Thursday, 8 October 2015

McEwen Mining And TNR Gold: Unlocking The Value Of Giant Los Azules Copper - Elections In Argentina.


  With elections fast approaching in Argentina it is time to revisit the potential of Los Azules Copper. This giant copper project in Argentina is under management of McEwen Mining and TNR Gold holds 0.4% NSR and 1% on sale of the project. All three major candidates have announced their support for the mining industry in Argentina. According to Rob McEwen, this winter number of interested parties were visiting Los Azules. Project is for sale and it is only the question of time now when it happens. We have just passed the anniversary of Taca Taca sale by Lumina Copper, which Rob McEwen is using as the benchmark for Los Azules value. On the links below you can find more information about Los Azules and TNR Gold assets in this project. Please carefully read my legal disclaimer, all technical data provided by McEwen Mining is for information only, you should not be relying on it to make any investment decisions. "Qualified Person"  of TNR Gold as defined under NI 43-101 was not able to verify all these information.

Rob McEwen: Los Azules Copper - "The Glimmer of Hope for Argentina."

"Rob McEwen was presenting at BMO Capital Markets conference this week. It is the very interesting presentation and you can find it on the McEwen Mining website. The most interesting for TNR Gold was his comment on the recent situation in Argentina. He sees "the glimmer of hope" with the coming elections in October later this year: "Producers are making their enquiries about the Los Azules Copper project and one of them is on the property now."

TNR Gold And Los Azules Copper: Argentina's Presidential Election Holds Keys To $5-billion In Mine Projects.

  "I will add here Los Azules Copper of McEwen Mining and Pascua Lama of Barrick Gold and we can easily change headline to 10 billion … The great country has the great hope for the change now and smart money are already picking up the best projects in Lithium, Copper, Gold and Silver in Argentina."

 There is very little coverage on Los Azules copper project despite of being "One of the largest undeveloped copper deposits in the world" - according to McEwen Mining. I am very pleased to find out this publication about McEwen Mining, Argentina and magnitude of Los Azules copper project.
  Please read carefully my legal disclosure. All this material is provided for information only, I was not able to verify any technical information in this article, it should not be relied upon in any investment decisions.
  TNR Gold holds now 0.4% NSR on the whole Los Azules copper deposit, 1% bonus on the sale of Los Azules and McEwen Mining shares. You can find all our financial information in the official reporting on SEDAR.

  "Copper and Lithium become the strategic metals for the ongoing green revolution. Solar and Wind Energy and Electric Cars will drive the new demand for these metals. Solar Energy is growing very fast all over the world now. Energy Storage will be the next step to ignite this growth. This is the new focus of Elon Musk and his Gigafactory. He will introduce the home storage system based on the lithium batteries in the next few months. Copper will have its special place in this mass scale roll out of distributed energy generation systems with Wind and Solar Power. Integral part of this system - Energy Storage is getting popular now with Elon Musk Gigafactory and Warren Buffet with BYD making the headlines. These Trillion Dollar industries: Electric Cars and Energy Storage will drive the demand for Copper and Lithium in the future. Read more."

McEwen Mining:

Los Azules – Argentina (Exploration)

Los Azules is a 100% owned advanced-stage porphyry copper exploration project located in the cordilleran region of San Juan Province, Argentina near the border with Chile. Los Azules is one of the world's largest undeveloped high-grade open pit copper projects, which contains significant growth potential. 

Preliminary Economic Assessment for Los Azules

2012 - 2013 exploration drilling at Los Azules expanded the resources by identifying important additional mineralization southwest of the main deposit. Consequently in November 2013 McEwen Mining filed an updated Preliminary Economic Assessment (PEA) that includes an updated resource estimate.The resource contains 14.3 billion pounds of copper Inferred and 5.4 billion pounds of copper Indicated. Gold resources are 840,000 ounces Indicated and 2.58 million ounces Inferred. Silver resources are 22.9 million ounces Indicated and 85.8 million ounces Inferred.  Exploration following the 2013 resource estimate represented the first time when a meaningful amount of deeper drilling has occurred at Los Azules, with holes that exceeded 700 meters in depth. The deeper drilling has begun to identify a potential parallel trend, west of the original Los Azules ore-body. Copper mineralization discovered within this trend occurs near surface and also at depth (down to 1,050 meters below surface). This is significant because it may indicate that the previous drilling, which was shallow and makes up the majority of the Los Azules resource, has not completely determined the potential of the deposit, which remains open at depth. As a result, many new exploration targets have emerged.

