Tahoe PEA pegs CAPEX at Peru gold-copper project at $1.36 billion

Tahoe Resources Inc. [THO-TSX, NYSE] has released the results of its preliminary economic assessment for La Arena II, a copper-gold porphyry project in Peru.

Tahoe shares rose 4.37% or $0.22 to $5.26 on Wednesday February 21.

The company said it expects to continue its evaluation of La Arena II Project with the intent of advancing it to a pre-feasibility or feasibility stage. The timeline and estimated capital required to advance the project to the next stage are under review, the company said. The project will be evaluated in the context of existing operations and pipeline opportunities with the intention of progressing it responsibly in order to maximize value for Tahoe shareholders.

Tahoe is an Americas-focused precious metals company. It operates the Escobal Mine in Guatemala, the La Arena and Shahiundo gold mines in Peru and the Timmins West and Bell Creek gold mines in Canada.

La Arena project consists of the currently operating La Arena Mine and La Arena II Project. Although the La Arena Mine and La Arena II Project are situated on the La Arena property, which is owned by Tahoe, they are stand-alone projects and independent of each other. La Arena II would not be an expansion of the current operation. Rather, it would be a separate operation constructed at the end of the La Arena Mine life.

The La Arena gold mine is located in northern Peru, 480 km northwest of Lima.  Primary access to the property is via a 165-km national highway from the coastal city of Trujillo. The closest population centre is the town of Huamachuco, about 21 km from the property, with a population of about 35,000 residents.

The mine consists of two types of mineral deposits: high sulfidation epithermal oxide gold mineralization hosted in brecciated sandstone within the Chimu Formation, and copper-gold sulfide mineralization hosted in multi-stage porphyry intrusives. The open pit heap leach mine was expected to produce 170,000-190,000 ounces of gold in 2017.

La Arena II is adjacent to the La Arena Mine. The 2018 PEA supersedes the 2015 feasibility study, which considered a small-capital-constrained project with restrictive financial hurdles. The resulting mineral reserve estimated presented in the prior study represented only a small portion of the total mineral reserves. Tahoe said its PEA includes new exploration drilling results and re-evaluates the La Arena copper-gold porphyry project in the context of a long-term copper-gold project designed to world standards.

The new La Arena II PEA highlights are as follows:

• Total measured and indicated mineral resources of 5.6 million ounces of gold and 5.8 billion pounds of copper. On top of that is an inferred mineral resource of 683,000 ounces of gold and 349 million pounds of copper.
• The PEA foresees a 21-year mine life.
• Average annual production is estimated at 149,000 oz gold and 207 million lbs copper, plus an additional 226,000 oz gold and 115 million lbs copper recovered over a two-year period.
• An open pit mining rate of 80,000 tonnes of mill feed per day, with a flotation process to create a high-quality copper-gold concentrate, with run-of mine heap leaching of the oxide gold cap.
• CAPEX is estimated at $1.36 billion for initial project capital (net of pre-production operating credit) and $1.09 billion for sustaining capital over the life-of-mine.
• Average co-product cost of $600/oz gold and $1.55/lb for copper.
• Base case economic estimate is an after-tax net present value of $824 million.