Re: News Release - Monday, December 03, 2007
Title: Inca Pacific Completes Final Feasibility
Study For Magistral Copper-Molybdenum Project
Vancouver,
British Columbia, December 3, 2007 - Inca Pacific Resources Inc. (TSX-V:
IPR, BVL: IPR) is pleased to announce the results of a Final Feasibility
Study ("FFS") for its 100% owned Magistral Copper-Molybdenum Project
(the "Project") located in Ancash, Peru.
The FFS has confirmed the technical and economic viability of the Project. Highlights
of the study are as follows (all dollar figures in US dollars and current at
3rd Quarter, 2007):
NPV
(After Tax & 8% Discount Rate)
|
$146.0 million
|
IRR (After Tax)
|
14.9 %
|
Capital Payback
|
3.3 years
|
Initial
Capital Expenditure (before IGV) including a 14% contingency
|
$402 million
|
LOM C-1
Cash Costs (net of Mo & Ag by-product credits)
|
$0.28/lb Cu
|
Mill Capacity (nominal)
|
20,000 tpd
|
Annual Throughput
|
7 million tonnes
|
Mine Life
|
15 years
|
Strip
Ratio (including pre-production waste)
|
2.2:1
|
LOM
average annual copper-in-concentrate production
|
34,100 tonnes
|
LOM average annual molybdenum-in-concentrate production
|
2860 tonnes
|
*LOM = Life of Mine, IGV = Value Added Tax
Anthony Floyd, President & CEO said "I am very pleased that, while
capital costs have escalated, we do have a robust project with a rapid payback.
In the case of copper our engineering consultants have realistically balanced
conservative long-term prices with higher ones indicated by the futures market
for 2011 and 2012. In
the case of molybdenum they have balanced conservative long-term prices with
higher short term ones predicted by a very rigorous and current supply and
demand study".
The FFS was managed by MTB Project Management Professionals Inc
("MTB") and included work by Samuel Engineering Inc.
("SE"), Mine Development Associates ("MDA") and Vector Peru
("Vector"). Richard Kunter, Neil Prenn, Steve Ristorcelli and Scott
Elfen from SE, MDA, MDA and Vector respectively were the Independent Qualified
Persons responsible for the preparation of the FFS. The FFS includes a new NI
43-101 Mineral Resource estimate for Magistral and a corresponding block model,
which were used by MDA to develop a mine plan and production schedule for the
Project. The FFS will be available on Inca Pacific's website
(www.incapacific.com) and SEDAR (www.sedar.com) within 45 days. Richard Kunter,
one of the independent qualified persons within the meaning of National
Instrument 43-101 that prepared the Final Feasibility Study, has reviewed and
approved the content of this news release.
Inca Pacific will host a conference call on Monday, December 3, 2007 at 9:00
am (Pacific Time) or noon (Eastern Time) to discuss these results. Call-in
information is provided at the bottom of this news release.
Project Economics
A project specific market study by H&H Metals Corporation, a metals trader,
was conducted to provide pricing, treatment and refining charges, and freight
for Magistral's concentrate production and grades. The results of this market
study are the basis for the economic evaluation model. MTB developed a cash
flow valuation model for the Project based upon the geological and engineering
work completed to date. The base case was developed using the following metal
prices:
YEAR
|
Copper Price per lb
in US$
|
Molybdenum Price
per lb in US$
|
Silver Price per
troy oz US$
|
2011 & 2012
|
2.76
|
22.38
|
12.00
|
2013 to 2025
|
1.50
|
12.00
|
12.00
|
These price forecasts are considerably lower than current prices which, as of
November 29, 2007, were $3.08/lb for copper, $33.00/lb for molybdenum and
$14.20/oz for silver. The first year of production is assumed to be 2011.
Copper concentrate treatment charges and copper concentrate refining charges
were assumed to be $80.00/tonne and $0.08/lb respectively. The following table
shows the NPV of the base case at various discount rates:
Discount Rate
(Real)
|
NPV
|
0%
|
$584.0 million
|
5%
|
$259.3 million
|
8%
|
$146.0
million
|
10%
|
$ 90.9 million
|
12%
|
$ 47.5 million
|
The following chart in millions of dollars shows the sensitivity of the base
case's NPV (at an 8% discount rate) to various long term copper and molybdenum
prices but keeping the metal prices in 2011 and 2012 the same as the base case.
