Capstone Buying Pinto Valley Mine from BHP

The Pinto Valley copper complex is designed to produce about 10 million lb/y of copper
cathode plus 130 million to 150 million lb/y of concentrate.
Capstone Mining and BHP Billiton announced in late April 2013 a definitive agreement whereby Capstone will pur-chase BHP Billiton’s wholly-owned Pinto Valley open-pit copper mining operation and the associated San Manuel Arizona Railroad Co. (SMARRCO) in Arizona for $650 million.

The Pinto Valley mine is located in the Globe-Miami mining district, approximate-ly 125 km east of Phoenix. It is projected to produce 130 million to 150 million lb/y of copper in concentrate and approximate-ly 10 million lb/y of copper cathode, along with by-product molybdenum and silver, at an estimated cash cost of approximately $1.80/lb net of by-product credits, over the next five years of operation.

BHP Billiton successfully restarted Pinto Valley in December 2012, after the mine had been on care and maintenance since early 2009. The restart involved capital expenditures of $194 million, including approximately $60 million for a new mining fleet. As of late April, the restart was progressing well and was on schedule to achieve a run-rate of more than 50,000 mt/d by the end of 2013.

The current Pinto Valley plan of oper-ation, based on BHP Billiton’s publicly reported reserves, projects five years of operation. Capstone believes that consid-erable potential exists to upgrade the property’s nearly 1 billion mt of meas-ured and indicated mineral resources into reserves, potentially extending the operation meaningfully beyond the current reserve life.

A preliminary feasibility study (PFS) is under way that will target these resources for potential conversion to reserves, with expected completion in 2013. The PFS will consider the potential to extend oper-ations within the currently permitted boundaries. In addition, Capstone intends to commission engineering and economic studies to consider all remaining current mineral resources in preparation for filing of permit applications.

Capstone is a Vancouver-based com-pany that currently has two producing mines, the Cozamin underground copper-zinc-lead-silver mine in Zacatecas state, Mexico, and the Minto open-pit copper-gold-silver mine in Yukon, Canada. In 2012, Cozamin produced 46.9 million lb of copper, 17.2 million lb of zinc, 2.9 million lb of lead, and 1.58 million oz of silver in concentrates, and Minto pro-duced 35.9 million lb of copper, 183,500 oz of silver and 18,600 oz of gold in concentrates.

Capstone has two development pro-jects, the large-scale, 70%-owned Santo Domingo copper-iron-gold project in Chile in partnership with Korea Re-sources Corp. and the 100%-owned Kutcho copper-zinc-gold-silver project in British Columbia. The company also has exploration properties in Canada, Chile, Mexico and Australia.

“Pinto Valley represents a unique opportunity to acquire a mid-sized pro-ducing copper mine in a well-established and low-risk mining jurisdiction with a significant mineral resource,” Capstone President and CEO Darren Pylot said. “This acquisition gives Capstone our third producing mine with a long mine life and is consistent with Capstone’s strategy of building an intermediate cop-per producer focused in the Americas.”

Under the terms of the purchase agreement, Capstone is committed to maintaining Pinto Valley’s existing envi-ronmental standards and will provide financial assurances reasonably necessary to obtain regulatory approvals for the transfer of the applicable permits. BHP Billiton employees working at Pinto Valley and SMARRCO will become employees of Capstone as part of the transaction.

The purchase agreement includes typ-ical closing conditions, including regula-tory approvals. The transaction is expect-ed to close in the third quarter of 2013.

As featured in Womp 2013 Vol 06 -