Mollacas Project

Location

The Mollacas Project, which occurs at an altitude of 1,500 metres above sea level, covers an area of 33 square kilometres and is located in Region IV, Chile, approximately 65 kilometres east of the town of Ovalle near the small settlements of Valdivia and Las Mollacas, and 160 kilometres by road from the port of La Serena. The project can be accessed from Ovalle via a 53 kilometre asphalt road to the town of Rapel, and then by 12 kilometres of a well-maintained dirt road east of Rapel.

History

Ownership

Hampton Mining Limited entered into an option agreement with MN Ingenieros (a private Chilean company) to acquire an interest of up to 75% in the Mollacas, Vallecillo and Loica projects in December 2005.  Following the satisfaction of certain obligations under the option agreement, Minera Hampton Chile Limitada (Hampton Chile), a wholly owned subsidiary of Hampton Mining Limited, exercised the option to acquire a 50% interest in the Mollacas, Vallecillo and Loica projects in September 2007, and a joint venture company was formed with MN Ingenieros (Sociedad Contractual Minera Ovalle).  In April 2011 Hampton Chile, now a wholly owned subsidiary of the Metminco group, completed the acquisition of Sociedad Contractual Minera Ovalle, resulting in the latter three projects becoming 100% owned by Hampton Chile.    

Exploration

Mollacas was largely unexplored until Inversiones EM Dos Limitada (a wholly owned subsidiary of MN Ingenieros) (EM Dos) acquired the property in 2002, at which point in time a small prospecting pit measuring 50 by 50 metres to a depth of 2 metres, was located on the property within a copper oxide zone.  During late 2002, and early 2003, EM Dos conducted a geological mapping and geochemical sampling program on the property, and identified a porphyritic intrusive with a central potassic core and concentric zones of phyllic, propyltic and argillic alteration.

Hampton Chile completed a Reverse Circulation (RC) drilling program comprising 10 drill holes (2,342m) in May 2006.  On the basis of the RC drilling results, Hampton Chile conducted a further diamond drill hole program of 46 drill holes (6,808m) that was completed in April 2007.  Over the period September 2008 to September 2011, 70 additional drill holes were completed totalling 6,892 metres, which effectively resulted in a final mineral resource estimate for the project.  While additional drilling was completed in late 2011 and 2012 (2,559m), the drilling was for geotechnical and sterilisation purposes. 

Title

The Company holds title to 21 Exploitation Licences covering the Mollacas deposit and surrounding area, as well as 179 hectares of surface rights, the latter of which were acquired for the establishment of mine infrastructure such as the leach pads, processing plant, administration facilities and mine workshops (Figure 1). Importantly, Metminco owns the water rights to approximately 175 litres/sec from two canals which traverse the property.  The estimated water usage for the planned mining operation is 40 litres/sec.  However, the surface titles to the area covering the planned position of the open pit are held by a private land owner (approximately 100 hectares) who has filed various actions against Metminco's wholly owned subsidiary, Hampton Chile, relating to land access.

Prior to commencing exploration in 2007, Hampton Chile acquired a Right of Access (Easement) to conduct its planned exploration programs from the previous owner of the Mollacas Project, who had initially been granted the Easement in 2004 by the First Court of Ovalle (Original Easement).  In May 2007 Hampton Chile applied for the First Easement Extension allowing mining access rights, which was granted on 11 November 2011.  The private land owner appealed the decision, and in March 2014, the Court of Appeal of IV Region (Court of Appeal) ruled that Hampton's First Easement Extension was invalid, but did confirm that the Original Easement permitting access for exploration purposes remained in full force and effect.

In January 2016 the Company announced that the Chilean Supreme Court had upheld a prior ruling by the Court of Appeal of Region IV, Chile, which had overturned a prior decision granting Hampton Chile access to the property for mining purposes by a lower court.This ruling however does not affect Hampton Chile’s mining concession rights.

Metminco will continue to evaluate other alternatives to secure mining access rights.

Figure 1:  Mineral and surface rights held by Metminco. 



 

Geology

Mollacas is located along a north-south trending sequence of volcanics, which has been intruded by younger porphyritic dacites. The copper deposit is associated with an alteration zone that measures 800 metres by 600 metres, where the defined resource is limited to an oxide and supergene "blanket" that occurs above a primary, low grade, porphyry (Figure 2).

Figure 2:  Mollacas mineral resource comprises an enriched copper oxide and supergene cap.


Drilling Program

Metminco completed its final resource definition drilling program at Mollacas during the third quarter of 2011, comprising 2,200 metres of diamond drilling and 1,154 metres of reverse circulation drilling, with the objective of providing sufficient data to upgrade the November 2007 mineral resource to Measured and Indicated Mineral Resource categories, as well as to acquire sufficient material by ore type for further permeability and tall column leach testwork.

Following the completion of the resource definition drilling program, 11 geotechnical drill holes (totalling 1,405m) to a maximum depth of 150 metres were completed, as well as 14 sterilisation drill holes (totalling 1,154m) to a maximum depth of 94 metres.  
 

