ingenieria basica de minera panama
TRANSCRIPT
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Mina de Cobre PanamaBASIC ENGINEERING
SUMMARY REPORT
May 2012
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Project Cobre Panama Status Shovel-ready, ESIA approved December 2011
Project location Panama, Coln province Products Cu-Au and Mo concentrates
Sovereign rating Investment grade Features Botija, Colina, Valle Grande open pits
Concession area 13,000 ha Gyratory crushing, grinding, flotation
Life of mine 31 years Owner port site, Panamax capable
Start of Production 1Q16 Owner 300 MW coal-fired power
Capital Cost $US6.18b Concentrate pipeline
TIER I CHARACTERISTICS AVG ANNUAL PROD. Y2-16 LOM TOTAL LOM
Average annual production (Y2-16) 298 ktonnes Cu Cu ktonnes 298 266 8,237
Average annual production (LOM) 266 ktonnes Cu Au koz 106 87 2,705
C1 cash costs (Y2-16) $US0.72/lb Cu Ag koz 1,572 1,545 47,899
C1 cash costs (LOM) $US0.82/lb Cu Mo ktonnes 3.1 2.9 90.2
Strip ratio 0.58
Design mill throughput (Y1-9) 160 ktpd
Design mill throughput (Y10-31) 240 ktpd
RESERVE & RESOURCE ktonnes Cu (%) Au (g/t) Ag (g/t) Cu ktonnes Au koz Ag koz Mo ktonnes
Proven 258,000 0.57 0.14 1.6 1,478 1,126 13,020 25
Probable 2,061,000 0.38 0.06 1.4 7,781 4,041 91,008 145Total 2,319,000 0.40 0.07 1.4 9,258 5,167 104,028 169
Measured 262,000 0.56 0.13 1.5 1,476 1,118 12,979 24
Indicated 3,905,000 0.34 0.06 1.2 13,237 7,845 155,392 214
Total 4,167,000 0.35 0.07 1.3 14,715 8,963 168,454 238
Inferred 3,749,000 0.23 0.04 1.0 8,660 4,805 120,534 156
(resources inclusive of reserves)
CAPITAL COSTS $USm % AFTER TAX VALUATION
Mining 760 12 LT Consensus FW Curve 3Y Trl. Avg.
Process plant 1,184 19 Financed Case 1 14.3% 18.5% 19.2%Site and services 550 9 Financed Case 2 16.7% 21.9% 22.5%
Port site 543 9 Financed Case 1 $3.2b $4.8b $6.0b
Power plant 646 10 Financed Case 2 $3.5b $5.0b $6.3b
Total Direct 3,682 59 Financed Case 1 $2.4b $3.9b $4.9b
Construction indirects 844 14 Financed Case 2 $2.8b $4.2b $5.2b
Total field costs 4,526 73 Financed Case 1 $1.8b $3.2b $4.0b
EPCM 355 6 Financed Case 2 $2.2b $3.6b $4.4b
Owner Costs 885 14
Contingency 415 7
Total project cost 6,181 100
Sustaining capex 2,916
POTENTIAL FOR UPSIDE
Expand throughput beyond max planned 240ktpd Financed Case 1: $US1.6b in debt drawn over 3.5 yearsAccelerate increase to 240ktpd
Conversion of substantial resources beyond reserves Financed Case 2: $US1.6b in debt drawn over 3.5 years
$US1.2b upfront payment for 86% of MPSA precious metal
and on-going paid $400/oz Au and $6/oz Ag for PM stream
PROJECT ADVANTAGES
Low strip-ratio (one fifth of industry O/P Cu mine avg 2011 )
Ammenable to large scale, efficient mining LT Consensus: Flat $2.75/lb Cu, $15/lb Mo, $1,250/oz Au, $20/oz Ag
Powered by owner-built, 300mW coal-fired plant FW Curve: Forward curve dropping to LT Consensus
Proximity to tidewater, permitting inexpensive con transport (2016 start at $3.66/lb Cu, $1,785/oz gold and $31/oz Ag)
Clean concentrate 3Y Trail. Avg: Flat $3.42/lb Cu, $14.68/lb Mo, $1,316/oz Au, $24.90/oz Ag
Extensively reviewed by 3rd parties (capex and opex)
COBRE PANAMA FACT SHEET - PG 1
NPV10%
NPV9%
NPV8%
PROJECT DESCRIPTION
PROJECT ECONOMICS
IRR
Moly (%)
0.010
0.0070.007
0.009
0.005
0.006
0.004
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SCHEDULE UNIT COSTS ($US/t ORE MILLED) - LT CONSENSUS
Notice to proceed 2Q12 Labour Material Power Other Total LOM Total Y2-16
Mine/process construction start 2Q12 Mining 0.27 1.87 0.05 0.24 2.44 2.68
Process earthworks complete 4Q13 Processing 0.24 2.13 0.91 0.01 3.29 3.28
Plant to port road complete 4Q13 G&A 0.15 0.01 0.04 0.69 0.88 0.97
Port complete 2Q14 Site Services 0.11 0.07 0.01 0.09 0.28 0.3
Power line complete 3Q14 Total 0.77 4.08 1.01 1.03 6.88 7.23
Tailings dam complete 3Q15
Ore hits grinding lines 4Q15 UNIT COSTS ($US/t ORE MILLED)Power plant complete 4Q15 LT Consensus FW Curve 3YR Trl. Avg.
