|Copper:||104 million lbs|
The El Morro copper-gold project in Chile is a joint venture development stage copper-gold project (‘El Morro’) currently being permitted for construction. The project is located in the high altitude cordillera of the southern Atcama Desert region approximately 80 kilometers east of the city of Vallenar. New Gold owns a 30% interest in El Morro with project operator, Xstrata Copper (previously Falconbridge Limited) owning the remaining 70%. Overall management of the project is done through a shareholder agreement between New Gold and Xstrata.
The project design is for an open pit mining operation with ore processed by conventional flotation at a rate of 90,000 tonnes per day to produce 2,200 tonnes a day of copper concentrate. Annual metal production estimates are 104 million pounds of copper and 94,000 ounces of gold on a 30% basis over the 15 year mine life.
El Morro respects and values the cultures, customs, interests and rights of the local communities and is committed to contributing to their sustainable development. To this end, El Morro seeks to form alliances with public and private entities and local interest groups to define and develop social projects to improve the quality of life of local communities and strengthen their cultural identity. Between 2005 and 2008, El Morro held consultation meetings with 44 different community organizations, attended by almost 1,200 people.
The availability of water was identified as a priority concern, particularly in the Huasco River basin. In response, El Morro incorporated into its design the installation of a desalination plant to meet the requirements for potable and industrial water during the construction and operation of the project. Built on the coast at Totoral, the proposed desalination plant would safely provide 640 litres per second of desalinated seawater via a 190 kilometer pipeline to the operation located at 4,000 meters above sea level.
The final design also incorporates thickened tailings technology which would allow the project to maximize water recovery from the tailings for recycling in the process plant and reduce the final volume of the tailings deposit while contributing to its stability.
Additionally, the redesigned project takes into account community concerns about the access roads to the mine site. In order to minimize the impact on the quality of life of people living in the area, the Environmental Impact Study (“EIS”) considers the construction of a new access road to the project that avoids traffic through the agricultural valleys and population centers. This measure seeks to protect the economic activity, lifestyle and safety of local people, and the landscape of the Huasco Valley.
This process of joint design, together with El Morro's vision of sustainable development, makes this project a pioneer amongst Chile's new generation of mining projects.
In early 2008, the Feasibility Study was completed and the EIS was submitted. In November 2008, El Morro entered the permitting stage. It is expected that the permit will be obtained in the first half of 2010.
The feasibility study includes an initial capital investment of $2.5 billion over the 14 year mine life. New Gold has an agreement with Xstrata whereby Xstrata will finance 70% of New Gold’s 30% share of El Morro’s project development costs. New Gold’s 30% interest in the construction capital represents $750 million.
As a result, New Gold’s cash funding requirement for the initial project capital is a net 9% of the total initial capital or approximately $225 million. New Gold will repay the funds loaned by Xstrata from 80% of the company’s share of future operating cash flow. With this funding agreement in place and the project entering the permitting stage, New Gold is well positioned to participate in this world-class development project, in one of the most mining friendly jurisdictions. New Gold’s cash flow requirements for El Morro in 2009 are approximately $1.6 million.