Stingray Copper Inc. (TSX:SRY) ("Stingray" or the "Corporation") is pleased to
announce the results of the definitive Feasibility Study (the "Study") on the
Corporation's 100% owned El Pilar oxide copper project located in Sonora,
Mexico. Based on the positive results of the Study, the Board of Directors of
the Corporation has approved the project for development as a low cost, open pit
mine with a solvent extraction and electro-winning plant to treat oxide mineral
reserves, subject to financing. M3 Engineering & Technology Corporation ("M3")
of Tucson, Arizona has prepared the Study and related NI 43-101 Technical
Report.
Peter Mordaunt, Chairman and CEO of Stingray states: "Our objectives, milestones
and time table established 2 years ago have been realized both on time and on
budget. The results of this Feasibility Study are in line with our conceptual
ideas both technically and economically from the start of this detailed work.
Oxide copper projects of this size are indeed rare today and the positive
conclusions from the Study demonstrate the economics of the project quite
clearly. Specifically, low capital and operating costs are characteristic of
oxide copper deposits and El Pilar is no exception. Although the financial
landscape of the copper industry has changed significantly since the start of
work at El Pilar, the demand for copper has remained strong. Stingray's ultimate
objective of becoming a mid-tier copper producer in North America with excellent
operating infrastructure at El Pilar has not changed."
The basis of the M3 Feasibility Study is the use of a mining contractor in the
open pit and owner operated primary crushing, conveying and stacking of ore onto
a heap leach pad, followed by solvent extraction and electro-winning (SX-EW) to
produce cathode copper. As estimated by Independent Mining Consultants, Inc. of
Tucson ("IMC"), Measured and Indicated Mineral Resources are calculated at 276.3
million tonnes ("Mt") averaging 0.31% total copper ("TCu") calculated at a cut
off of 0.20% TCu or 344.9 Mt averaging 0.28% TCu calculated at a cut off of
0.15% TCu . Copper mineralization remains open and continues to the south.
Within this Resource, Proven and Probable Mineral Reserves planned for mining
over a period of 14 years are calculated by IMC to be 229.7 Mt averaging 0.31%
TCu calculated at a cut off of 0.15% TCu. The mine-life waste to ore stripping
ratio is estimated at 1.61:1.
For this Study, IMC developed a 14 year mine plan and schedule. At the process
plant design criteria, the project is expected to produce 35,000 tonnes of
copper cathode per year, or 77 million pounds of copper per year, which is
achieved during the first 3 years of the project. For economic and practical
reasons, the maximum mine and crushing/conveying ore capacity was designed at 17
Mt per year. At this capacity, the average copper cathode production would be
68.3 million pounds per year over 14 years. This production schedule forms the
basis for the financial model.
The project's primary crushing plant reaches maximum design, able to deliver 17
million tonnes of ore per year to the heap leach facility designed by Golder
Associates, Inc. ("Golder") or approximately 48,000 tonnes per day in year 3.
The project is expected to produce 956 million pounds of copper cathode over the
14 year life of mine. The cathode product should meet LME Grade "A" copper
cathode specifications (99.99+% copper).
Stingray determined that a copper price of $2.25 per pound was to be used by M3
for the Study. This price is less than the 60:40 formula price that was
determined by M3 and was deemed more appropriate and conservative. (All dollar
figures referenced are in United States dollars unless otherwise indicated).
Feasibility Study Summary:
The Initial Capital Cost (+/- 15%) for the base case at El Pilar is estimated to
be $209 million. This includes a co-generation acid/power plant and the use of a
mining contractor. Sustaining capital of $30.9 million is estimated over the
life of mine. A cash reserve of $12.8 million is also included in the financial
model. The operating cash cost for the project is calculated at $1.20 per pound
of copper.
Before taxes, the El Pilar Project has an internal rate of return ("IRR") of
33.6% and the estimated payback of capital is 2.8 years. After taxes the IRR is
25.3% and payback is 3.7 years.
Table 1: Financial Summary El Pilar
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After Taxes Before Taxes
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Cash Unit Operating Cost $1.20/lb Copper $1.20 /lb Copper
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NPV @ 8% $230 M $348 M
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IRR 25.3% 33.6%
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Direct Payback 3.7 years 2.8 years
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Mineral Reserves and Resources, Mining and Production:
Table 2 below summarizes the Mineral Reserves. At a 0.15% total copper cutoff
grade, the Proven and Probable Mineral Reserves are 229.7 Mt at 0.31% total
copper for 1.55 billion pounds of contained copper. Table 3 summarizes
additional Mineral Resource, exclusive of the Mineral Reserves. Measured and
Indicated Mineral Resource adds 115.2 Mt at 0.24% total copper or 606 million
pounds of contained copper. Inferred Mineral Resource adds an additional 72.8 Mt
at 0.24% total copper or 385 million pounds of contained copper.