Start of production 4Q15 Mining 2.44 2.46 2.55
Concentrate shipment 1Q16 Processing 3.29 3.36 3.60
Commercial production 2Q16 G&A 0.88 0.88 0.89
RESOURCE ADDITIONS SINCE 2010 Site Services 0.28 0.28 0.28
(contained metal)
M&I FEED Increase Current
Cu (m lb) 25,800 6,641 32,441 Power($US/kWh) Y1-91,2 0.027 0.033 0.034
Au (k oz) 6,533 2,430 8,963 Power($US/kWh) Y10-312 0.05 0.05 0.055
Ag (k oz) 133,300 35,154 168,454 C1 cash cost ($US/lb) Y2-16 - Fin Case 1 0.72 0.74 0.77
Mo (m lb) 474 51 525 C1 cash cost ($US/lb) LOM - Fin Case 1 0.82 0.83 0.87 1-Power costs adjusted to reflect sales into grid 2-Power costs are quoted before D&A expense covering the $646m capital
INF FEED Increase Current NSR BY METAL
Cu (m lb) 16,600 2,492 19,092 Avg. Annual Avg. AnnualAu (k oz) 4,003 802 4,805 Y2-16 ($USm) LOM ($USm)
Ag (k oz) 103,100 17,434 120,534 Cu 1,557 1,389
Mo (m lb) 236 18 344 Au 121 100(resources inclusive of reserves) Ag 28 27
RESOURCE NOT IN MINE PLAN Cu ktonnes Cu mlbs Mo 93 86
Measured and Indicated 5,457 12,031 Total 1,798 1,602
Inferred 8,660 19,092
TAXATION VARIANCE FROM FEED CAPEX
Corporate tax rate 25% Capital costs $USm
Alternative minimum tax rate 1.17% FEED study estimate 4,320
Base metal royalty 5% Power plant 646
Precious metal royalty 4% Increased process plant estimate 403
Increased mining estimate 312
AVG LOM RECOVERIES Increased port site estimate 285
Copper 89.0% Other 215
Molybdnemum 53.3% Basic Engineering Estimate 6,181
Gold 52.4% Drivers:
Silver 46.1% Process Changed scope to achieve higher productivity
2 year tailings starter dam (vs. 1 prev)
CONCENTRATE ASSUMPTIONS Higher certainty of estimates
Copper TC $70/dmt Mining Fuel costs of $1.06/litre in capex (vs. $0.56 prev)
Copper RC $0.07/lb Higher certainty of earthwork estimates
Gold RC $5/oz Pre-strip costs moved from indirect to direct
Silver RC $0.50/oz BENEFITS TO PANAMAMolybdenum roast and freight $1.49/lb $110m regional development plan to maximize sustainable socio-economic benefits
Freight $41/t wet con Increased local access to healthcare, education, sanitation and clean drinking water
Copper Con Moisture 8% Generates $US20b purchases in national economy and $US3.6b in royalties and taxes
Losses and Insurance charges 0.25% Prioritizes local hiring and job-training, total salaries $US2.2b (locals and expats):
Peak total manpower during construction of 10,000
Average total manpower during operations of 2,100
PROJECT DETAIL
OTHER USEFUL INFORMATION
COBRE PANAMA FACT SHEET - PG 2
Total 6.88 6.98 7.32
Total LOM
COBRE PANAMA
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Cautionary statement regarding forward-looking statements
This Basic Engineering Summary Report contains forward-looking statements with respect to the CobrePanama development project (Cobre Panama or the Project), including, without limitation, information
relating to future financial or operating performance, plans, outlook, financing plans, growth in cash flowand operating margin; projections, targets and expectations as to reserves, resources, results ofexploration (including targets) and related expenses, mine development mine production costs, drillingactivity, sampling and other data; receipt of construction permits; estimated grade levels; future recoverylevels; future production levels, capital costs, costs savings, cash and total costs of operations, productionof copper and other minerals; expenditures for environmental matters; projected mine life; reclamation andother post-closure obligations and estimated future expenditures for those matters; future copper, andother mineral prices (including the long-term estimated prices used in calculating mineral reserves).
