Los Azules is a copper porphyry mine project located in San Juan Province, Argentina along the border with Chile. McEwan Mining has been developing this project for some time. Let’s look at some of the project data from their NI 43-101 report and see how it compares to San Tomas. All prices are in USD.
Los Azules (October 2017 NI 43-101)
NPV: $2.2 B
CAPEX: $2.4 B
OPEX: $15.4 B (over the life of the mine)
Long-term Cu price assumption: $3 / pound
Indicated resource estimate of 962 M tonnes ore:
0.48% Cu
0.003% Mo
0.06 g/t Au
1.8 g/t Ag
Contained metal resource:
10.2 B pounds Cu
57.3 M pounds Mo
1.7 M ounces Au
55.7 M ounces Ag
San Tomas
Historical measured and indicated resource estimate
333 M tonnes ore:
0.437% Cu
3.2 B pounds Cu
822 M tonnes ore:
0.322% Cu
5.84 B pounds Cu
We don’t yet know what additional resource credit can be included for Au, Ag, and Mo at San Tomas, but there will likely be some additional lift. The Exall sampling data reported Au content that is within range of the Los Azules data. From the historical copper grade data and total tonnage presented here, the two projects are close for now. Along with everyone else, I anxiously await assay data results later this year and updates to the San Tomas resource estimate. But for now, the Los Azules NI 43-101 report could be helpful for estimating a rough, back-of-the-envelope NPV. Keep in mind a few very significant details with Los Azules.
The Los Azules project is located at an elevation of 3,500 – 4,500 meters above mean sea level. “The Los Azules Project is currently accessed by 120 km of unimproved road with eight river crossings and two mountain passes (both above 4,100 m elevation). This access is subject to snow accumulation and is generally passable only from December through to May. Calingasta is located west of the city of San Juan along Route 12. The last 95 km of dirt road to the project was constructed by Battle Mountain Gold, prior to which, access was by mules...The climate is tundra-like (semiarid/cold) with abundant snowfall during winter and temperatures as low as 30°C. Apparently frequent northwesterly winds can approach 120 kms/hr (about 75 mph).” (October 2017 and March 2008 NI 43-101 reports)
I visited Mendoza, Argentina ten years ago and took a bus trip up to the top of the Andes on scenic route 7. The border with Chile is at the top of the mountain range. The terrain is stunning and resembles the mountains of Tibet. If you ever travel to Mendoza, you should include this on your itinerary. Building and operating a copper mine at this elevation and climate will present a whole host of engineering, transportation, and physical challenges. Glacier and snow-melt runoff from the Andes is collected and routed to the wine region of Mendoza. This is probably the case in San Juan as well, some 160 km to the north. I don’t know specifically what water-resource limitations the project may encounter. Not everyone’s physiology works well at 4,500 meters elevation. Transporting billions of pounds of copper concentrate along mountain roads safely (presumably by truck rather than by mule) will add costs. The project anticipates building a road to the west and shipping concentrate to the Port of Coquimbo, Chile, some 244 km away on the other side of the Andes.
Construction of a mine in a high-elevation location with extreme weather poses real challenges. The limited construction season in western Alaska prompted Teck-Cominco in the late 80s to build and deliver its plant for the Red Dog mine in large modules. A total of 18 modules of up to 1,800 tons each were built in the Philippines and then shipped to Alaska. From the Port at the sea of Chukchi, it was another 52-miles of slow driving on a dirt road to deliver the completed sections at the mine site during the 3-month summer construction season. I have traveled on that road. It is at low elevation and very safe to navigate. Delivering large sections of material and machinery to high-elevations in the Andes will be much different.
You can download the 43-101 reports from the links below and adjust the accounting metrics to approximate a NPV for a project located not far from Choix, Mexico.