life 17 years.
    • Life-of-mine ("LoM") operating costs US$1.41/lb copper equivalent.
    • Average production of approx. 36 million lbs copper and 628,000 lbs molybdenum per annum over first 13 years of operations.
    • Average production of approx. 15 million lbs copper and 335,000 lbs molybdenum per annum over a further 4 years.
    • NPV (6%) US$144 million.
    • IRR (post-tax) 23%.
    • Initial capital US$179 million and sustaining capital over the LoM of US$112 million.
    • Mine closure costs of US$40 million.
  • A boost to the project economics is anticipated once gold and silver values are incorporated into the financial model and as aspects of the proposed mining operation are optimised.
  • The updated Copper Flat Mineral Resource estimate by SRK (announced on May 25, 2010) now includes molybdenum.
  • Upon completion of the Transaction THEMAC will proceed with a prefeasibility study, and pending positive economic results at that stage, onto a full feasibility study.

Barrett Sleeman, Chief Executive Officer of THEMAC, comments:

"These are highly encouraging figures which demonstrate the Copper Flat project's economic robustness, even before the inclusion of gold and silver values in the financial model.

Bringing to account the gold and silver content of the deposit, which is documented by historic reserve estimates and indeed historic production, will be a main objective for THEMAC over the coming months.

Furthermore, as feasibility work continues we believe that the project can be optimised in several areas to positive economic effect."

Financial Model Results

The following provides the basis of the PEA LoM plan and economics:

  • Measured, Indicated and Inferred resources were included.
  • An overall average metallurgical LoM recovery of 90% Cu and 55% Mo was assumed.
  • Mill recoveries of gold and silver were excluded.
  • The financial model was prepared on an unleveraged, post-tax basis.
  • All costs are in Q2 2010 US constant dollars.
  • Market price assumptions of US$3.00/lb copper and US$12.00/lb molybdenum. Copper and molybdenum concentrates are currently assumed to be sold to nearby smelters in Arizona.
  • Operating costs have been estimated using SRK's in-house and commercial database information. Over the LoM, operating costs are projected to be approximately US$7.84/ short ton of ore milled.
  • Capital costs have also been estimated using SRK in-house and commercial database information. Capital costs for the mill (crusher, grinding mills, flotation cells, etc.) based on recently completed studies have been applied. The capital costs presented are to a PEA level of accuracy and are expected to be within +/- 40%. A contingency of 20% has been applied to account for exclusions in the estimate.
  • A cut-off grade strategy was incorporated to improve mill feed head grades. This would involve sending material with a cut-off grade greater than 0.20% Cu to the crusher and incremental material between 0.14% and 0.20% to a low-grade stockpile during the first 14 years of operations. At the end of the in situ mining, the low-grade stockpile material would be fed to the crusher starting in the fourth to final year of operation (3 to 4 years of low-grade stockpile processing).
Table 1
Financial Model Results (US$)
  Value   Units
Market Prices      
Copper $ 3.00     /lb-Cu
Molybdenum $ 12.00     /lb-Mo
Estimate of Cash Flow (all values in $000s)          
Net Smelter Return (NSR)          
Copper Concentrate $ 1,494,203   $ 000s
Molybdenum Concentrate $ 102,215   $ 000s
NSR $ 1,596,418   $ 000s
Freight & Handling   ($24,828 ) $ 000s
Gross Revenue $ 1,571,591   $ 000s
Royalty   ($51,077 ) $ 000s
Net Revenue $ 1,520,514   $ 000s
Operating Costs          
Mining $ 208,354   $ 000s
Processing $ 488,207   $ 000s
G&A $ 52,535   $ 000s
Total Operating $ 749,096   $ 000s
Operating Margin (EBITDA) $ 771,418   $ 000s
Initial Capital $ 179,037   $ 000s
LoM Sustaining Capital $ 111,720   $ 000s
Income Tax $ 133,387   $ 000s
Cash Flow Available for Debt Service $ 347,274   $ 000s
NPV6% $ 144,497   $ 000s
IRR   23 %    

Mining & Processing

Mining operations at Copper Flat will be characterized by a low stripping ratio pit (strip ratio of 0.38, waste to minable resource) and will benefit from relatively short ore hauling distances, bulk material mining and ample operational mining widths.