Table 2: El Pilar Mineral Reserve
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0.15 % Total Copper Cutoff
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Ore Total Cu Cu
Mineral Reserve Class kt (%) (million lbs)
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Proven Mineral Reserve 88,434 0.32 629.7
Probable Mineral Reserve 141,290 0.30 927.3
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Proven/Probable Reserve 229,724 0.31 1,557.0
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Total Pit Material 599,455 kt Waste: Ore 1.61
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Table 3: El Pilar Mineral Resource (Exclusive of Reserve)
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0.15 % Total Copper Cutoff
-----------------------------------
Ore Total Cu Cu
Mineral Resource Class kt (%) (million lbs)
---------------------------------------------------------------
Measured Mineral Resource 15,385 0.24 82.1
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Indicated Mineral Resource 99,798 0.24 523.7
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Measured/Indicated Resource 115,183 0.24 605.8
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Inferred Mineral Resource 72,848 0.24 385.4
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The copper mineralization remains open at its southern limit. The Mineral
Resource at El Pilar exceeds the Mining Reserve scheduled for mining in the
Study and additional mineral resources and mining reserves may be available at
El Pilar subject to appropriate programs of drilling and confirmation.
IMC performed a trade-off study of owner operation of the mining equipment
versus contract mining. Table 4 shows the results of the Study. Based on this
information, it was decided to use a contract miner and eliminate additional
capital costs.
Table 4: Mining Trade-Off Study
---------------------------------------------------------------
Owner Mining Contract Mining
---------------------------------------------------------------
Capital Cost $150.9 M $2.5 M
---------------------------------------------------------------
Operating Cost $0.870/t $1.109/t
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Metallurgy and Recovery Estimates:
M3 estimated the recoveries and acid consumptions for ore crushed at minus 6
inches that will be placed on the leach heap based on test results from METCON
Research, Inc. The estimates were based on locked cycle columns with material at
19 mm and 37.5 mm, after 120 days of leaching. The size distribution for the
minus 6 inch ore was calculated by one of the main vendors of crushing
equipment. The results show that copper recovery will be 62.9% for year 1,
including the preproduction period, 68.4% for year 2, 60.4% for year 3, 59.8%
for years 4-6, 60.9% for years 7-9, 60.9% for years 10-12, and 61.5% for years
13 and 14. These estimated recoveries and acid consumptions are shown in Table
5.
Table 5: El Pilar Copper Recovery and Acid Consumption Summary
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El Pilar Copper Recovery Summary(i) Acid Consumption
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kg/t kg/kg Cu
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Year 1 62.9% 19.7 7.3
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Year 2 68.4% 20.6 8.2
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Year 3 60.4% 21.7 11.6
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Years 4 to 6 59.8% 16.2 8.7
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Years 7 to 9 60.9% 17.9 10.1
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Years 10 to 12 60.9% 14.8 8.7
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Years 13 and 14 61.5% 15.2 8.8
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(i) As determined by M3 and extrapolated from column leach test results.
Initial Capital Costs:
The initial capital cost for the El Pilar Project is estimated to be $209
million, including a co-generation acid/power plant and the use of a mining
contractor. See Table 6 for detailed information. Sustaining Capital of $30.9
million is estimated over the life of mine plus a cash reserve of $12.8 million.
These are all included in the financial model.
Table 6: Initial Capital Cost Estimate
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GENERAL SITE PLAN $3,860,118
MINE $20,499,509
CRUSHING $9,843,309
HEAP LEACHING $34,792,621
SOLVENT EXTRACTION $11,629,528
TANK FARM $3,995,576
ELECTRO WINNING $18,016,427
WATER SYSTEMS $2,169,964
POWER SUBSTATION AND POWER DISTRIBUTION $2,416,447
115KV TRANSMISSION LINE $3,293,224
ACID PLANT, TURBINE, STORAGE AND REAGENTS $58,253,780
ANCILLARIES AND BUILDINGS $5,405,234
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$174,175,736
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TOTAL DIRECT FIELD COST $174,175,736
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MANAGEMENT & ACCOUNTING $715,700
ENGINEERING $4,485,600
PROJECT SERVICES $954,200
PROJECT CONTROL $715,700
CONSTRUCTION MANAGEMENT $4,771,100
EPCM FEE $582,115
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EPCM SUBTOTAL $12,224,415
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TOTAL CONTRACTED COST $186,400,151
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COMMISSIONING AND CAPITAL SPARE PARTS $2,111,670
ADDED OWNER'S COST $4,283,456
CONTINGENCY (15%)(i) $16,463,780
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TOTAL CONTRACTED AND OWNER'S COST $209,259,057
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------------------------------------------------------------------
TOTAL $209,259,057
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(i) Excludes acid plant, turbine, storage and reagents
Operating Costs:
The El Pilar project base case operating and maintenance costs are shown in
Table 7. These costs include the use of a mining contractor and all other cost
areas that include mine department, crushing, conveying, stacking, heap leach
and the SX-EW Plant.