The impact of silver pricing changes is not significant and therefore
sensitivities are not presented.
Metal Price/lb
|
Cu $1.00
|
Cu $1.25
|
Cu $1.50
|
Cu $1.75
|
Cu $ 2.00
|
Mo $ 16.00
|
$98.0
|
$155.0
|
$212.0
|
$268.7
|
$324.9
|
Mo $14.00
|
$65.0
|
$122.0
|
$179.1
|
$236.0
|
$292.5
|
Mo $12.00
|
$32.2
|
$88.7
|
$146.0
|
$203.2
|
$260.0
|
Mo $10.00
|
$4.5
|
$55.4
|
$112.8
|
$170.3
|
$227.3
|
Mo $8.00
|
$0.8
|
$22.6
|
$79.4
|
$137.1
|
$194.5
|
The following chart in millions shows the sensitivity of the base case's IRR to
various long term copper and molybdenum prices but keeping the metal prices in
2011 and 2012 the same as the base case:
Metal Price/lb
|
Cu $1.00
|
Cu $1.25
|
Cu $1.50
|
Cu $1.75
|
Cu $ 2.00
|
Mo $ 16.00
|
13.0%
|
15.3%
|
17.3%
|
19.1%
|
20.7%
|
Mo $14.00
|
11.5%
|
14.0%
|
16.1%
|
18.0%
|
19.8%
|
Mo $12.00
|
9.9%
|
12.6%
|
14.9%
|
17.0%
|
18.8%
|
Mo $10.00
|
8.3%
|
11.0%
|
13.6%
|
15.8%
|
17.8%
|
Mo $8.00
|
8.1%
|
9.3%
|
12.2%
|
14.6%
|
16.7%
|
Mineral Resources & Reserves
MDA updated the resource model and the corresponding block model in 2007 to
develop a mine plan and production schedule for the project. The estimation in
all cases included a nearest neighbour, Krige, and inverse-distance
interpolation, but in all cases the inverse-distance model was selected as the
final and reported model. MDA utilized mineral domains defined by grade and
geology to control the estimation. Estimation parameters were chosen to be
appropriate for the drill spacing, geologic complexity, sample locations and
parameters defined by point validation and correlograms. The new NI 43-101
Mineral Resource estimate is based on assay results from 65,214 metres of core
drilling in 286 holes and at a 0.4% Cu equivalent* cut-off is as follows:
Resource Category
|
Tonnes
Millions
|
Grade
(% Cu)
|
Copper
Millions lbs
|
Grade
(% Mo)
|
Molybdenum
Millions lbs
|
Measured
|
108.8
|
0.52
|
1237
|
0.055
|
133
|
Indicated
|
86.7
|
0.51
|
974
|
0.047
|
90
|
Measured & Indicated
|
195.5
|
0.51
|
2,211
|
0.052
|
223
|
Inferred
|
55.4
|
0.55
|
673
|
0.023
|
28
|
* Copper equivalent calculation of 5 to 1 reflects metal prices used in the
Pre-Feasibility Study (Cu - US $1.20/lb, Mo - US $6.00/lb) with no adjustment
for metallurgical recoveries and relative processing and smelting costs.
Using Whittle (Lerchs-Grossman) optimizations of potential economic pit limits
on only the Measured & Indicated Resource, MDA determined the mine plan and
production schedule. The estimate of mineral reserves within the pit phases was
reported using an internal NSR cut-off value of $5.25. The table below shows
the Mineral Reserves within the designed ultimate pit based on the MDA resource
model. Proven and Probable Mineral Reserves have been estimated as of today's
date to be:
Reserve Category
|
Tonnes
Millions
|
Grade
(% Cu)
|
Copper
Millions lbs
|
Grade
(% Mo)
|
Molybdenum
Millions lbs
|
Proven
|
76.1
|
0.48
|
805
|
0.051
|
86
|
Probable
|
37.4
|
0.51
|
421
|
0.047
|
39
|
Proven and Probable
|
113.5
|
0.49
|
1226
|
0.050
|
125
|
Mining & Milling
The Project will utilize conventional mining and milling processes. The open
pit is scheduled to deliver a nominal 20,000 tonnes per day (7 million tonnes
per year) of sulphide ore to the primary crusher for 15 years. The processing
plant is forecast to produce, on average, 34,178 tonnes (75.2 million lbs) per
year of copper in concentrate, 2,860 tonnes (6.3 million lbs) per year of
molybdenum in concentrate and 380,000 ounces per year of silver in copper
concentrate. Average LOM metallurgical recoveries have been estimated to be 95%
for copper and 79% for molybdenum, producing a copper concentrate grading on
average 33.5% copper and 117g/t silver and molybdenum concentrate grading 53%
molybdenum. The copper concentrate will attract minor penalties for arsenic. In
all years the arsenic content will average less than 0.5% except in year 12
when it will average 0.74%.
