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On March 28th, 2006 Peru Copper announced that Independent Mining Consultants, Inc. ("IMC") of Tucson, Arizona had completed an updated Technical Report based on the results of the recent pre-feasibility study for the Company's Toromocho Project previously announced on February 9, 2006. The Technical Report is available at www.sedar.com.
Changes incorporated in the Technical Report, which are described below, resulted in an increase in the estimated Net Present Value ("NPV") of the Company's Toromocho project from US$814 million to US$922 million and increase in the estimated Internal Rate of Return ("IRR") from 16.0% to 16.7% (both on an after tax basis) when compared to the NPV and IRR reflected in the pre-feasibility study.
J. David Lowell, the Company's Executive Chairman, said "we are pleased to see the positive impact on the pre-feasibility study of both new drilling information and further reserve and resource analysis reflected in the Technical Report. An additional US$108 million in the estimated NPV is an important improvement and we expect to see others as we continue to optimize the project."
The pre-feasibility study was completed by SNC-Lavalin, Chile, S.A. ("SNC") with input from a number of contractors including IMC, Mineral Advisory Group ("MAG"), and Montgomery Watson Harza ("MWH"). The data verification, block model, mine plan, mine capital and mine operating costs, and the mineral reserve and resource estimates discussed in the pre-feasibility study were the responsibility of IMC. The concentrator, infrastructure and pre-feasibility assembly were the responsibility of SNC.
The Technical Report is based on findings outlined in the pre-feasibility study; however certain information noted in the pre-feasibility study has been further updated by IMC in the Technical Report. The updates to information contained in the pre-feasibility study are summarized below:
1. Updates to the pre-feasibility study include drilling completed by the Company through October 2005, a January 2006 IMC block model and a February 2006 IMC mine plan. The primary change resulting from the new mine plan was to increase mill ore tonnage by about 4% and slightly reduce the strip ratio when compared to the pre-feasibility mine plan. The pre-feasibility study was based on an August 2005 drill hole database, a September 2005 IMC block model and a December 2005 IMC mine plan.
2. Additional smelter charges of US$1.05 and US$1.08 per tonne of concentrate were added to the smelter charges for years 1 and 2, reflecting possible arsenic penalties. The calculation was completed by IMC based on the same criteria for smelter charges as was used in the mine development plan.
3. Heap leach recovery by year was modified by IMC to reflect inventory in pad and residual leach. Overall recovery matched that estimated by MAG in the pre-feasibility study. Run of mine heap leach solvent extraction / electrowinning costs were reduced from US$2.01 per tonne in the pre-feasibility study to US$1.82 per tonne in the Technical Study to adjust rehandling costs.
All other unit costs reflected in the Technical Report are identical to those used in the pre-feasibility study.
The use of the updated IMC reserve estimate, block model and mine plan in the Technical Report result in an increase in the estimated Net Present Value ("NPV") of the Toromocho project from US$814 million to US$922 million and increase in the estimated Internal Rate of Return ("IRR") from 16.0% to 16.7% (both on an after tax basis) when compared to the NPV and IRR reflected in the pre-feasibility study.
Base economic assumptions used in the pre-feasibility study remain unchanged in the Technical Report and include a copper price of US$1.10/lb.; a molybdenum price of US$10.00/lb.; a silver price of US$6.50/oz.; a discount rate of 8%; capital costs of $1.524 billion; and a daily production rate of 150,000 tonnes per day of mill ore to the primary crushers.
Table 1-2 below details the updated resource and reserve estimates used in the Technical Study.
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On March 6, 2006 the Company issued a press release announcing new mineral reserve and resource calculations for its Toromocho project. During the preparation of the Technical Report by IMC, minor modifications were made to the statement of mineral reserves and resources.
The primary difference between the results stated in the March 6, 2006 press release and the Technical Report is the transfer of the low grade leach stockpile from a mineral resource category to mineral reserve category. The amount of this material changed as a result of an update of the block model, however the pre-feasibility study did incorporate this material into the heap leach process by rehandling it at a variable rate per year.
Other minor changes made to the mineral reserve and resource estimate were primarily rounding differences in grade and the use of a consistent copper equivalent calculation in both the mineral reserve and resource estimates. Different equations of equivalent copper had been used for mineral reserves versus mineral resources within the press release.
Table 1-3 summarizes the differences between the Technical Report and the reserve and resource estimate announced by the Company on March 6, 2006.
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Mr. John Marek, Professional Engineer, of IMC is the independent "qualified person", within the meaning of National Instrument 43-101, that prepared the updated mineral reserve and resource estimate in the Technical Report and he has reviewed and approved the content of this press release. Mr. J.W. Gulyas, Professional Engineer, of SNC is the independent "qualified person", within the meaning of National Instrument 43-101, that reviewed the engineering report on the process plant in the Technical Report and he has reviewed and approved the content of this press release. Dr. Martin C. Kuhn, Professional Engineer of MAG is the independent "qualified person" within the meaning of National Instrument 43-101 that prepared the report of metallurgical investigations and has reviewed and approved the disclosures of applicable metallurgical data.
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