Candente Copper Announces Positive PEA Results for the Cañariaco Copper Project

Date/time : 2022-02-08 06:00 AM
Symbol :

DNT

Company : Candente Copper Corp.
Price : -
Market cap : -
O/S : -
Exchange :

TSX

Industry :

Copper

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Candente Copper Announces Positive PEA Results for the Cañariaco Copper Project

NPV of US$1.01 B with CapEx of $1.04 B

Annual Average Copper Production of 173 Million Pounds Over Mine Life of 28 Years

VANCOUVER, British Columbia, Feb. 08, 2022 (GLOBE NEWSWIRE) -- Candente Copper Corp. (TSX:DNT, BVL:DNT, US:CDOUF) ("Candente Copper” or “the Company") is very pleased to announce completion by Ausenco Engineering Canada Inc. (“Ausenco”) of a positive Preliminary Economic Assessment (“the 2022 PEA”) for its 100% owned Cañariaco copper project in Northern Peru.

Based on projected average annual metal production of 173 million (“M”) pounds (“lb”) (78,543 tonnes) copper, 31,395 ounces (“oz”) gold (“Au”), and 703,588 oz silver (“Ag”) for 28 years and an initial capital cost estimate (“CapEx") of $1.04 B, the Cañariaco Norte project has an after-tax net present value (“NPV”) of US$1,010 M, and after-tax internal rate of return (“IRR”) of 16.3% using a copper price of US$3.50 /lb, US$1,650/oz Au, US$21.50/oz Ag and a discount rate of 8%.

The NPV increases to US$1,833 M, with an IRR of 21.9% and payback of 4.5 years when using a copper price of US$4.50/lb, US$1,650/oz Au and US$21.50/oz Ag. The C1 cash operating cost (*see below under Operating Costs) is estimated to be US$1.28/lb of copper.   The forecast strip ratio is 0.66.

Commenting on the results, President and CEO Joanne C. Freeze stated, “We are very pleased with the results of this new PEA which has achieved three key project objectives: 1) a lower initial capital cost; 2) a subsequent project expansion financed from cash flow and 3) enhanced environmental, social, and governance (“ESG”) practices. The lower CapEx offers many more opportunities to finance the project. The focus on enhancing ESG practices led to a single dry stack waste management facility (WMF) with co-mingling and co-disposal of waste rock and filtered mill tailings, would produce an overall smaller footprint for the project that is further distanced from farming communities. Building on the ESG mandate, geometallurgical modelling of the Cañariaco Norte deposit gives a better understanding of the mineralization, resulting in a highly marketable concentrate with no need for arsenic treatment and lowers the projected operating cost estimate (“OpEx”)”.

“The 2022 PEA presents an alternative business case for developing the Cañariaco Project with a smaller initial CapEx, however larger companies could prefer to develop it as a larger project with a much higher throughput on start-up.   The Cañariaco project offers many advantages. It is reasonably close to key road and power infrastructure, has a low strip ratio, moderately soft rock (BWI 11.2), low operating cost and offers excellent potential for discovery of additional mineralization.   The very large data base from previous engineering work supports the 2022 PEA which together could allow moving directly into a feasibility evaluation phase,” also stated Joanne Freeze.

The 2022 PEA by Ausenco builds on earlier advanced engineering studies conducted from 2010 through 2014. Key highlights follow:

