Xstrata Queensland to fund US$30-M feasibility study for mining project

Xstrata Queensland, a subsidiary of Xstrata Plc., expected he study to be completed in approximately 18 months.

The study will include a more detailed assessment of mining methods, plant design and engineering, detailed metallurgical characterization of the resource and infrastructure plans, Robbins said.

Indophil owns 95 percent of Sagittarius Mines, Inc, which is eyeing huge mineral deposits in the towns of Tampakan in South Cotabato, Columbio in Sultan Kudarat and Kiblawan in Davao del Sur. Alsons Corp. owns the remaining five percent of the venture more known as the Tampakan project.

Xstrata Copper, in an agreement forged in September 2000 with Indophil, has an option to acquire 62.5 percent of the Tampakan project which is strongly opposed by various sectors including the local Catholic Church.

Pursuant to the terms of the agreement and various revisions, Xstrata Copper has opted to exercise its right to solely fund the feasibility study following an assessment of the prefeasibility study work program which was submitted to it by Indophil last September.

The prefeasibility study confirmed that the Tampakan project is a world class, two billion-ton resource, containing 11.6 million tons of copper and 14.6 million ounces of gold at a 0.3-percent copper cut-off grade. It also indicated potentials to increase the mineral resource within the project area.

Undertaken at a cost of US$21 million, the prefeasibility study showed that the Tampakan project is robust and is potentially one of the world’s outstanding new large-scale copper-gold mines.

The study is based on a mining rate of 30 metric tons per annum, producing an average of 210,000 tons of copper and 218,000 ounces of gold per annum in
its first 10 years of operation.

“After review of the prefeasibility study work program by Xstrata Copper, it elected to exercise its right to solely fund the cost of the work as is reasonably necessary to make its decision to exercise or terminate its option,” the Indophil announcement read.

The agreement between Indophil and Xstrata Copper now provides for the latter to pay Indophil approximately A$50 million if the option is exercised prior to December 31, 2006.

After that date, the payment increases to approximately A$60 million should Xstrata Copper choose to exercise.

Xstrata Copper must determine its position on the option exercise not later than December 31, 2007.

“Since completing the pre-feasibility study one month ago, the work program has continued unabated. We remain on schedule. The work required to advance the Tampakan copper-gold project’s feasibility continues at a solid pace. We have in
place a significant technical work program,” Robbins said.

“The work program confirms that the Tampakan Copper-Gold Project is a world class development, emerging at a time of strong world-wide demand and buoyant price conditions for those metals. In support of this, our field programs are very active at the local government, community and environment level,” he added.

The other key findings of the prefeasibility study work program include the projected capital cost of the Tampakan project at US$1.4 billion, with infrastructure costs estimated at US$0.5 billion.

The firm said that capital costs for the Tampakan project were based on 2006 costings.

Estimates for plant and on-site infrastructure include an open pit mine option, concentrator, services, accommodation, access and site roads, pre-operations, and waste rock and tailings storage facilities,

Off-site infrastructure includes power plant, port facility and concentrate handling and options to offset some of these infrastructure capital costs are being pursued, Indophil said.

Paul Dominguez, Sagittarius chief operating officer, recently indicated that a power plant may rise in Tampakan town to support the electricity needs of the mining venture and the other industries that may sprout in the area.

Owing to the huge undeveloped copper and gold resources in the Tampakan project, company officials ranked it as the second largest combined copper-gold resources in South East Asia, next to the Grasberg copper-gold deposit in Irian Jaya.