Mineral Resource Estimate

With the completion of the final drilling program at Mollacas, a further mineral resource was estimated by SRK Consulting (Chile) S.A. on 06 July 2012, which incorporates the results from 119 drill holes (16,280m), of which 95 holes are diamond drill holes (12,784m) and 24 are reverse circulation holes (3,496m).

The mineral resource estimate for the oxide and secondary sulphide zone, which is summarised in Tables 1 and 2 below, has been classified in accordance with the JORC Code (2004) for reporting Mineral Resources and Mineral Reserves.  Sensitivities of the mineral resource to various Cu cut-off grades are summarised in Appendix 1.

The Measured and Indicated Mineral Resource for the oxide and secondary sulphide zone at a 0.2% Cu cut-off grade is 15.5 million tonnes at a CuT grade of 0.51%, containing 79,111 tonnes of leachable copper.  Of the leachable copper, an estimated 61,650 tonnes is soluble.

Figure 3 shows the position of the drill holes completed and a Cu (%) x Thickness (m) contour plan for the oxide and secondary sulphide zone, whereas Figure 4 represents an east-west section through the Mollacas Block Model showing the distribution of copper grades by ore type.
 

Figure 3:  Mollacas Copper Leach Project – Drill holes and Cu (%) x Thickness (m) contour plan (Oxides and Secondary Sulphides).


Figure 4:  East-West section through the Mollacas Block Model.



It must be noted in Tables 1 and 2 below that CuT represents total leachable copper, whereas Cu_Sol represents total soluble copper.


Table 1: Mineral Resource Statement – Oxide and Secondary Sulphide Zone, Mollacas Project, SRK Consulting (Chile) S.A., July 06, 2012.

Category Tonnes (million) CuT (%) Cu_Sol (%)
Measured 11.2 0.55 0.44
Indicated 4.3 0.41 0.29
Total 15.5 0.51 0.40

 

Table 2: Contained Metal Content by Resource Category – Oxide and Secondary Sulphide Zone.

Category Tonnes (million) CuT (kt) Cu Sol (kt)
Measured 11.2 61.4 49.1
Indicated 4.3 17.7 12.5
Total 15.5 79.1 61.6
Note:
Reported at a 0.2% Cu cut-off grade.
Rounding-off of figures may result in minor computational discrepancies, where this happens, it is not deemed significant.

Metallurgical Testwork

Metminco has completed three separate phases of metallurgical column leach testwork on the different ore types identified at Mollacas over a period of 4 years.

The Phase 1 testwork was designed as a preliminary test program to determine whether the Mollacas oxide and chalcocite ore types leached, and whether any major problems existed in a possible leach environment. The columns used in this phase were 2 metre columns.

The Phase 2 testwork program used 6 metre columns, and although recoveries were acceptable, the columns remained flooded throughout the program.  Hence, whilst recoveries were acceptable, acid consumption was high due to the fact that ferric leaching of the chalcocite ore was suppressed by the lack of oxygen in the system, principally due to the high solution application rate.

The Phase 3 testwork (Figure 5) was conducted within tightly controlled operating parameters so as to create the most conducive environment for ferric leaching of the chalcocite ore, and to determine the optimum acid addition strategy so as to minimise acid consumption - as the results of the Phase 2 testwork clearly demonstrated how sensitive the gangue rock is to the acid concentration applied to the ore.

The most significant findings arising from the Phase 3 testwork can be summarised as follows:

1. A reduction in the solution application rate to the ore, together with a reduction in the amount of acid in the feed solution to the heaps, and rest/rinse cycle leaching, did not have a significant impact on the recovery rate;

2. Blending the oxide ore with supergene ore appears to be a reasonable approach to leaching the oxide ore;

3. The level and rate of acid consumption was greatly reduced by the lower solution application rate and heap leach acid feed strategy, which resulted in the following observations: 
 
  • The reduction in the solution application rate and the decrease in the acid feed to the columns to 3 g/L showed positive results with limited impact on recovery rates
  • There is still room to optimise the acid addition strategy by limiting both the acid added in agglomeration, and the acid concentration in the heap leach feed
  • These observations are the key outcomes of this Phase of testing and should have the additional benefit of providing the means to reduce the impurity level in the leachate and to ensure improved bacterial activity in the chalcocite leach
 
Figure 5:  Phase 3 Metallurgical Testwork - 6 metre columns (SGS Laboratory, Santiago, Chile).



The major objectives of the Phase 3 testing were all met in a positive manner:
  • All rock-type composites tested in the 6 metre columns performed similarly and satisfactorily both with respect to their hydraulic characteristics (that is, <50% saturation to ensure good biological leach conditions), and with respect to recovery and acid consumption
  • Bacterial activity was improved significantly by comparison the Phase 2 testing, by adhering to the ore depth and dry-bulk density parameters recommended by the consultants IDIEM
  • Additional hydraulic characterisation conducted by MINTEK, South Africa, also showed the leached residue to have positive characteristics with respect to percentage saturation and dry-bulk density under the anticipated 6 to 10 metre load for single-lift leaching
  • The “sequential” assay procedure appears to be ideally suited to modelling the “leachable” copper resource with consistency of recovery in the column testing
  • There is a slight “soluble” copper grade versus recovery relationship which, together with the “net” gangue acid consumption, should be used to determine the cut-off grade and modeling of the “leachable” ore reserves
  • Testing shows that the commercial extraction rate should attain 80% to 85% of the deposit-average, “sequential”, assayed copper content - provided all the recommended operating parameters are met
  • Acid consumption, with strict control of both the amount added in agglomeration and via the raffinate solution, should be 12 kg/t to 14 kg/t in total, although the possibility exists that this can be reduced further by 2.5 kg/t to 5 kg/t. However, additional column testing is necessary to confirm this

