Summo Minerals Corporation is pleased to announce The Winters Company, a Tucson-based full-service mining and engineering consulting firm, has completed the Bankable Feasibility Study for the Lisbon Valley Copper Project, located in San Juan County, Utah. The Lisbon Valley Project is an open pit heap leach SX-EW operation designed to produce 40 million pounds of cathode copper annually over a minimum 8½ year period. The Final Feasibility Study is a complete re-evaluation of the ore reserves, production schedule, and capital and operating cost profiles, and supercedes the previous project studies. The Final Feasibility Study incorporates terms, conditions, and schedules of:
The above construction contracts fix approximately 80% of the initial capital required for construction and start-up for the project: the remainder is for working capital and miscellaneous services and equipment. The service and supply contracts fix approximately 75% of the cash operating costs for the project. The effect of these contracts is to limit the project's exposure to over-runs on initial capital expenditures and operating costs, and provide the Company the ability to meet the operating costs and revenue stream projected by the Final Feasibility Study.
Total ore reserves on the project currently stand at 36.74 million tons grading 0.514%Cu(T), containing 377.6 million pounds of copper, at a life-of-mine strip ratio of 2.25 (PR #00-21). The Final Feasibility Study projects an average cash operating cost of $0.45/lb. for the project life. Initial and ongoing capital are projected to average $0.20/lb., including closure costs, and additional "non-cash" items are projected to average $0.08/lb., for a projected total cost of production of $0.73/lb. over the 8 ½ year project life. Total initial capital required to proceed with construction is US$57 million.
The project has the following economic parameters based upon a 74:26 debt:equity split, after property and severance taxes but before income tax calculations. The Company currently has in excess of US$7.7 million in tax losses which can be applied against future income.
The project is highly leveraged to the price of copper. The price of copper on the LME has averaged $0.95/lb. over the past eight years, and peaked at $1.45/lb. in 1997.
The Lisbon Valley Copper Project is fully permitted with the State of Utah and the U.S. Bureau of Land Management and other government agencies. The Company has successfully defended these permits against an Appeal brought by environmental opposition groups in 1997, prevailing in decisions rendered by the U. S. Administrative Law Judge of the Interior Board of Land Appeals in both September 1998 and March 1999.
The project is ready to go to construction. The Company has completed discussions with TIC, The Industrial Company, on the revisions to the fixed price lump sum contract for construction of the project. The revised terms and conditions are good through the end of the year, such that the Company can trigger construction immediately upon arranging project financing, commence mining within 12 months, and be producing cathode copper within 14 months of issuing the Notice to Proceed to TIC.
Management will proceed with discussions with several banks who have expressed interest in providing a senior debt facility for construction of the project. The Company expects to be able to supplement a project loan with an equity offering in order to issue the Notice to Proceed to the contractors and commence construction at the earliest opportunity.
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