Mitsubishi Materials to Buy 20% Stake in $1.5 Billion Zafranal Copper Mine Project in Peru

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Researched by Industrial Info Resources (Sugar Land, Texas)--Canadian mining company AQM Copper Incorporated (TSX:AQM) (AQM) (Vancouver) signed an agreement with Mitsubishi Materials Corporation (Tokyo, Japan), in which Mitsubishi bought an indirect 20% stake in the Zafranal project in Peru. The project is being developed by Compania Minera Zafranal SAC (Lima, Peru), a 50:50 joint venture between AQM Copper Peru SAC (Lima, Peru) and Teck Resources Limited (NYSE:TCK) (Vancouver, Canada). According to the agreement, Mitsubishi will invest $22.6 million and commit an additional $15.7 million in AQM's Peruvian subsidiary AQM Copper Peru SAC; in exchange, it will acquire a 40% stake in the company, meaning an indirect 20% stake in Compania Minera Zafranal.

Zafranal is about 90 kilometers northwest of Arequipa, in southern Peru. According to a positive preliminary economic assessment released in December 2012, the property includes measured and indicated resources of 557.2 million tons, grading 0.36% copper and 0.007 grams-per-ton gold. Operations are expected to consist of a 215,000 ton-per-day conventional open-pit mining operation, feeding an 80,000 ton-per-day concentrator plant, including crushing, grinding and flotation circuits. Annually, 94,000 tons of copper in concentrate are expected to be produced, which will be trucked from the mine to a regional port in the Pacific Coast, some 150 kilometers away.

Furthermore, Zafranal entails a 20,000-ton-per-day leach facility to treat oxide and secondary sulphide material. The solvent extraction-elctrowinning plant (SX/EW) will produce 10,000 tons of copper cathodes per year. The study was performed by Tetra Tech WEI Incorporated (Vancouver, Canada). Zafranal is expected to be worth about $1.5 billion.

The preliminary economic assessment also contemplates a desalination plant located approximately 115 kilometers from a mine site in the Pacific Coast. Nevertheless, the joint venture company is negotiating an alternative water source with local communities. The desalination plant represents a capital cost of $275 million, and a $20 million-per-year operational cost.

In two months, a bidding process will take place to select an engineering firm to conduct a prefeasibility study on Zafranal. The study is expected to last one year. With environmental approvals granted on the schedule time, construction should commence by the beginning of 2016, with project completion planned for 2018.

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