Production cost comparisonThis is an analysis of cost data from the ten projects cited in my previous post and a more refined evaluation of key economic drivers in order to create a more accurate picture of where Santo Tomas’ costs will lie.
Each of the ten projects has an average grade and average cost per pound CuEq over the life on mine, as obtained from their published technical reports. Each mine’s annual ore processing rate is fixed and driven by the mill’s capacity. Multiplying annual ore processing rate by average grade will tell us how much metal is produced in the mill, and after taking into account mill losses, we can determine the CuEq recovered on an annual basis, offset by recovery rates.
When a mill processes a higher than average grade from the same ore volume over a year, more metal is produced during that year. Presuming that annual mine production costs are the same between two given years, the average production cost per pound of copper is lower in that discrete year with the higher ore grade. The reverse is true during years when lower grades are processed.
I reviewed production cost data for each of the ten projects, applied mill loss rates obtained from the respective technical reports, and scaled each project to a hypothetical 0.50% grade to see what the cost / pound would be if the mill processed a 0.50% grade for an entire year.
In the first example below, Hudbay Mason has a reported average production cost of $1.61 / pound at an average grade of 0.34 CuEq over the entire life of mine. Hudbay tells us in their PEA that the Mason project has a 90% recovery rate. In one year, the 120 ktpd mill can process 96,535,200,000 pounds of ore. 328,220,000 pounds of CuEq are produced from that volume of ore (assuming an average grade of 0.34%), and after taking into account mill losses, some 295,398,000 pounds of metal are recovered. I multiplied this quantity by the $1.61 / pound cost from Hudbay, to arrive at the an annual production cost of $475,590,000. This data is captured on the middle column.
The column on the right represents a hypothetical year during which annual production costs are the same (same amount of ore processed, energy, labor, etc.), but with a higher 0.50% average grade run through the mill for that entire year. From that higher grade, but same ore processing rate, we can calculate the pounds of metal produced, apply the recovery rate and determine the amount of metal recovered. This is calculated to be 434,408,000 pounds. The cost per pound to produce metal from the higher 0.50% grade is determined by dividing annual production costs of $475,590,000 by the 434,408,000 pounds of CuEq recovered. This works out to be $1.09 / pound.
By scaling each project’s production cost per pound to a hypothetical 0.50% grade, we can see how they compare and we can also use that historical data to estimate costs at Santo Tomas.
Each project has different average life of mine grades and different Cu recovery rates, as obtained from their different technical reports. Au, Ag, and Mo have varying recovery rates as well, but the relative losses from those additional precious metals are less significant to the overall equation. Page 10 of the Santo Tomas Technical report cites a 1992 preliminary metallurgical test suggesting that a Cu recovery of 95% was attainable. This is a positive data point for us, because the industry average is closer to 90%.
Los Andes Vizcachitas and Hudbay Rosemont have the highest per pound production costs among the group, and I have identified specific reasons at the end why I believe those projects are not comparable to Santo Tomas or to the other eight projects. These other eight projects fall within a narrower cost band, and after scaling to a 0.50% grade, the average production cost is $0.99 / pound.
Hudbay Mason Cost / pound $1.61 $1.09
Average grade CuEq 0.340% 0.50%
Tons / day 120,000 120,000
Tons / year 43,800,000 43,800,000
Pounds of ore per year 96,535,200,000 96,535,200,000
Annual production cost $475,590,000 $475,590,000
Pounds CuEq produced 328,220,000 482,676,000
Pounds CuEq recovered 295,398,000 434,408,000
(90% Cu recovery)
Hudbay Constancia Cost / pound $1.38 $0.86
Average grade CuEq 0.311% 0.50%
Tons / day 90,000 90,000
Tons / year 32,850,000 32,850,000
Pounds of ore per year 72,401,400,000 72,401,400,000
Annual production cost $267,230,000 $267,230,000
Pounds CuEq produced 225,168,000 362,007,000
Pounds CuEq recovered 193,645,000 311,326,000
(86% Cu recovery)
Josemaria Cost / pound $0.89 $0.73
Average grade CuEq 0.410% 0.50%
Tons / day 150,000 150,000
Tons / year 54,750,000 54,750,000
