El Pilar

Overview


The El Pilar property is 100% owned by Mercator and is located in the state of Sonora, Mexico approximately 15 kilometres south of the international border with the United States. The property is situated in a highly prospective belt of porphyry copper deposits ranging from La Caridad in the south through to central Arizona in the north. This copper trend accounts for the second largest concentration of porphyry copper deposits in the world where mining for copper has been continuous for over 100 years.

El Pilar is located close to infrastructure and skilled labour and will be conventional open-pit mining. Run-of-mine leach ore will be mined and stacked on a leach pad. Copper cathode will be produced from the oxide copper ore by acid leaching and processed through the solvent extraction/electrowinning (SX/EW) processing plant. The project will include an on-site acid plant and associated power plant ensuring stable low cost acid and power supply.

Investment highlights of El Pilar(1) include:
  • Net present value ("NPV") after-tax, discounted at 8%, of US$335.3 million;
  • Internal rate of return ("IRR"), after-tax, of 35.7%;
  • Payback period of 1.7 years;
  • Life-of-mine ("LOM") average annual production of 73.0 million pounds of copper cathode, with copper cathode production averaging 78.7 million pounds in the first five years;
  • Expected average life of mine total cash operating costs (2) are $1.37 per pound of payable copper, average $1.27 per pound in the first five years, and $0.94 per pound in the first year;
  • Initial capital of US$245 million, excluding working capital;
  • 12-year mine life, with total estimated LOM copper production of 881.7 million pounds; and
  • Mining and stacking of run-of-mine ore at an average LOM rate of 52,000 metric tonnes per day, 49,000 metric tonnes per day in the first five years.
(1) Metal Prices used were $3.83/lb copper price per pound Year 1, $3.44/lb Year 2, $3.14/lb Year 3 and $2.60/lb for the remaining life of mine, averaging $2.82/lb copper over the life of mine.
(2) Total cash operating costs is a non-IFRS alternative performance measure furnished to provide additional information.

The feasibility study highlights various opportunities to increase the value of El Pilar, with the two most significant opportunities being:
  1. Final metallurgical test results, based on column teardown data, indicate increased copper extractions may occur in the planned three meter lifts, as compared to the six meter column copper extractions used for the Base Case. It should be noted that the three meter lift height was already contemplated in the Base Case stacking configuration, but the full benefit of the anticipated higher recovery related to the thinner lifts was not yet accounted for, pending receipt of the finalized column teardown data. This opportunity could result in:
    • Total copper recovered to 970 million pounds, an increase of 10% over the Base Case;
    • Average life of mine recoveries of 59.9%, an increase of 8% over the Base Case;
    • An increase in NPV8% to US$435.4 million, an IRR of 42.2% and a payback of 1.5 years.

  2. These metallurgical tests also indicate that even higher copper extraction may occur over 360 days of leaching, using either three meter or six meter lift height, due to continued copper extraction over time in the multi-lift heap configuration. This opportunity could result in:
    • Total copper recovered to 1,072 million pounds, an increase of 22% over the Base Case;
    • Average life of mine recoveries of 64.9%, an increase of 17% over the Base Case;
    • An increase in NPV8% to US$552.3 million, an IRR of 50.3% and a payback of 1.4 years.
The feasibility study also includes an option to continue contract mining for the life of the mine, which would further reduce future capital expenditures and provides the Company with additional flexibility.

Plans for 2012

The 2012 goals at El Pilar are to continue to de-risk the project by: (1) releasing an optimized feasibility study to further highlight the potential improved project economics as a result of by reducing the leach pad lift heights from the six meters used in the El Pilar Feasibility StudyNovember 2011 feasibility study.( The optimized feasibility study could increase the project's NPV by as much as 29%); (2) continuing to ensure the project is construction ready, to which all the permits are in place to start building, and commencing the project's detailed engineering; and (3) obtaining a value-accretive financing package to build El Pilar. Once construction has begun, the Company anticipates a construction time line of 15 months, a relatively short cycle to start recovering the Company's initial investment. Also, with the short construction timeline, the project can be timed to market conditions. With an initial investment of $245 million, and the capacity to produce nearly 78 million pounds of cathode copper annually in the first five years, El Pilar is one of the industry's lowest capital intensive projects.


Reserves/Resources


The following tableshows Proven and Probable Mineral Reserves as at September 2011:

El Pilar Reserves
Resource Class Tonnes (million) Copper % Soluble Copper % Copper (m lbs)
Proven 99.6 0.332 0.153 728.8
Probable 130.6 0.299 0.131 860.8
TOTAL 230.2 0.313 0.140 1589.6


El Pilar Resources, inclusive of Reserves
0.15% copper cut-off
Resource Class Tonnes (million) Copper % Soluble Copper % Copper (m lbs)
Measured 128.1 0.307 0.153 728.8
Indicated 231.2 0.266 0.095 1,355.5
Measured + Indicated 359.3 0.281 0.107 2,222.5
Inferred 68 0.239 0.068 358.3


Mineral Resources for El Pilar are estimated at a cut-off grade of 0.15% total Cu and $2.75 copper price
The mineral resource estimate was completed by Mike Hester, FAusIMM, under the supervision of Mike Broch, Mercator's Vice-President Exploration, both deemed independent qualified person as this term is defined in National Instrument 43-101.

Tables Source: 2011 ElPilar Technical Report.

Technical Report


El Pilar Project
Executive Summary
Sonora, Mexico
April 27, 2009
Click here to view PDF (13MB)

Photo Gallery

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Mike Broch, BSc, Geology, Msc, Economic Geology, FAusIMM, the Company's Vice-President Exploration, a Qualified Person as defined by NI 43-101, supervised the preparation of and verified and approved the technical information in respect of the El Pilar project contained on this website  
Last updated: May 16, 2012
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