The primary leach design parameters resulting from metallurgical testwork are summarised below:

  • Ore crush size:  P80 = 12mm to 16mm
  • Agglomeration acid addition:  10kg/t
  • Stacked ore depth:  6 metres
  • Stacked dry-bulk density:  1.5t/m3 (nominal); 1.7t/m3 (maximum)
  • Two stage leach: i) 90-day Primary Leach Stage at 5 L/hm2 at 6g/L H2SO4 and ii) 210-day Secondary Leach Stage at 2.5 L/hm2 at 3 g/L H2SO4
  • Solution Management Scheme:  Staged leach and acid concentration values can be met with a series/parallel solvent extraction (SX) configuration, where the Primary Leach PLS feeds the two in series SX extraction stages, and the Secondary Leach PLS feeds the parallel extraction stage

Additional column leach testwork is planned to determine the lowermost limit of acid addition in the agglomeration stage with the objective of determining whether the acid consumption can be reduced further. 

Life of Mine Financial Model

With the benefit of the pit optimisation study completed by the Company in 2013, and the Phase 3 metallurgical testwork results, the Scoping Study completed by SRK in 2008 was updated, inclusive of revised operating costs and capital estimates.

The Life of Mine production schedule incorporated the results of the pit optimisation work completed in 2013, with a modeled inventory of 14.5 million tonnes at a CuT grade of 0.52% (0.42% Cu_Sol), with an in situ soluble copper content of 60,753 tonnes.  However, as the pit optimisation study of 2013 does not provide for the updated mining and processing costs, and given the substantial changes in the acid consumption rate, further optimisation work will be conducted during the planned Feasibility Study.

At a mining rate of 6,108 tonnes per day, the project has a Life of Mine of some 7 years, producing up to 8,000 tonnes of cathode copper per annum.  The results of the Life of Mine Financial Model are summarised in Table 2 below, which support the robust nature of the economics, and hence the decision to progress with a Feasibility Study and Environmental Impact Assessment.

Table 2:  Summary of results - Life of Mine Financial Model (March 2014).

Physicals Units Parameter
Mining Rate Ore tpd 6,108
Crushing Rate (Max throughput) 000 tpa 2,500
Total Tonnes 000's 14,500
Average Cu_Sol Grade % 0.42
Payable Cu tonnes 51,765
Life of Mine Years 7
Strip Ratio waste:ore 1.3:1
Time to Production Years 2.50
Financials    
Feasibility Study and Permitting  US$000 6,600
Development Capital (includes pre-stripping) US$000 40,456
Sustaining Capital US$000 5,250
Total Capital Expenditure US$000 52,306
C1 Cash Operating Costs US$/lb Cu 1.23
Operating Cost (per tonne crushed) US$/t 9.68
Government Royalties % n/a
Project Economics (ungeared)    
Project NPV (After Tax) @ 8.0% US$000 74,921
IRR % 37.2%
Payback Years 2.44
Project Economics (geared)    
Interest Rate (US Libor + 4.5% per annum) % 6.30
Gearing Ratio (Debt:Equity) % 70:30
NPV (After Tax) @ 8% US$000 74,416
IRR % 41.0
Copper Price    
Average Cathode Copper Price US$/lb 3.10


Note: Effective tax rate of 20% assumes profits are not repatriated.

Feasibility Study and Environmental Impact Assessment

Based on the encouraging results from the Life of Mine Financial Model, the decision was made to proceed with a Feasibility Study, as well as an Environmental Impact Assessment. 

Work that has been completed on the project to-date in support of the planned Feasibility Study includes the following:

  • Updated Scoping study
  • Resource definition drill programs
  • Oxide and secondary sulphide resouce upgraded to Measured and Indicated Mineral Resource categories
  • Phase 3 metallurgical testwork program (tall column leach testwork, permeability and saturation testing and derivation of acid consumption rates)
  • Geotechnical design work for proposed heap leach pads
  • Geotechnical work in support of the 3-D modeling of the planned open pit and associated slope angles
  • Environmental base line study
  • Freehold rights for planned infrastructure purchased and supporting water rights
Figure 6 below provides a schematic representation of the envisaged mining layout for the Mollacas SX/EW mining operation.

 

Figure 6: Preliminary infrastructural layout of the Mollacas Copper Leach SX/EW mining operation.

 


Following the ruling by the Court of Appeal of the IV Region that the Company's First Easement Extension was invalid, Metminco has deferred further work on the project until such time as land access for the conduct of mining has been resolved.

 

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