Mineral Resource Estimate Greater than 0.35%

Copper Grade
Contained Copper
(B lb)
Gold Grade
Silver Grade
Indicated389 0.635.40.071.8
Inferred1397 0.4614.30.061.9 
Details on the parameters of the resource estimate are as follows:
  • The resource estimate is based on data from 185 drill holes comprising a total length of 59,518 meters of drilling completed to the end of March 2013.
  • There were a total of 27,688 individual samples selected for analysis.  The samples were collected and analyzed in accordance with industry standards.  Splits from the drill core samples were submitted to either Alex Stewart in Mendoza or ALS Chemex or ACME in Santiago, Chile for fire assay and ICP analysis. Accuracy of results is tested through the systematic inclusion of standards, blanks and check assays.
  • The May 2013 mineral resource estimate for the Los Azules Copper Project was prepared under the direction of Robert Sim P.Geo. of SIM Geological Inc.  The mineral resource estimate uses drill hole sample assay results and the interpretation of a geologic model that relates to the spatial distribution of copper in the deposit.  Interpolation characteristics were defined based on the geology, drill hole spacing and geostatistical analysis of the data.  Block grade estimates were done using Ordinary Kriging with a nominal block size measuring 20 meters long, 20 meters wide and 15 meters high.  Resources are classified according to their proximity to sample data locations and are reported, as required under Canadian National Instrument 43-101 "Standards of Disclosure for Mineral Projects" ("NI 43-101"), according to the CIM Definition Standards for Mineral Resources and Mineral Reserves.
  • Mineral resources which are not mineral reserves do not have demonstrated economic viability.
  • The quantity and grade of reported Inferred resources are uncertain in nature and there has been insufficient exploration to classify these Inferred resources as Indicated or Measured, and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured category.
  • As required under NI 43-101, reasonable prospects for economic viability of the mineral resources has been exhibited by the application of a resource limiting pit shell built about copper grades in the model using a projected metal price of US$2.75 per lb. Cu, mining costs of US$1.00 per tonne, milling and G&A costs of US$4.25 per tonne, 100% recoveries and an average pit slope of 34 degrees.

Los Azules Resource Map

The results from the PEA demonstrate that Los Azules has the potential to become one of the largest, lowest cost copper mines in the world. In addition, there remains excellent exploration potential to further expand the size of the existing mineral resource. Highlights from the PEA are shown below: 

PEA Study Highlights*

($3.00/lb Copper and $1,300/oz Gold)
  • Pre-tax Net Present Value (“NPV”) of $3.0 billion (8% discount rate) and an Internal Rate of Return (“IRR”) of 17.6%.
  • After-tax NPV of $1.7 billion (8% discount rate) and an IRR of 14.3%.
  • Annual copper production during years 1 to 5 to average 255,000 tonnes (563 million lb), which would have placed it in the top 3%¹ of copper mines in the world during 2012. Life of mine (“LOM”) annual copper production to average 171,000 tonnes (377 million lb) over 35 years.
  • Cash operating costs during years 1 to 5 to average $0.87/lb copper (net of gold by-product), placing it in the bottom 14%¹ in the world during 2012. Cash operating costs over entire mine life to average $1.08/lb copper (net of gold by-product). 
  • Indicated resource of 5.4 billion pounds of copper and 0.8 million ounces of gold and Inferred resource of 14.3 billion pounds of copper and 2.6 million ounces of gold (please see Table 2 below for resource details).
  • Initial capital costs to construct the mine and a 120,000 tonnes per day (“tpd”) process plant have been estimated at $3.9 billion.
  • Capital payback on a pre-tax basis has been estimated at 3.8 years at $3.00/lb copper and $1,300/oz gold. 
¹ Based on internal market data.
The updated PEA contemplates the construction of a mine and process plant operating over a 35 year mine life at a throughput of 120,000 tonnes per day. The mine would produce a copper cathode via a pressure oxidative leach process, in addition to heap leaching the lower grade mineralized material. Compared to the previous PEA released in December 2010, there have been two significant improvements to the project: 
  1. Resource Size: Indicated and Inferred resources have increased by 184% and 55% respectively, which were slightly offset with decreases in respective grades of 14% and 12%. Overall, this has led to a 37% increase in mine life and 44% increase in total copper production.
  2. Process Methodology: The current PEA plans to produce copper cathode at site whereas the 2010 PEA contemplated producing copper concentrate and transporting it via pipeline through Chile. The main advantages of producing copper cathode at site are that it eliminates this previously planned pipeline through Chile, which was a substantial risk for the project, as well as an overall increase in recovered metal, both copper and gold. Additional benefits include: i) a reduction in export taxes (5% payable on cathode versus 10% on concentrate) and, ii) the removal of treatment and refining charges from the smelting process.

