Capital Cost for Petaquilla Increases Substantially


Inmet Mining, Petaquilla Copper and Teck Cominco announced the results of an interim report on the Front End Engineering and Design (FEED) study being conducted by AMEC Americas (AMEC) on the Petaquilla copper project in Panama. The interim report estimates that the capital cost required to develop the Petaquilla project would be US$3.5 billion (including a contingency of $515 million but not including working capital and escalation). The capital cost estimate includes approximately $500 million for the construction of an oil-fired power plant and approximately $280 million for port facilities. Cash costs, including operating and realization costs and net of by-product credits, in years one to 10 of the project are estimated to average $0.85/lb of copper produced. The study is based on the mine plan developed in 1998, which contemplates a 23- year mine life. The project includes a concentrator capable of processing 120,000 mt/d of ore. Construction is expected to take approximately 44 months from issuance of construction permits. Permitting would follow the submission of a social and environmental impact assessment, expected to be completed in the fourth quarter of 2008. Capital costs for the project have increased substantially over previously published estimates both as a result of scope changes, including enhancements in erosion control, water management and other environmental protection measures, as well as increases in equipment and construction costs that have been affecting projects worldwide. Despite the increase in capital costs required to develop Petaquilla, the mining companies believe that the project still has the potential to be a world-class operation.

Work is continuing on the FEED study. A project review team is currently studying opportunities to reduce the capital costs. Several possible opportunities have already been identified in the area of the grinding circuit, power supply and port infrastructure. The project review team will evaluate these opportunities over the next six weeks and, where appropriate, incorporate these changes into the capital cost estimate.

The parties have agreed that Petaquilla Copper will have the right to present proposals for the construction of the power plant and port facilities for the project, and associated infrastructure, including the road from the concession to the Caribbean coast. To the extent that Petaquilla Copper’s proposals are technically, economically and commercially equivalent to or more attractive than the base case contemplated by the FEED program, Petaquilla Copper’s proposals will be incorporated in the development of the project, and Petaquilla Copper will receive a management fee for preparing the proposals.

Inmet holds a 48% equity interest in Minera Petaquilla, S.A., the Panamanian company that holds the Petaquilla concession, while Petaquilla Copper currently holds a 52% equity interest. Teck Cominco has the right to acquire a 26% equity interest in Minera Petaquilla by committing, prior to March 31, 2008, to participate in work plans and budgets leading to commercial production, and by committing to fund 52% of development costs for the project.


As featured in Womp 08 Vol 3 - www.womp-int.com