Capital Costs
SE developed capital cost estimates for the proposed mining and processing
operation at Magistral. The following table summarizes the capital cost
estimates in the FFS for the Project:
Direct Capital Costs
|
$258 million
|
Indirect Capital Costs
|
$109 million
|
Owner's Direct and Indirect Capital Costs
|
$34 million
|
Closure Cost-Annual Advance Payment
|
$1 million
|
Total (Base Case)
|
$402 million
|
Upfront Working Capital
|
$2 million
|
LOM Sustaining Capital
|
$169 million
|
The total (Base Case) Capital Cost estimates contain a contingency of $50
million (14%) and excludes IGV. The estimates have been compiled with an
accuracy level of -4% to +14%.
There has been a material increase in capital costs since the publication of our
Preliminary Feasibility Study (PFS) in October 2006. The following table
summarizes the increase in capital cost estimates from the PFS to the FFS:
Item Description
|
PFS
Millions
|
FFS
Millions
|
Increase
(Decrease)
|
Direct Costs
|
|
|
|
Mining
|
$54.3
|
$21.4
|
(61%) *
|
Process
|
$86.4
|
$137.0
|
59%
|
Infrastructure
|
$81.2
|
$107.7
|
33%
|
subtotal Direct Costs
|
$221.8
|
$266.1
|
20%
|
Indirect Costs
|
$15.5
|
$101.0
|
552%
|
Owner's Costs
|
$22.0
|
$34.2
|
56%
|
Total Capital
|
$259.3
|
$401.3
|
55%
|
* Owner mine equipment purchases were deferred due to contract mining being
employed in years minus one and minus two (pre-production).
Operating Costs
The results of the FFS show that a mine at Magistral will be a low cost
operation. The FFS estimates that the cash costs (net of Mo & Ag
by-products) over the life of the mine will average $0.28 per pound of copper
payable. Cash costs include mining, processing, mine site administration costs,
all costs associated with delivery of concentrates to smelters and all
treatment and refining charges. The LOM operating cost estimate is $8.31 per
tonne, not including contingency. Operating costs in the cashflow include a 10%
contingency on estimated cost.
Infrastructure
Magistral is 261 kms by road from the port of Salaverry from which concentrate
will be shipped to smelters. Seventy seven kms of the road will require
upgrading and 28 kms of new road will need to be constructed to allow the
passage of 40 tonne trucks. Electrical power for the Project will require the
construction of a 51 kms power line (138kV) from the existing grid at Sihuas to
Magistral. Water will be sourced locally from the Magistral valley and also
recycled from the tailings impoundment.
Environmental
The Project will utilize World Bank Guidelines for environmental management
practice, development and design. Preliminary baseline studies completed to
date have included initial surface water quality sampling, archaeological
studies, socio-economic reviews and biological and re-vegetation studies. A
water treatment plant will be constructed to process discharges from the
tailings impoundment.
Employment and Taxes
The project will create 1,200 temporary construction jobs and 231 permanent
jobs. Over the life of the mine, the project should generate US $278 million in
taxes and US $90 million in royalties.
Timing
The Company anticipates that it will take 12 months to obtain approval of its
Environmental Impact Assessment (EIA) and obtain all permits to allow site
construction to commence. It will then take a further 24 months to complete
site construction of the project. Production is anticipated to commence in the
first quarter of 2011. Under its agreement with the Government of Peru
("GOP") the Company must commence commercial production by the end of
2011.