Pounds of ore per year 120,669,000,000 120,669,000,000
Annual production cost $374,273,000 $374,273,000
Pounds CuEq produced 494,743,000 603,345,000
Pounds CuEq recovered 420,531,000 512,843,000
(85% Cu recovery)
Taesko Yellowhead Cost / pound $1.67 $0.97
Average grade CuEq 0.290% 0.50%
Tons / day 90,000 90,000
Tons / year 32,850,000 32,850,000
Pounds of ore per year 72,401,400,000 72,401,400,000
Annual production cost $315,575,000 $315,575,000
Pounds CuEq produced 209,964,000 362,007,000
Pounds CuEq recovered 188,967,000 325,806,000
(90% Cu recovery)
Panaro Minerals Cotabambas Cost / pound $1.22 $1.12
Average grade CuEq 0.460% 0.50%
Tons / day 80,000 80,000
Tons / year 29,200,000 29,200,000
Pounds of ore per year 64,356,800,000 64,356,800,000
Annual production cost $288,936,000 $288,936,000
Pounds CuEq produced 296,041,000 321,784,000
Pounds CuEq recovered 236,833,000 257,427,000
(80% Cu recovery)
Note: The mixed-oxide ore contribution reduces the average Cu recovery rate at Cotabambas to a paltry 80%. See table 1-2 in Cotabambas PEA. McEwen Mining Los Azules Cost / pound $1.28 $1.18
Average grade CuEq 0.460% 0.50%
Tons / day 90,000 90,000
Tons / year 32,850,000 32,850,000
Pounds of ore per year 72,401,400,000 72,401,400,000
Annual production cost $387,932,000 $387,932,000
Pounds CuEq produced 333,046,000 362,007,000
Pounds CuEq recovered 303,072,000 329,426,000
(91% Cu recovery)
Copper Mountain Cost / pound $1.90 $1.22
Average grade CuEq 0.320% 0.50%
Tons / day 65,000 65,000
Tons / year 23,725,000 23,725,000
Pounds of ore per year 52,289,900,000 52,289,900,000
Annual production cost $270,234,000 $270,234,000
Pounds CuEq produced 167,327,000 261,449,000
Pounds CuEq recovered 142,228,000 222,232,000
(85% Cu recovery)
Candente Copper Canariaco Norte Cost / pound $0.82 $0.77
Average grade CuEq 0.470% 0.50%
Tons / day 95,000 95,000
Tons / year 34,675,000 34,675,000
Pounds of ore per year 76,423,700,000 76,423,700,000
Annual production cost $262,138,000 $262,138,000
Pounds CuEq produced 359,191,000 382,119,000
Pounds CuEq recovered 319,680,000 340,085,000
(89% Cu recovery)
Outliers that are not comparable: Hudbay Rosemont Cost / pound $1.29 $1.37
Average grade CuEq 0.530% 0.50%
Tons / day 90,000 90,000
Tons / year 32,850,000 32,850,000
Pounds of ore per year 72,401,400,000 72,401,400,000
Annual production cost $396,007,000 $396,007,000
Pounds CuEq produced 383,727,000 362,007,000
Pounds CuEq recovered 306,982,000 289,606,000
(80% Cu recovery)
Note: The high strip ratio (3.7 : 1) and low copper recovery rate of 80% at Rosemont drives production cost higher. Rosemont streamed their silver at $3.90 / ounce and can not take full benefit from the silver revenue (see cash flow model Table 22-5). These factors all drive the cost per pound higher than the others. Los Andes Vizcachitas Cost / pound $1.58 $1.43
Average grade CuEq 0.451% 0.50%
Tons / day 110,000 110,000
Tons / year 40,150,000 40,150,000
Pounds of ore per year 88,490,600,000 88,490,600,000
Annual production cost $573,815,000 $573,815,000
Pounds CuEq produced 399,093,000 442,453,000
Pounds CuEq recovered 363,174,000 402,632,000
(91% Cu recovery)
The 2019 PEA presents strip ratio data at 2 early on and then hovering around 1 for the first 30 years of life of mine as shown in Table 16.4. However, Figure 16.19 demonstrates that for every 300 tonnes per day of ore mined, they are only milling 110 tonnes. In other words, the amount of ore mined is distributed 1/3 to the mill, 1/3 to the stockpile, and 1/3 to waste. This punishes the project economics as the stockpiled ore is not processed until three decades later. Normally, this would be a strip ratio of 2.9 : 1. Since half of the unmilled ore goes to a stockpile for 32 years, this is how they report a strip ratio of 1. Los Andes is reportedly working on completing a Pre-Feasibility Study in Q1-2022 to improve project economics. The calculated average costs of $1.58 / pound for a life of mine average grade of 0.451% is high and an outlier in the dataset. Santo Tomas will have no where near as high a strip ratio as at Vizcachitas, and presumably will not need to stockpile North Zone ore for 30 years. Santo Tomas We do not yet know the grade and volume of Brasiles and have just a few sundry data points from the historical South Zone drilling campaigns. The current exploration has multiple avenues at expanding grade and volume.
In my next post, I will apply the cost data to different grade scenarios to illustrate the value of Santo Tomas. I anticipate additional surprises on the upside as exploration continues. Stay tuned.