Table 7: Operating Cash Cost - Contract Mine Site Cost Summary
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Operating Cost Component LOM $/Cu Lb.
-------------------------------------------------------------------
Mining Operations
-------------------------------------------------------------------
Contract Mining $0.65
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-------------------------------------------------------------------
Subtotal Mining $0.65
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-------------------------------------------------------------------
SXEW Operations
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Crushing $0.02
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Heap Leach $0.30
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SXEW Plant $0.14
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Ancillary Services $0.02
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-------------------------------------------------------------------
Subtotal Processing $0.48
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-------------------------------------------------------------------
Supporting Facilities
-------------------------------------------------------------------
General, Administrative and Laboratory $0.07
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Subtotal Supporting Facilities $0.07
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Total Operating Cost $1.20
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Acid Plant Trade-Off Study:
An internal comparative study indicated that a "captive" co-generation
sulfur-burning acid plant with a turbine waste-heat electric power generating
unit installed at El Pillar would reduce sulfuric acid costs and power costs. It
is estimated that the 600 tonne per day acid plant will generate 8 MW of power,
of which 1.8 MW will be required to run the acid plant. A final net production
cost of sulfuric acid, using sulfur at $40/t as the base case, and including the
power credit, is sulfuric acid at a cost of $24.63/t or $0.10 cents per pound
copper. The acid component operating costs for the El Pilar Project if an acid
plant was not included would be based on the purchase of all sulfuric acid at
the study base case price for sulfuric acid at $100/t and results in an average
operating component per pound of copper of 42 cents as shown in Table 8.
Table 8: Acid Cost Comparison
----------------------------------------------------------------------------
Acid Plant(i) No Acid Plant
----------------------------------------------------------------------------
Sulfuric Acid Cost $24.63 per tonne $100 per tonne
----------------------------------------------------------------------------
Sulfuric Acid Operating
Cost Component $0.10 per pound copper $0.42 per pound copper
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(i) Based on a "captive" acid plant producing 80% of the project sulfuric
acid requirement with the balance of acid purchased at $100 per tonne
Assumes a base case cost of sulfur for feed to the acid plant of $40
per tonne
Assumes a 1.8 MW power credit to operate the acid plant
Stingray intends to continue with basic engineering on the co-generation plant
and review additional capacity to 700-800 t/d to avoid any make up acid
requirement and improve the economics of the project. Specific early goals of
defining items that could be procured and constructed in Mexico for cost savings
will also be determined during this work.
Environmental:
Patricia Aguayo ("AGUAYO"), an expert independent environmental consultant based
in Hermosillo, Sonora, was engaged to conduct the Environmental Baseline Study
("EBS") at the El Pilar Project site, including an extensive socioeconomic study
in the area. AGUAYO will be assisting Stingray with its submissions and
applications to the appropriate government authorities for the requisite
approvals and permits. The EBS will serve as the foundation for and will form
part of the environmental documents to be presented to the Secretaria de Medio
Ambiente y Recursos Naturales ("SEMARNAT") (Natural Resources and Environment
Ministry) in order to obtain the permits required to develop this project. An
Environmental Impact Study (MIA) is in preparation and will be presented to the
Mexican authorities by AGUAYO on Stingray's behalf.
The Socioeconomic Report concludes that the project will have welcomed benefits
to the local community. The socioeconomic influence area of the El Pilar project
was considered to be a 20 km radius, in which a total of 16 communities were
canvassed, consisting of 3,314 inhabitants; the closest one to the project is
Miguel Hidalgo (San Lazaro) with a population of 520 people. The general opinion
of all people living in the area of influence is in favor of the El Pilar
Project. Within the local community 95% of the people in Miguel Hidalgo (San
Lazaro) were in favor of the project. The main concerns of the people locally
are lack of employment, education and services. The El Pilar Mine once
constructed will help the local community address these concerns.
Financial Highlights:
The financial evaluation presents the determination of the Net Present Value
(NPV), Payback Period (time in years to recapture the initial capital
investment), and the IRR for the project as presented earlier. Annual cash flow
projections were estimated over the life of the mine based on the estimates of
capital expenditures and production cost and sales revenue. The sales revenue is
based on the production of copper cathode. The estimates of capital expenditures
and site production costs have been developed specifically for this project.