Next Steps
The Company intends to deliver the Final Feasibility Study to the GOP on or
before December 31, 2007. The Final Feasibility Study, in NI 43-101 format,
will be available on Inca Pacific's website (www.incapacific.com) and SEDAR
(www.sedar.com) within 45 days.
The project is situated on lands owned by the community of Conchucos. The
community of Conchucos has voted to grant the company a surface right to allow
development of the project. The Company is optimistic that it will obtain this
surface right on fair terms and in such a manner that will benefit the
community and promote sustainable development in the region.
The Company has appointed Pincock, Allen & Holt as Independent Engineer to
review the Final Feasibility Study and to express an opinion as to whether the
study is in a form and content that would allow major financial institutions to
provide all or part of the debt and/or equity financing for the construction of
the Magistral project.
On or before February 28, 2008 the Company must provide the GOP with one or
more letters from major financial institutions stating that the Feasibility
Study is a Bankable Feasibility Study.
Final Feasibility Study Qualified Persons
The Independent Qualified Persons responsible for the FFS are as follows:
Name
|
Responsibility
|
Company
|
Richard Kunter, FAusIMM(CP)
|
Process and Metallurgy
|
Samuel Engineering Inc.
|
Neil B. Prenn, PE
|
Mine Design
|
Mine Development Associates
|
Steve Ristorcelli, RPG
|
Resource Estimate
|
Mine Development Associates
|
Scott Elfin, PE
|
Environmental,
Roads, Mine waste Tailings
|
Vector Peru
|
Conference Call
Call in details for the conference call to be held on Monday, December 3, 2007
at 9:00 am (Pacific Time) or noon (Eastern Time) are:
North American toll-free: 866-322-2356
International: 416-640-3405
A replay of this conference call will be available on Inca Pacific's website at
www.incapacific.com. The replay numbers are:
North American toll-free: 888-203-1112
International: 647-436-0148
Replay Code: 7452209
INCA PACIFIC RESOURCES INC.
Signed: "Anthony Floyd"
President and Director For further information contact: Bill Galine
Investor Relations
Phone: 604-662-3922
Email: bgaline@incapacific.com
CAUTION REGARDING FORWARD LOOKING STATEMENTS:
This news release contains "forward-looking statements" within the
meaning of the United States Private Securities Litigation Reform Act of 1995
and applicable Canadian securities legislation. Forward-looking statements
include, but are not limited to, statements with respect to the future price of
copper, molybdenum and silver, the timing of exploration activities, the mine
life of the Magistral Project, the economic viability and estimated internal
rate of return of the Magistral Project, the estimation of mineral resources,
the results of drilling, estimated future capital and operating costs, future
stripping ratios, projected mineral recovery rates and Inca Pacific's
commitment to, and plans for developing, the Magistral Project. Generally,
these forward-looking statements can be identified by the use of
forward-looking terminology such as "plans", "expects" or
"does not expect", "is expected", "budget",
"scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and
phrases or state that certain actions, events or results "may",
"can", "could", "would", "might" or
"will be taken", "occur" or "be achieved". Forward-looking
statements are subject to known and unknown risks, uncertainties and other
factors that may cause the actual results, level of activity, performance or
achievements of Inca Pacific to be materially different from those expressed or
implied by such forward-looking statements. The FFS includes a detailed
discussion of the risks and assumptions underlying such forward-looking
statements including but not limited to: risks related to the exploration and
potential development of the Magistral Project, risks related to international
operations, the actual results of current exploration activities, conclusions
of economic evaluations, changes in project parameters as plans continue to be
refined, future prices of copper, silver and molybdenum. Although Inca Pacific
has attempted to identify important factors that could cause actual results to
differ materially from those contained in forward-looking statements, there may
be other factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such statements will prove to be
accurate, as actual results and future events could differ materially from
those anticipated in such statements. Accordingly, readers should not place
undue reliance on forward-looking statements. Inca Pacific does not undertake
to update any forward-looking statements that are incorporated by reference
herein, except in accordance with applicable securities laws.
The TSX Venture Exchange has not reviewed and does not accept responsibility
for the adequacy or accuracy of this release.
Copyright � 2007 INCA PACIFIC RESOURCES INC. (IPR) All
rights reserved. For more information visit our website at http://www.incapacific.com/
or send email to contact@incapacific.com
..