A conceptual process flowsheet based on a conventional crushing, SAG-ball mill grinding, bulk flotation, copper-molybdenum separation and concentrate handling operation was developed for processing 17,500 short tons per day with an overall availability factor of 93%. The major equipment would be the same size as originally installed by Quintana Minerals Corporation ("Quintana Minerals"), which brought the project into production in 1982.

The present flowsheet design incorporates more modern equipment where applicable. For example, larger flotation cells have been selected for the rougher flotation, bulk cleaner flotation cells are column cells and tower mills replaced the regrind mills. The design incorporated into the PEA is considered standard practice in the mining industry.

A 4-year pre-production period is estimated to be required to allow for permitting, detailed engineering, and due diligence/financing and construction/commissioning.

Updated Resource Estimate

SRK has completed an updated Mineral Resource estimate for the Copper Flat deposit. An estimate including copper only was announced by the Company on May 25, 2010. Molybdenum has now been incorporated, as detailed in the Table 2 below.

SRK has recommended that in the next stage of study the Copper Flat resource model should be developed to include gold and silver so as to be reportable as a Mineral Resource, and thus ultimately also a Mineral Reserve within a mine plan, in accordance with NI 43-101 standards.

Table 2
SRK Mineral Resource Statement for the Copper Flat Deposit*, May 6, 2010
Resource Quantity Grade Cu Contained Cu Grade Mo Contained Mo
Classification (Mst) (%) (million lbs) (%) (million-lbs)
Indicated 107 0.303 645 0.010 21.4
Inferred 46 0.240 222 0.006 5.6
* Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. Mst refers to millions of short tons. All figures have been rounded to reflect the relative accuracy of the estimates. The cut-off grades are based on metal price assumptions of US$3.50/lb of copper, and a metallurgical recovery of 90.9% for copper. Economic assumptions used for reporting molybdenum were a metal price of US$10.00/lb of molybdenum, and a metallurgical recovery of 54.3%. Gold and silver were not used in the pit limits optimization for reporting resources.
† Reported at a cut-off grade of 0.12% Cu contained within a potentially economic open pit.

The Mineral Resources are reported above a 0.12% copper cut-off grade to reflect "reasonable prospects" for economic extraction. SRK considers that portions of the Copper Flat deposit are amenable for open pit extraction, and has not considered underground mining methods for deeper portions of the deposit. The "reasonable prospects for economic extraction" requirement was tested by designing a series of conceptual open pit shells using the Lerchs-Grossman optimizing algorithm. These parameters were selected by SRK to reflect the intent that the resource should comprise material that has the potential to be economically mineable in the future. The reader is cautioned that the results from this pit optimization are used solely for the purpose of reporting Mineral Resources that have "reasonable prospects" for economic extraction by an open pit. This is separate from the pit optimization completed for the purposes of PEA mine engineering that estimates potentially mineable material on a more conservative basis. After review of several scenarios considering different metal prices, SRK assumed an "optimistic" copper price of US$3.50/lb. Other parameters included a metallurgical recovery for copper of 90.9%; mining costs of US$1.72/short ton mined; processing and G&A costs of US$5.49/short ton processed, and slope angles of 45º in all areas. Pit optimization for PEA mine engineering purposes used a copper price of US$2.75/lb.

Phase II Drilling Program

A Phase II drilling program for Copper Flat has been developed based on parameters provided by SRK. The objectives of this program (to follow on from the Phase I drilling program completed in early 2010) would be directed towards data required for a prefeasibility study.

Key objectives of the Phase II program would be:

  • To convert the maximum amount of Inferred Mineral Resources to Indicated Mineral Resources.
  • To drill a minimum of three and preferably four drillholes to 1,500ft depth to enable down-hole IP (induced polarization) modelling of the breccia pipe.
  • To provide further data for construction of a gold-silver resource.
  • To complete geotechnical and hydrogeological testing in support of mine and pit planning needs.

SRK noted in the PEA that there is potential for step-out drilling to extend the current Copper Flat resource base. In addition, exploration targets were identified within the district by Quintana Minerals and further targets have been identified by representatives of New Mexico Copper Corporation (now renamed Copper Flat Corporation). It is planned that these targets will be tested by THEMAC through a phased exploration process.

