Tuesday, December 09, 2008

Big numbers for Rosemont Copper

At yesterday's SME Arizona Conference here in Tucson, Lance Newman from Augusta Resources provided an update on the Rosemont Copper project in the Santa Rita Mountains [right, credit Rosemont Copper]. A few items were new to me.

The copper prospect is one of the most heavily drilled in the country, with Augusta drilling 113,876 feet of hole to add to over 200,000 feet from previous exploration companies, for a total of 254 drill holes and 323, 875 feet.

The overall cost of the project, including both a sulfide and oxide plant, is $798 million. There is $71 million built in for contingencies. Newman praised the consultants hired by the Forest Service to review the project EIS, saying he expected a competent and thorough review of the plan.

One of the side products of the copper, moly, and silver production will be an estimated 15,000 ounces of gold per year.

And I was struck by Case 3 of their financial scenarios, which looks at copper at $1.50 per lb, moly at $15 per lb, and silver at $10 an oz. If I wrote down the numbers accurately, it looks like that still provides the company a very attractive internal rate of return and a few year payout. Newman said Rosemont will be a low-cost producer of copper, with an operating cost of 62 cents a lb, based on the assessment completed last year. That would seem to directly challenge critics arguments that the mine should not be permitted because it won't be profitable.

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