RE: ''Northern Miner'' Here you go!Expected years of production.
Panama City, Panama -- Petaquilla Minerals (PTQ-T, PTQMF-O) is aggressively
advancing its plans to bring the Molejon gold-silver deposit, in north-central
Panama, to production.
Proposed open-pit development of the project, which recently received
Panamanian government approvals for a multi-phase mine plan on the large mineral
concession, is now being advanced through infill, confirmation and advanced
exploration drilling.
Molejon forms a portion of the 135-sq.-km Minera Petaquilla project area,
which hosts several mineral deposits, including the large Botija and Petaquilla
copper-gold-molybdenum porphyry bodies. The company is targeting the gold
deposit as a stand-alone operation that may springboard future development of
the copper deposits.
Petaquilla is fortunate to be able to leverage a significant amount of
existing infrastructure and previous exploration work on the project area toward
its goal. The ground was worked extensively in the mid-1990s when the company's
predecessor, Adrian Resources, along with partners Inmet Mining (IMN-T, IEMMF-O)
and Teck Cominco (TEK.SV.B-T, TCKBF-O), drill defined resources on the Molejon
gold and Petaquilla copper deposits, completing a bankable feasibility study on
the latter. Petaquilla Minerals holds 52% and Inmet 48%, with Teck holding an
option to earn half of Petaquilla's interest by completing a final feasibility
study (done in 1998) and funding the company's entire share of costs to place
the main copper project into production.
Petaquilla's main exploration office, constructed in the 1990s by the
partners, was built as a mine and administrative centre. The facility is ideally
situated in central Panama, not far off the Pan-American Highway, and serves as
an ideal staging post to the project, located farther north in the densely
forested, tropical zone, near the Caribbean coast. The property is accessible
primarily by helicopter, although during a recent visit by The Northern Miner,
an access road was under construction.
In mid-2005, Petaquilla signed agreements with Inmet and Teck Cominco to
acquire full title to Molejon and any other gold deposit on the Minera
Petaquilla land package, subject to royalties. The move gives Petaquilla control
of the project, aiding development decisions and project financing. Tenure to
the entire project would convert from annual exploration licences to an
exploitation permit for up to 60 years (three 20-year concessions renewable
automatically) once a mine permit is received for Molejon, extending the window
for possible future development of the large copper deposits.
The Panamanian government recently OK'd Petaquilla's mine plan, under
proposals initially tabled in 1997, providing the prospective developer
guaranteed stable land tenure. In addition, a favourable tax structure has been
tabled, allowing for accelerated depreciation and depletion allowances along
with an import duty exemption for essentially all equipment and supplies
necessary for the project. The operation will also enjoy an income tax holiday
(except for a mineral production royalty) until all of the construction
financing costs are retired. Further, there will be no withholding tax on
interest or dividend payments to foreign lenders or shareholders,
respectively.
Expanding Molejon
Petaquilla resumed activity at Molejon in 2004, triggered by an upswing in
the metal price and junior mining equity market, looking to expand areas of
known gold mineralization. In late 2005, SRK Consulting revised a 1995 resource
estimate on the epithermal gold deposit, resulting in a 35% boost to 11.2
million tonnes of inferred resources grading 2.5 grams gold, or about 893,000
contained ounces gold, using a 0.5 gram gold cutoff.
Programs of trenching and drilling are providing infill confirmation of
previous work, and are also aimed at expanding mineralized zones.
Last year's trenching encountered significant high-grade gold in the Molejon
Main zone. At the 244 area (defined by a silicified hill 45 metres in diameter),
trench 205B returned 51.5 metres grading 16.9 grams gold per tonne, including
25.4 metres of 28.3 grams gold. Two consecutive 1.5-metre intervals in the
trench averaged 106 and 101 grams gold, respectively. Exploration indicates the
area is completely mineralized, with good extension potential both to the
northwest and southeast. Additional sampling on the Central, Main and Northwest
zones have also successfully tested extensions to known mineralization.
A 5,000-metre drill program, started early this year, is testing depth
potential of the zones and will serve as a check to some previous holes.
Previous drilling, conducted in 1994-95, consisted of 124 holes on a 50-metre
grid with 40- to 70-metre hole spacing.
This year's first hole, MO-06-01, was drilled about 5 metres from previous
hole MO-95-244 and returned 8.5 metres (from surface) grading 32.5 grams gold
per tonne in a quartz breccia zone.
The program will provide data for a feasibility study and the design of a
planned starter pit for the operation.
Initial mine modelling at Molejon outlines a 10-year mine life with a
1,800-tonne-per-day operating rate, expected to begin with a high-grade starter
pit in the 244 area. The project is anticipated to deliver a 2-year payback with
about a 35% internal rate of return.
Petaquilla Minerals has been working with International Finance Corp. (IFC),
the financing arm of the World Bank, which has carried out due diligence on the
company's development plans. Upon final mine plans, the IFC will review its
involvement options; previous reports had it considering backing 25% of the
project through debt financing and possibly taking a 10% equity interest in
Petaquilla, thereby reaching its maximum exposure of 35%.
Divide and conquer
Petaquilla has tabled plans to split into two separate public companies, one
developing Molejon and other possible gold deposits, and the other holding the
large copper assets. Management says this will offer shareholders an improved
valuation for the minerals portfolio. The process, subject to shareholder
approval, is expected to be completed by mid-year.
The company recently entered into a preliminary agreement with one of China's
largest integrated metal producers for the development of the Petaquilla copper
deposits. The agreement reviews a potentially significant equity investment in
the new Petaquilla copper entity by the unnamed Chinese company, as well as the
potential acquisition of the interests and rights currently held by partners
Inmet and Teck Cominco. The Chinese mining group also proposes participation in
project financing and construction, in addition to an offtake agreement for of
copper concentrates.
The Chinese group was lured by the sheer size of the Petaquilla copper
deposits. "In the mid-1990s, we were ranked as one of the top five copper
projects by research group CRU International, and of those five, three are now
in production," says company director Richard Fifer. "Hopefully, Petaquilla will
be the fourth."
To generate the feasibility study, Fifer says the three partners spent $60
million and conducted 120,000 metres of drilling between 1995 and 1997.
The 1998 bankable feasibility study, completed by engineering firm AMEC,
reviewed the three main porphyry deposits on Minera Petaquilla and indicated a
pre- National Instrument 43-101 minable reserve calculation of 1.1 billion
tonnes grading 0.5% copper, 0.09 gram gold and 0.015% molybdenum. The report
proposed a 120,000-tonne-per-day throughput and a 23-year mine life with a
relatively low stripping ratio of 0.97:1. Initial capital spending was pegged at
US$1.1 billion to put the mine into production.
Minera Petaquilla largely sat stagnant after 1998, following the commodity
price collapse and a weakened junior mining market. Metals prices have improved
significantly since the 1998 feasibility study, when gold was less than US$300
per oz. and copper traded around US70¢-US80¢ per lb.
Hydrometallurgical copper processing has also evolved dramatically since the
1990s, and may have application potential at Petaquilla, where significant
amounts of secondary copper sulphides exist -- specifically in Botija,
Petaquilla, and Cuatro Crestas. The molybdenum component in the copper porphyry
may also prove to be a sweetener given the metal's recent price rally.
With 70.1 million shares outstanding, Petaquilla Minerals posts a
$115-million market capitalization given its recent $1.65-per-share trading
level. The company's shares have traded in a 52-week range of 37¢ to
$1.93.