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Baja Confirms Robust Economics at Boleo
Update projects 23-year mine life with 25.6% IRR and $1.306 billion NPV
Baja Mining Corp. today announced that an updated capital cost estimate and economic model have confirmed that its 70%-owned Boleo deposit in Baja California Sur, Mexico, can be developed economically at an after-tax internal rate of return (IRR) of 25.6% based on 100% equity. The project, which has a minimum scheduled mine life of 23 years, has a NPV of $1.306 billion using an eight percent discount rate and an average life of mine cash cost of negative $0.29/lb for copper, net of by-product credits. All dollar amounts are stated in U.S. dollars and are on an equity basis (i.e. assume no debt or related finance charges).
Highlights of Boleo project update
Proven and probable reserves for minimum 23-year mine life.
Negative $0.29/lb for copper average life of mine cash cost, net of by-product credits.
Remaining estimated capital costs of $889 million (including $92.3 million contingency).
Average annual production, for the first six years of full production:
Copper cathode: 56,697 tonnes
Cobalt cathode: 1,708 tonnes
Zinc sulphate monohydrate: 25,364 tonnes
265 million tonnes of measured and indicated resources grading 1.50% copper equivalent.
159 million tonnes of inferred resources grading 1.15% copper equivalent.
After-tax IRR of 25.6% using SEC guidelines, or 27.9% at current market prices.
After-tax NPV (at 8% discount rate) of $1.306 billion using SEC guidelines or $1.473 billion at current market prices.
"We are pleased that the updated capital and operating cost estimates confirm the robust economics of the Boleo project," says Baja President and CEO John Greenslade. "This update now provides a strong foundation for completing construction financing and recommencing construction of the mine and processing facility in order to move to production as soon as possible."
Mr. Greenslade says "there is also significant upside potential for Boleo which is endowed with a rich resource of manganese. We will shortly commence a feasibility study to quantify this potential which could substantially add to the projects value."
The current update incorporates plant capital cost estimates prepared by ICA Fluor Daniel, S. de R.L. de C.V. (ICA Fluor), operating cost estimates prepared by the Company and reviewed by ICA Fluor, and owners costs prepared by the Company. A revised geological model, in accordance with NI 43-101, has been prepared by Wardrop, A Tetra Tech Company (Wardrop) and used by Agapito Associates, Inc. (AAI) to prepare the current mine plan. The initial capital cost for the mine was prepared by AAI, however mine sustaining capital and operating costs were prepared by the Company. The Company utilized these cost estimates to prepare the financial projections. In doing so, the capital and operating costs were adjusted to reflect leasing of certain equipment, and to capture costs incurred in the fourth quarter of 2009.An updated NI 43-101 compliant technical report (the Technical Report) will be filed within 45 days of todays date.
Capital Cost Estimate
The total project cost remaining, including Engineering, Procurement, Indirects, Construction Management, Owners Costs, and an 11.6 % overall Contingency, but excluding leased equipment, is $889 Million. A summary of estimated capital costs is listed below:
Capital Cost Breakdown
Total Capital to be Spent ($000)
Mining & Tailings
68,914
Process Plant
321,033
Site Services & Infrastructure
84,022
Buildings
9,072
Total direct costs
483,041
Construction Indirects & Freight
70,029
EPCM
52,391
Contingency
92,297
Total Construction Costs
697,758
Owners Costs & Pre-development Costs
141,101
Total Cost Before W/C and Financing
838,859
First Fills, Reagents, Spares and Working Capital
50,616
Total Estimated Capital Costs
889,474
Costs, all dollars are third quarter 2009.
Production and Operating Costs
Start-up of the process plant is scheduled for the second half of 2012, based on funding the project during the first half of 2010, in accordance with the following production schedule:
Base Case Production Summary
Yrs 11
Yrs 2-7
Yrs 8-10
Yrs
11-13
Yrs
14-20
Yrs
21-23
Ore Treated (kt/y)
2,174
3,100
3,100
3,100
3,100
3,021
Grade: % Cu
2.04
2.02
1.74
1.39
0.91
0.61
% Co
0.074
0.071
0.061
0.070
0.074
0.059
% Zn
0.40
0.47
0.52
0.58
0.62
0.81
% Mn
2.45
2.55
2.58
2.93
3.08
4.95
Production (t/y):
Copper
40,221
56,697
49,009
39,161
25,701
17,249
Cobalt
710
1,708
1,481
1,699
1,802
1,398
Zinc Sulphate
Monohydrate
9,027
25,364
28,482
30,469
33,054
36,760
1. Note: year 1 is a ramp-up year and partial year production for cobalt and zinc sulphate monohydrate estimated at 8 months
Unit Operating Costs (expressed in $/tonne of ore treated)
Yrs
1
Yrs
2-7
Yrs
8-10
Yrs
11-13
Yrs
14-20
Yrs 21-23e
Mining
15.36
14.91
11.89
7.90
8.62
7.47
Process
19.36
18.96
17.87
17.63
17.60
18.45
G&A, Sales
9.70
7.54
7.36
7.07
6.66
6.64
Total ($/t)
44.37
41.41
37.12
32.60
32.87
32.56
Cash cost* $/lb
0.49
(0.04)
(0.07)
(0.43)
(0.80)
(0.78)
of copper
Cash Flow $000/yr
216,002
316,432
233,539
204,462
148,931
97,749
*Cash cost/lb of Cu is net of cobalt, zinc and sulphuric acid credits. Cash flows are after-tax, using Base Case SEC guideline prices of $2.91/lb Cu, $26.85/lb Co and $1,175/tonne ZnSO4H2O.
Project Economics
Project economics are presented for three cases: 1) Base Case; 2) Case 2 using lower prices; and 3) January 2010 prices. No manganese production is assumed for any of the cases.
1) Base Case:
Base case project economics use the weighted average three-year trailing price (in accordance with SEC guidelines) of $2.91/lb for copper; $26.85/lb for cobalt; and $1,175/tonne for zinc sulphate monohydrate.
2) Case 2:
$2.25/lb for copper; $20/lb for cobalt; and $1,100/tonne for zinc sulphate monohydrate.
3) January 2010 Price Case:
Prices as of January 8, 2010 were $3.40/lb for copper; $21.17/lb for cobalt; and $1,000/tonne for zinc sulphate monohydrate.
Base Prices
Case 2 Prices
Jan 10 Prices
IRR Pre-tax
28.7%
23.0%
31.2%
IRR After tax
25.6%
20.4%
27.9%
NPV* @ 0%