All statements in this Basic Engineering Summary Report that address events or developments we expectto occur, are forward-looking statements. Forward-looking statements are statements that are nothistorical facts and are generally, but not always, identified by the words expects, plans, anticipates,believes, intends, estimates, projects, potential, target, plan, scheduled, forecast, budgetand similar expressions or their negative connotations, or that events or conditions will, would, may,
could, should or might occur. All such forward-looking statements are based on our opinions andestimates as of the date such statements are made. Forward-looking statements are necessarily basedon estimates and assumptions that are inherently subject to known and unknown risks, uncertainties andother factors, many of which are beyond our ability to control, that may cause the Projects actual results,level of activity, performance or achievements to be materially different from those expressed or implied bysuch forward-looking statements. Such factors include, without limitation:
price levels and volatility in the spot and forward markets for metals and;
access to the necessary capital to fund the development and construction of the Project;
the ability to develop and construct the Project in accordance with the currently projected budget andtimeline;
the uncertainties inherent in current and future legal challenges we or the Project are or may becomea party or subject to;
changes in national and local government legislation or regulations;
the lack of certainty with respect to foreign legal systems, which may not be immune from theinfluence of political pressure, corruption or other factors that are inconsistent with the rule of law;
the speculative nature of mineral exploration and development, including the risks of obtaining andmaintaining the validity and enforceability of the necessary licenses and permits and complying withpermitting requirements;
inherent hazards, risks and uncertainties associated with mining exploration, development andoperations, including accidents;
diminishing quantities or grades of reserves;
discrepancies between actual and estimated production, between actual and estimated costs,between actual and estimated reserves and resources and between actual and estimatedmetallurgical recoveries;
geotechnical issues;
the possibility of temporary or permanent shutdown;
the actual costs of reclamation;
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increased energy prices;
dependency of cash flow and earnings growth upon the development of our current reserve base andconverting our resource base to reserves and production;
actual capital costs, operating costs and expenditures, production schedules and economic returnsfrom the Project;
fluctuations in the international currency markets and the rates of exchange between currencies;
volatility of global financial conditions;
taxation, including with respect to tax laws and regulations that are unclear or subject to ongoingvarying interpretations;
significant capital requirements and additional funding requirements;
risks associated with joint ventures;
dependence on transportation, electric and water facilities and infrastructure;
fluctuation in the cost of significant inputs including fuel; delays or disruptions in supplies required for exploration, development, mining or processing,
activities;
disruptions arising from non-performance of off-take and other counterparties;
changes in environmental laws and regulations;
potential losses, liabilities and damages related to the Projects business which are uninsured oruninsurable;
regulation of greenhouse gas emissions and climate change issues;
labour disputes;
defective title to mineral claims or property or contests over claims to mineral properties; competition; and
the loss of key employees and the ability to attract and retain qualified personnel.
In addition, there are risks and hazards associated with the business of mineral exploration, developmentand mining, including environmental hazards, industrial accidents, unusual or unexpected formations,pressures, (and the risk of inadequate insurance or inability to obtain insurance to cover these risks) aswell as other risks, uncertainties and other factors.
Forward-looking statements are not guarantees of future performance, and actual results and futureevents could materially differ from those anticipated in such statements. All of the forward-lookingstatements contained in this Basic Engineering Summary Report are qualified by these cautionary
statements.