  • Initial CapEx of $1.04 B – 40,000 tonnes per day (“tpd”) mine and plant;
  • Mine and plant expansion to 80,000 tpd in year 7 with additional CapEx of $305 M from cash flow;
  • Cash operating cost of US$1.28/lb of copper including all on-site and off-site costs, treatment and refining charges (“TC/RC"), net of by-product credits;
  • Advanced ESG development strategies result in improved Infrastructure Design including a single waste management facility (WMF) with co-mingling and co-placement of waste rock and filtered mill tailings creating a smaller overall footprint further distanced from populated areas;
  • Waste to mineralized material strip ratio of 0.66:1
  • After-tax NPV of US$1,010 M for base case of US$3.50/lb Cu, US$1,650/oz Au, US$21.50/oz Ag, and 8% discount rate;
  • After-tax IRR of 16.3% for base case of US$3.50/lb Cu, US$1,650/oz Au, and US$21.50/oz Ag;
  • After-tax NPV increases to US$1,833 M, with an IRR of 21.9% and payback of 4.5 years when using a copper price of US$4.50/lb.
  • Payback of pre-production capital in 7.1 years using base case price of US$3.50/lb Cu and 4.5 years using US$4.50/lb Cu;
  • Highly leveraged to copper prices;
  • Life-of mine (“LOM”) metal production of 4,848 Mlb (2,199,215 tonnes) Cu, 879,051 oz Au, and 19,700,467 oz Ag;
  • Average annual metal production of 173 Mlb (78,543 tonnes) Cu, 31,395 oz Au, and 703,588 oz Ag during the LOM;
  • Average annual metal production of 120 Mlb (54,539 tonnes) Cu, 24,375 oz Au, and 548,667 oz Ag for the first six years;
  • Average annual metal production of 193 Mlb (87,475 tonnes) Cu, 34,243 oz Au per year, and 766,753 oz Ag per year for the second mine phase, which will run for 21.4 years;
  • Average LOM metal recoveries of 88.1% for Cu, 64.7% for gold and 57.2% for silver;
  • Concentrate grades are forecast to average approximately 26% Cu, 3.63 g/t Au and 84.16 g/t Ag for first six years;
  • LOM Concentrate grades are projected to average approximately 26% Cu, 3.27 g/t Au and 75.40 g/t Ag;
  • Conventional crush/grind and flotation technology;
  • Decreased OpEx with marketable concentrate with no need for arsenic treatment;
  • Pre-production capital cost of US$1.04 B is based on leased mining equipment and includes a contingency allocation of 18.5%;
  • All-in capital cost of US$1.57 B based on leased mining equipment and including life-of-mine sustaining capital, expansion capital and closure cost;
  • 28-year mine life, with potential for extension if additional resources identified below proposed pit can be included in a mine plan;
  • Located at a moderate elevation with pit centroid and process plant at approximately 3,000 metres above sea level;
  • Connection to the national power grid is planned to be by direct line approximately 55 km from the project site to the Carhuaquero substation site;
  • Significant potential for discovery of additional mineralization at nearby Cañariaco Sur and Quebrada Verde targets.

The Cañariaco Norte Mineral Resource estimate has been updated (see Table 5 below and also the Company’s news release NR 144 dated January 28, 2022 ) and using a 0.15% Cu applied cut-off, which represents an approximate breakeven cut-off, contains 9.29 Blb Cu, 2.14 Moz Au and 59.43 Moz Ag in the Measured and Indicated categories as well as 2.66 Blb Cu, 0.55 Moz Au and 18 Moz Ag in the Inferred category.

Measured, Indicated and Inferred Mineral Resources were used in the 2022 PEA mine plan. Within the ultimate pit, at the $6.52/t NSR cut-off the classification breakdown of the mill feed material is 54% Measured Mineral Resources, 38% Indicated Mineral Resources and 8% Inferred Mineral Resources.

The 2022 PEA is preliminary in nature. It includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the 2022 PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

An Inferred Mineral Resource estimate was also recently completed for a portion of Cañariaco Sur which contains 2.2 Blb Cu, 1.2 Moz Au and 15 Moz Ag ( NR 144 ), however the 2022 PEA mine plan only includes resources from Cañariaco Norte.

The current scope of development incorporates open pit mining, crushing, semi-autogenous grinding (“SAG”), and flotation followed by a waste management facility using co-mingling (mixed together) and co-placement (not mixed together) deposition strategies for filtered tailings and waste rock. The initial production rate is expected to be 40,000 tpd with an expansion to 80,000 tpd in year 7 of operation. The LOM waste to mineralized material stripping ratio is very low at 0.66:1, with the majority of waste coming out by year 10. Incorporation of the filtered tailings technology is favoured for new mining projects as it eliminates the need for wet slurry tailings deposition along with being considered best practice for environmental compliance and social acceptance. The 2022 PEA mine plan calls for a mine life of 28 years, however additional mineral resources exist below the current pit outline which may offer potential to extend the mine life.

Importantly, updated geometallurgical modelling of Cañariaco Norte has provided a more detailed understanding of the deposit and mineralization and enabled development of a mine plan that could produce a marketable copper concentrate with no requirement for treatment to reduce arsenic.

Financial Analysis

The NPV of the Cañariaco project at various copper price points and discount rates are presented in Table 1. Candente Copper has selected as the base case long-term metal prices of US$3.50/lb Cu, US$1,650/oz Au and US$21.50/oz Ag. The Cañariaco project is highly leveraged to the price of copper. At long term copper prices above US$3.50/lb, the after tax NPVs and IRRs increase significantly. Sensitivity to the copper price is also presented in Tables 1 and 2.