Infrastructure

Infrastructure requirements for the project include items such as the primary access road, water systems, electrical power distribution, and the concentrate load-out facility. Where possible, existing serviceable items were presumed to be re-used or upgraded, otherwise new construction was assumed. 

The primary items that were assumed to be re-usable include the mine access road, the water well field, the primary freshwater pipeline, the main electrical substation at I-25, the 115kV power transmission lines, 25kV power line to the well field, the reclaim tunnel and the access cutting from the mill site to the tails area. Although foundations from the plant previously operated on site by Quintana Minerals were left buried in place, for the purposes of the PEA it was assumed that these foundations would not be suitable for reuse. There is opportunity for the foundation costs to be partially reduced should some of the foundations be found to be in suitable condition for reuse.

Key Recommendations of the PEA

  • Continue development of the resource model to include gold and silver.
  • Carry out field programs including aerial survey, drilling for resource category conversion, and geotechnical, hydrogeology and environmental studies.
  • Collect and evaluate additional geotechnical data with a view to optimization (steepening) of pit slope angles, which could reduce the waste stripping ratio within designed open pits for the project.
  • Perform trade-off studies to determine the optimum tailings storage approach. This could reduce the estimated costs for this facility, and could possibly increase the tailings capacity within the historical project permit boundary limits.
  • Advance ongoing environmental permitting programs.
  • Conduct prefeasibility study level metallurgical testwork, mining studies, and necessary trade-off studies to optimize the project economics, culminating in the completion of a prefeasibility study.

SRK anticipates that the proposed prefeasibility study programs will cost approximately US$3 million (including the Phase II drilling previously described), excluding ongoing project environmental permitting programs.

Based on field observations, available geological data, previous production operations, metallurgical testwork, available environmental data, various studies and other PEA work, SRK's opinion is that there are no evident flaws to the development of the Copper Flat project.

About the Copper Flat Project

The Copper Flat project is a porphyry copper-molybdenum-gold-silver deposit located in the Las Animas mining district of South Central New Mexico. The project is approximately 150 miles south of Albuquerque, New Mexico and approximately 20 miles southwest from Truth or Consequences, New Mexico (straight-line distances). Access from Truth or Consequences is by 24 miles of paved highway and 3 miles of all weather gravel road.

In 1982, Quintana Minerals brought the project into production as an open pit mine with a mill and concentrator rated at 15,000 short tons per day. The mine was in production for three and a half months, but operations were halted when copper prices declined. The property was placed on care and maintenance until 1986 at which point all the buildings and equipment were removed and sold. However building foundations and other infrastructure remain.

The individuals who have provided their input to the PEA have extensive experience in the mining industry and are members in good standing of appropriate professional institutions. Mark Pfau, Exploration Consultant for New Mexico Copper Corporation (now renamed Copper Flat Corporation), is the qualified person ("QP") for the geological data; Jeff Volk, Principal Resource Geologist (SRK), is the QP for the resource estimation; Bret Swanson, Senior Mining Engineer (SRK), is the QP for the open pit mining; Deepak Malhotra, Process Engineering Consultant (RDi), is the QP for the mineral processing; and Peter Clarke, Principal Mining Engineer (SRK), is the QP for all other areas and the overall preparation of the report.

The Mineral Resources in the PEA are reported in accordance with Canadian Securities Administrators (CSA) National Instrument 43-101 (NI 43-101) and have been estimated in conformity with generally accepted Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Estimation of Mineral Resource and Mineral Reserves Best Practices guidelines. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources will be converted into Mineral Reserves. The resource estimate was completed by Jeffrey Volk, CPG, FAusIMM, an independent Qualified Person, as this term is defined in NI 43-101. The effective date of the resource estimate is May 6, 2010 and it is based on data received by SRK in March 2010.

Completion of the Transaction is subject to a number of conditions, including TSX Venture Exchange acceptance and disinterested shareholder approval. The Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement prepared in connection with the Transaction, any information released or received in respect of the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of THEMAC Resources Group Limited should be considered highly speculative.

The TSX Venture Exchange has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this news release. Neither the TSX Venture Exchange (the "TSXV") nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) has reviewed, nor do they accept responsibility for the adequacy or accuracy of, this release.

Contact Information

  • THEMAC Resources Group Limited
    Barrett Sleeman, P.Eng.
    Chief Executive Officer
    (604) 806-6110
    (604) 806-6112 (FAX)