Pertinent Details of the PEA

Pre-tax NPV ($3.00/lb Cu, 8% discount rate)$3.02 billion
After-tax NPV $1.68 billion
Pre-tax IRR17.6%
After-tax IRR14.3%
Initial Capital Expenditure$3.92 billion
LOM Sustaining Capital$1.47 billion
LOM Average Operating Costs$8.65/t ore
First 5 Years Average C-1¹ Cash Costs (net of by-product credits)$0.87/lb Cu
LOM Average C-1 Cash Costs (net of by-product credits)$1.08/lb Cu
Nominal Mill Capacity120,000 tpd
Average Tonnes of Mineralized Material Processed Annually – Mill43 million tonnes
Average Tonnes of Mineralized Material Processed Annually - Heap Leach6 million tonnes
Mine Life34.9 years
LOM Strip Ratio0.76
LOM average annual copper production171,000t or 377M lb
First 5 years average annual copper production255,000t or 563M lb
¹ C-1 cash costs include at-mine cash operating costs, treatment and refining charges, mine reclamation and closure costs, and copper cathode and gold doré transportation and freight costs.
In comparing the economics to the 2010 PEA, the pre-tax NPV discounted at 8% has increased from $2.8 billion to $3.0 billion and the IRR has decreased from 21.4% to 17.6%. In addition, the payback of pre-production capital has increased from 3.1 years to 3.8 years from the start of production. The previous PEA did not include economics that were calculated on an after-tax basis.
The PEA contains a cash flow model based upon the geological and engineering work completed to date and technical and cost inputs developed by Samuel Engineering, Inc., Ausenco Vector, WLR Consulting, Inc., and MTB Project Management Professionals, Inc. The base case was developed using long term forecast metal prices of $3.00/lb for copper and $1,300/oz for gold. 
Los Azules technical information and figure on this page were derived from (1) the news release titled “McEwen Mining Announces Updated Preliminary Economic Assessment for the Los Azules Copper Project” released on September 23, 2013. To access the news release click here And (2) the technical report titled “Canadian National Instrument 43-101 Technical Report, McEwen Mining Inc., Los Azules Porphyry Copper Project, San Juan Province, Argentina", with an effective date of August 1, 2013, prepared by Richard Kunter, FAusIMM, CP, QP, Robert Sim, PGeo, Bruce M. Davis, PhD, FAusIMM, James K. Duff, PGeo, William L. Rose, PE, Scott C. Elfen, PE, and Steven A. Pozder, PE, MBA, all of whom are qualified persons and all of whom but  James K. Duff  are considered independent of McEwen Mining, as defined by NI 43-101. To access the report click here.
Cautionary Notes
McEwen Mining reports its resource estimates in accordance with standards of the NI 43-101. These standards are different from the standards generally permitted in reports filed with the SEC. Under NI 43-101, McEwen Mining reports Measured, Indicated and Inferred resources, measurements which are generally not permitted in filings made with the SEC. According to Canadian NI 43-101 criteria, the estimation of measured resources and indicated resources involve greater uncertainty as to their economic feasibility than the estimation of proven and probable reserves. Under SEC Industry Guide 7 criteria, Measured, Indicated and Inferred resources are considered Mineralized Material. The SEC considers that in addition to greater uncertainty as to the economic feasibility of Mineralized Material compared to proven and probable reserves, there is also greater uncertainty as to the existence of Mineralized Material. U.S. investors are cautioned not to assume that Measured or Indicated resources will be converted into economically mineable reserves. The estimation of Inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources. 
Mineral resources which are not mineral reserves do not have demonstrated economic viability.
This website contains certain forward-looking statements and information and investors are encouraged to review our "Cautionary Note Regarding Forward Looking Statement". "