Table 1: Project Net Present Value & IRR (After Tax)*

Cu Price (US$/lb) 3.00 3.25 3.50 4.00 4.50 5.00
Undiscounted Cumulative Net Cash Flow (US$ M) 3,990 4,680 5,368 6,734 8,092 9,444
Discounted Cash Flow
(US$ M)



6% 1,014 1,286 1,556 2,092 2,624 3,153
8% 591 802 1,010 1,423 1,833 2,241
10% 299 465 630 955 1,278 1,599
IRR (%) 13.2 14.8 16.3 19.2 21.9 24.4
Average Annual Cash Flow (US$M) 180 204 229 278 326 375
Payback (Years) 8.6 7.9 7.1 6.3 4.5 3.8

Table 2: Project Net Present Value & IRR (Pre-Tax)*

Cu Price (US$/lb) 3.00 3.25 3.50 4.00 4.50 5.00
Undiscounted Cumulative Net Cash Flow (US$ M) 6,762 7,968 9,174 11,586 13,998 16,410
Discounted Cash Flow
(US$ M)



6% 1,969 2,443 2,917 3,866 4,814 5,762
8% 1,291 1,657 2,023 2,754 3,485 4,216
10% 821 1,109 1,397 1,974 2,550 3,126
IRR (%) 17.2 19.4 21.6 25.7 29.5 33.3
Average Annual Cash Flow (US$M) 279 322 365 451 537 623
Payback (Years) 7.4 6.6 6.1 3.9 3.3 2.8

*Gold and silver prices used did not vary and are US$1,650/oz Au and US$21.50/oz Ag

The financial model is based on open pit mining by the owner with financed mobile mining equipment including scheduled additions and replacements. All other project costs are the responsibility of the Owner, including process and infrastructure preproduction capital, LOM sustaining capital, and closure costs.

Taxes have been estimated by a third-party tax consultant and include a Peruvian corporate income tax of 29.5% (plus 2% during the term of an assumed Stability Agreement), employee profit sharing of 8% of taxable income and mining taxes for the exploitation of mineral resources which are based on the operating profit (mining royalties on a sliding scale of 1% to 12% with a minimum of 1% of sales and special mining tax on a sliding scale of 2% to 8.4%). Depreciation on capital equipment, development and exploration cost as permitted by Peru tax regulations has been applied. Finance charges for project construction capital have not been applied in the financial model.

Capital Costs

Pre-production direct capital costs for the 40,000 tpd initial phase of the project are estimated to be US$744 M, which includes US$119 M for mine preproduction development, US$49 M for mining infrastructure and equipment, US$360 M for the process plant, US$116 M for the waste management facility, and US$85 M for infrastructure (including access road, and external power line), US$7 M for site-wide water services, and US$7 M for site-wide power and lighting. The total indirects, Owner’s costs, and contingency are estimated to total US$299 M.

The capital cost estimate is predominantly based on Q4 2021 costs. In addition to the pre-production capital cost, the financial analysis includes LOM sustaining capital costs of US$119 M, Phase II expansion capital costs of US$305 M, and closure costs of US$104 M.

Table 3: Capital Cost Summary

PHASE I
(40,000 tpd)
PHASE II
(80,000 tpd)
Cost Area Cost (US$M) Cost (US$M)
Pre-stripping 119 -
Mining Infrastructure & Equipment 49 -
Process Plant 360 204
Site Related Infrastructure (inc. Ext Power) 85 2
Tailings and Waste Rock Management 116 -
Sitewide Water Services 7 1
Sitewide Power and Lighting 7 -
Subtotal – Directs 744 207
Indirects 137 42
Owner's Cost 14 5
Contingency 148 50
Subtotal - Indirects 299 97
TOTAL PREPRODUCTION CAPITAL 1,043 305
Sustaining Capital (Life-of-Mine) 45 74
Closure Costs 104
Subtotal Life-of-Mine 45 178
TOTAL PROJECT CAPITAL COSTS* 1,088 483

* Note to Table 3 - Totals may not sum due to rounding

Capital cost for the mobile mining equipment including drills, haul trucks and shovels (LOM total of US$71M) is assumed to be financed at 20% down, 4.25% interest and terms up to 60 months.

Operating Costs

Life of mine operating costs are summarized in Table 4. C1 cost of US$1.28/lb of payable copper consists of mining, processing, site general and administrative (“G&A”), off-site treatment and refining, transport, and royalties net of by-product credits (Au and Ag). C3 cost of US$1.39/lb of payable copper includes C1 plus sustaining capital, expansion capital, and closure costs.

Table 4: Life of Mine Operating Costs Summary

Area Unit US$ Unit US$ /lb
Cu
On-site Costs
Mining $/t processed 2.62 $/lb Cu 0.38
Processing $/t processed 4.76 $/lb Cu 0.69
Co-mingle Tailings $/t processed 0.12 $/lb Cu 0.02
General & Administration $/t processed 0.70 $/lb Cu 0.10