The economic analysis for the base case which evaluates a contract mining option
indicates that the project has an IRR of 25.3% after tax with a payback period
of 3.7 years after tax, or 33.6% IRR before tax with a payback of 2.8 years
before tax. Tables 9 and 10 reflect sensitivities for copper price and owner
verses contract miner both before and after tax.
To view the Table 9: IRR Before Taxes graph, please visit the following link:
http://media3.marketwire.com/docs/srytable9.jpg.
To view the Table 10: IRR After Taxes graph, please visit the following link:
http://media3.marketwire.com/docs/srytable10.jpg.
Project Execution:
The overall project execution program as determined in the Study will take 20
months from detail engineering to commissioning.
Corporate Strategy:
Stingray had a working capital position of $17.2 million as presented in the
Corporation's Audited Consolidated Financial Statements for the year ended
January 31, 2009.
The Corporation will be working towards project financing while continuing with
basic and detail engineering on specific areas of the project. Costs associated
with many of the capital cost items included in the Study have been declining in
recent months. Stingray and M3 feel there is the potential to reduce the capital
cost of the project.
Qualified Persons:
Qualified Persons responsible for the technical content of this news release are
Doug Austin, P.E., of M3 and Mike Hester, F Aus IMM of IMC, and David Kidd, P.
E., of Golder, and Peter Mordaunt, P.Geo , of Stingray who is also responsible
for the corporate content of this release.
Filing of 43-101:
The Corporation intends on filing the corresponding NI 43-101 Technical Report,
"El Pilar Project, Executive Summary, Sonora, Mexico" on the SEDAR database and
on the Corporation's website.
Stingray Website: www.stingraycopper.com.
TSX Symbol: Common Shares - "SRY" Issued: 58,725,982 common shares
Forward Looking Statements:
Certain statements contained in this news release, including those regarding
production, costs, timing of permitting, construction or production, future
financial or operating performance and other statements that express
management's expectations or estimates of future performance constitute
"forward-looking statements". All statements, other than statements of
historical fact, are forward-looking statements. Information concerning the
interpretation of mineral resource and reserve estimates and capital cost
estimates may also be deemed as forward-looking statements as such information
constitutes a prediction of what mineralization might be found to be present and
how much capital will be required if and when a project is actually developed.
Forward-looking statements are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by management, are inherently
subject to significant business, economic and competitive uncertainties and
contingencies. The Corporation cautions the reader that these statements involve
known and unknown risks, uncertainties and other factors that may cause actual
results or events to differ materially from those anticipated in such
forward-looking statements. These risks, uncertainties and other factors
include, but are not limited to: general business and economic conditions; the
supply and demand for, deliveries of, and the level and volatility of prices of
copper as well as petroleum products; the timing of the receipt of regulatory
and governmental approvals for the Corporation's development project and other
operations; the availability of financing for the Corporation's development
project on reasonable terms; Stingray's estimation of its costs of production,
its expected production and its productivity levels, as well as those of its
competitors; power prices; the ability to procure equipment and operating
supplies in sufficient quantities and on a timely basis; the ability to attract
and retain skilled staff; engineering and construction timetables and capital
costs for Stingray's development project; market competition; the accuracy of
our resource estimate (including, with respect to size, grade and
recoverability) and the geological, operational and price assumptions on which
it is based; tax benefits and tax rates; the Corporation's ongoing relations
with its employees, its business partners and joint venture partners and the
local communities.
These forward-looking statements involve risks and uncertainties relating to,
among other things, changes in commodity prices and, particularly, copper
prices, access to skilled mining development and mill production personnel,
results of exploration and development activities, the Corporation's limited
experience with production and development stage mining operations, uninsured
risks, regulatory changes, defects in title, availability of materials and
equipment, timeliness of government approvals, actual performance of facilities,
equipment and processes relative to specifications and expectations and
unanticipated environmental impacts on operations. These factors are discussed
in greater detail in the Corporation's most recent Annual Information Form filed
on SEDAR. Other assumptions are also more fully described in the Study. The
Corporation cautions that the foregoing list of important factors is not
exhaustive. Investors and others who base their decisions on the Corporation's
forward-looking statements should carefully consider the above factors as well
as the uncertainties they represent and the risk they entail. The Corporation
believes that the expectations reflected in those forward-looking statements are
reasonable, but no assurance can be given that these expectations will prove to
be correct and such forward-looking statements included in this news release
should not be unduly relied upon. These statements speak only as of the date of
this news release. Actual results and developments are likely to differ, and may
differ materially, from those expressed or implied by the forward-looking
statements contained in this news release. Moreover, these forward-looking
statements may not be suitable for establishing strategic priorities and
objectives, future strategies or actions, financial objectives and projections
other than those mentioned above.
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