Capstone mulls sale of Chilean copper mine

Capstone Mining Corp. [CS-TSX] said Monday November 26 that it is mulling strategic options for is Santo Domingo iron-oxide-copper-gold project in Chile, including the sale of a portion of its 70% project interest.

The announcement comes after Capstone released an updated technical report for the Santo Domingo Project, which is owned 30% by Korea Resources Corp.

Santo Domingo is located 50 km southwest of Codelco’s El Salvador copper mine and 130 km northeast of Copiaco, near the town of Diego de Almagro, in Region 111.

The project plan includes the development of two open pit mines.

The technical report updates project economics, which benefit from significantly lower power costs and several engineering changes, including the use of desalinated water and the addition of cobalt to the mineral resources, the company said.

“This positive technical report confirms the value of Santo Domingo as a desirable copper-iron-gold project that has an approved Environmental Impact Assessment (EIA) in a mining-friendly jurisdiction and local community support,” said Capstone President and CEO Darren Pylot.

The updated technical report foresees an initial construction cost of $1.51 billion, and average annual copper production of 134 million pounds over an 18-year life span (including an average of 259 million pounds of copper output in the first five years). During the 18-year period, the mine is also expected to produce 4.2 million tonnes of iron (annually), and 17,000 ounces of gold.

The 2018 technical report includes an initial cobalt resource for Santo Domingo that was not included in the project’s economic model. To date, the company has performed metallurgical testing which suggests that the cobalt is recoverable, Capstone said.

Referring to the strategic process, Capstone said it will explore several alternatives, including selling a portion of the project.

“There is a shortage of high-quality, large scale copper projects and the completion of our updated technical report comes at an ideal time,” Pylot said.

Capstone shares were down 1.67% or $0.01 to 59 cents in early afternoon trading Monday on volume of 5.4 million.

Capstone recently announced reductions to its organizational structure, including changes to its senior executive team.  It also eliminated 35% of positions from its head office in Vancouver and said it expects to reduce annual and corporate general and administrative expenses by approximately US$5 million per year.

The company has two producing copper mines. They are the Pinto Valley mine in Arizona, and the Cozamin Mine in Mexico. Capstone recently terminated a deal to sell its Minto Mine in the Canadian Yukon to Pembridge Resources Plc. [PERE-LSE]. Capstone said at the time it would immediately put the mine on care and maintenance while it waits for copper and equity markets to improve.

Capstone recently secured an option to earn up to a 70% interest in Lara Exploration Ltd.‘s [LRA-TSXV] Planalto Copper Project in northern Brazil.

Lara said its exploration work over the past 12 months has yielded a series of very promising drill results from the Homestead target, including hole PDH 18-03, which intersected 130.41 metres between 68.05 metres and 198.46 metres down hole, with an average grade of 0.88% copper, 90 ppb gold, or 0.93% copper equivalent, within a wider zone of 284.71 metres from surface averaging 0.48% copper and 48 ppb gold.