Although we have attempted to identify important factors that could cause actual results to differ materiallyfrom those contained in the forward-looking statements, there may be other factors that cause actualresults to differ materially from those which are anticipated, estimated or intended. There can be noassurance that such statements will prove to be accurate, as actual results and future events could differmaterially from those anticipated in such statements. You should not place undue reliance onforward-looking statements. We expressly disclaim any intention or obligation to update or revise anyforward-looking statements whether as a result of new information, events or otherwise.
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Market, ranking, industry data and forecasts
This Basic Engineering Summary Report includes industry data and forecasts that we obtained fromindustry publications and surveys, public filings and internal company sources. Industry publications,
surveys and forecasts generally state that the information contained therein has been obtained fromsources believed to be reliable, but there can be no assurance as to the accuracy or completeness ofincluded information. We have not independently verified any of the data from third-party sources, norhave we ascertained the underlying economic assumptions relied upon therein. We cannot guarantee theaccuracy or completeness of such information contained in this Basic Engineering Summary Report.
Cautionary notice regarding reserve and resource estimates
The disclosure in this Basic Engineering Summary Report uses mineral reserve and resourceclassification terms that comply with reporting standards in Canada, and certain mineral resourceestimates are made in accordance with Canadian National Instrument 43-101Standards of Disclosurefor Mineral Projects (NI 43-101). NI 43-101 is a rule developed by the Canadian SecuritiesAdministrators (the CSA) that establishes standards for all public disclosure an issuer makes of scientific
and technical information concerning mineral projects. Unless otherwise indicated, all reserve andresource estimates contained in this Basic Engineering Summary Report have been prepared inaccordance with NI 43-101. These standards differ significantly from the mineral reserve disclosurerequirements of the Securities and Exchange Commission (SEC) set out in Industry Guide 7.Consequently, reserve and resource information contained in this Basic Engineering Summary Report isnot comparable to similar information that would generally be disclosed by U.S. companies in accordancewith the rules of the SEC.
In particular, the SECs Industry Guide 7 applies different standards in order to classify mineralization as areserve. As a result, the definitions of proven and probable reserves used in NI 43-101 differ from thedefinitions in the SECs Industry Guide 7. Under SEC standards, mineralization may not be classified as areserve unless the determination has been made that the mineralization could be economically andlegally produced or extracted at the time the reserve determination is made. Among other things, all
necessary permits would be required to be in hand or issuance imminent in order to classify mineralizedmaterial as reserves under the SEC standards. Accordingly, mineral reserve estimates contained in thisBasic Engineering Summary Report may not qualify as reserves under SEC standards.
In addition, this Basic Engineering Summary Report uses the terms mineral resources, measuredmineral resources, indicated mineral resources and inferred mineral resources to comply with thereporting standards in Canada. The SECs Industry Guide 7 does not recognize mineral resources andU.S. companies are generally not permitted to disclose resources in documents they file with the SEC.Readers are specifically cautioned not to assume that any part or all of the mineral deposits in thesecategories will ever be converted into SEC defined mineral reserves. Further, inferred mineral resourceshave a great amount of uncertainty as to their existence and as to whether they can be mined legally oreconomically. Therefore, readers are also cautioned not to assume that all or any part of an inferredresource exists. In accordance with Canadian rules, estimates of inferred mineral resources cannot formthe basis of feasibility or pre-feasibility studies. It cannot be assumed that all or any part of mineralresources, measured mineral resources, indicated mineral resources or inferred mineral resourceswill ever be upgraded to a higher category. Readers are cautioned not to assume that any part of thereported mineral resources, measured mineral resources, indicated mineral resources or inferredmineral resources in this Basic Engineering Summary Report has demonstrated economic viability or iseconomically or legally mineable. In addition, the definitions of proven mineral reserves and probablemineral reserves under reporting standards in Canada differ in certain respects from the standards of theSEC. For the above reasons, information contained in this Basic Engineering Summary Report thatdescribes the Projects mineral reserve and resource estimates is not comparable to similar informationmade public by U.S. companies subject to the reporting and disclosure requirements of the SEC.
