Quadra FNX expects to start prestripping at Sierra Gorda in 2Q12

- Monday, May 9, 2011

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Vancouver-based Quadra FNX Mining (TSX: QUX) expects to start prestripping at its Sierra Gorda copper-molybdenum project in northern Chile's region II by 2Q12, CEO Paul Blythe said.

The financing study for the project was completed in draft form at end-Q1 and the US$40mn feasibility study remains on schedule for Q2, Blythe said during a conference call to discuss Q1 financial results.

"Intense negotiations for partnership and funding are going on," Blythe said, adding that a partnership and the financial structure for the project, which has an estimated capital cost of US$2.5bn, will be in place by end-Q2, as previously scheduled.

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The company expects the environment ministry's (MMA) evaluation service (SEA) to approve the EIS by mid-year, Blythe said. The EIS was presented in May last year and regulators have asked the company to submit a fourth amendment to clarify questions on the project.

At end-Q1, Quadra FNX awarded the engineering, procurement and construction management (EPCM) contract for Sierra Gorda's processing facilities to Texas-based engineering and construction company Fluor (NYSE: FLR), the CEO said.

An initial truck fleet is expected to be commissioned early in 2012. The purchase order on the equipment was placed in 2010. Another US$51mn purchase order, of which US$30mn has been paid, was placed last year for items such as two electric shovels and two drills.

The company spent US$23.9mn on the project during Q1. Total project costs and capital expenditures to the end of June this year are expected to be in the range of US$110mn, including continuing detailed engineering and down-payments for major equipment.

Sierra Gorda remains on target to start operations in early 2014. Based on the prefeasibility study, the mine will have processing capacity of 110,000t/d of sulfide ore at start-up, expanding to 190,000t/d at the end of the fourth year of operations.

The operation aims to produce 306Mlb/y (138,000t) copper, including copper in concentrate and cathodes, 16Mlb/y molybdenum and 36,000oz/y gold at a cash cost of US$0.79/lb of copper equivalent over a more than 25-year mine life.

In Chile, Quadra FNX also owns and operates the Franke copper mine, which started operations in August 2009 and turned out 37Mlb of copper cathodes in 2010. The company continues to advance the transition to own-mining after putting an end to a contract with a local contractor company in February this year.

Quadra FNX posted Q1 net earnings of US$168mn, a 205% jump from US$55mn registered in the same quarter last year, driven by a US$134mn pre-tax gain on the disposition of Gold Wheaton shares, higher average copper prices and the inclusion of the Sudbury operations following the merger with FNX.

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