Baja Mining (TSX: BAJ, OTCQX: BAJFF)(“Baja”) climbed higher in early deals this morning after the company released an updated capital cost and economic model for its huge Boleo Copper-Cobalt-Zinc-Manganese Project (“Boleo”) in Mexico.
Baja Mining has a 70% interest in the project, with the remaining 30% held by a consortium of Korean investors. Boleo currently hosts a measured and indicated resource of 265 million tonnes grading 1.5% copper equivalent, with a further 159 million tonnes of inferred resources grading 1.15% copper equivalent.
Today Baja reported that a revised mine plan estimated a capital cost of $889 million, including an 11.6% contingency to build a 3.1 million dry metric tonnes per annum operation that would produce 56,697 tonnes of copper cathode, 1,708 tonnes of cobalt cathode and 25,364 tonnes of zinc sulphate monohydrate per annum for the first six years of the projected 23 year mine life.
Based on the base case of $2.91/lb for copper, $26.85/lb for cobalt and $1,175/tonne for zinc, the project has a NPV of $1.3 billion (8% discount) with an average life of mine cost of negative $0.29/lb for copper, net of zinc and cobalt credits. The post-tax internal rate of return (IRR) is 25.6% on a 100% equity basis.
“We are pleased that the updated capital and operating cost estimates confirm the robust economics of the Boleo project,” says Baja President and CEO John Greenslade. “This update now provides a strong foundation for completing construction financing and recommencing construction of the mine and processing facility in order to move to production as soon as possible…there is also significant upside potential for Boleo which is endowed with a rich resource of manganese. We will shortly commence a feasibility study to quantify this potential which could substantially add to the project’s value.”
The Boleo Copper-Cobalt-Zinc-Manganese Project covers approximately 11,000 hectares of mineral concessions and 7,000 hectares of surface occupancy rights, and will be developed as a series of underground mines and small open-cut mines feeing on central processing plant.
While the current modeling is based on the copper, cobalt and zinc, Baja Mining said it was planning to commence a feasibility study in 2010 on the possibility of producing manganese.
Shares in Baja Mining rose 6% against a falling market.