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The Projects proven and probable reserve estimates contained throughout this Basic EngineeringSummary Report are as of March 5, 2012, and are estimated based on information compiled by or underthe supervision of a qualified person as defined under NI 43 -101.
Important NoticeThis report shall not constitute an offer to sell or a solicitation of an offer to purchase any securities ofInmet Mining Corporation in the United States or any other jurisdiction. Any securities of Inmet MiningCorporation have not and will not be registered under the U.S Securities Act of 1933, as amended (theSecurities Act), or the securities laws of any other jurisdiction and may only be offered and sold in theUnited States pursuant to an exemption from the registration requirements of the Securities Act andapplicable state securities laws
.
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Contents
1 INTRODUCTION ......................................................................................................... 15
1.1 A Tier 1 Copper Asset ........................................................................................ 16
1.2 Concession, Permits and Socio-Environmental Commitments ...................... 19
1.3 Capital Costs ...................................................................................................... 19
1.4 Operating Costs .................................................................................................. 20
1.5 Project Economics ............................................................................................. 21
1.6 Third Party Reviews ........................................................................................... 22
1.7 Risks and Opportunities .................................................................................... 23
1.8 Project Execution ............................................................................................... 25
1.9 Conclusions ........................................................................................................ 26
2 TECHNICAL SUMMARY ............................................................................................ 272.1 Project Description ............................................................................................. 27
2.1.1 Geology and Mineral Resources ................................................................ 29
2.1.2 Mine Plan and Mineral Reserves ................................................................ 33
2.1.3 Metallurgy ..................................................................................................... 39
2.1.4 Mine Waste Management ............................................................................ 43
2.1.5 Solid and Hazardous Waste Disposal ........................................................ 44
2.1.6 Tailings Management Facility ..................................................................... 44
2.1.7 Water Management ...................................................................................... 46
2.1.8 Power Plant .................................................................................................. 472.1.9 Project Infrastructure / Ancillary Facilities ................................................ 49
2.1.10 Port ............................................................................................................... 50
2.1.11 Pipelines ....................................................................................................... 51
2.1.12 Balance of Plant ........................................................................................... 52
2.2 INDEPENDENT THIRD-PARTY REVIEWS .......................................................... 52
2.2.1 Independent Tailings Review Board (ITRB) ............................................... 52
2.2.2 URS Corporation Independent Review....................................................... 53
3 PRIVILEGE TO OPERATE ......................................................................................... 54
3.1 Panama ............................................................................................................... 54
3.1.1 Mining in Panama: Changes to the Mineral Code in 2012 ........................ 56
3.1.2 Contract Law 9 ............................................................................................. 57
3.1.3 MPSAs Panamanian Society Participation............................................... 58
3.2 Inmets Approach To Corporate Responsibility ............................................... 58
3.3 Cobre Panama: Inmets Commitment in Action.............................................. 59
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3.3.1 Regulatory Context for Environmental and Social Impact Assessments 61
3.4 Socio-environmental Context of the Project ..................................................... 63
3.4.1 Environmental Baseline Conditions ........................................................... 63
3.4.2 Social Baseline Conditions ......................................................................... 65
3.4.3 Community Relations and Community Development Activities............... 67
3.4.4 Project Socio-environmental Actions and Benefits .................................. 69
3.4.5 Partnerships ................................................................................................. 71
4 CAPITAL COST ESTIMATE ....................................................................................... 73
4.1 Basis of Estimate ................................................................................................ 73
4.1.1 Site Investigation ......................................................................................... 74
4.2 Capital Cost (CAPEX $US) ................................................................................. 75
4.2.1 Contract budgetary incentives ................................................................... 79
4.3 Sustaining Capital (SUSEX) ............................................................................... 79
4.4 Independent Third Party ReviewCapital Cost Estimate ............................... 80
5 OPERATING COST ESTIMATE ................................................................................. 82
5.1 Basis of Estimate ................................................................................................ 82
5.2 Operating Cost Estimate (OPEX) ....................................................................... 83
5.3 Brook Hunt C1 Cash Cost .................................................................................. 86
5.4 Independent Third Party Reviews ..................................................................... 88
5.4.1 Process Plant Operating Cost Estimate ..................................................... 88
5.4.2 Benchmark of Mining Cost ......................................................................... 895.4.3 Power Plant Operating Cost Estimate ........................................................ 89
5.4.4 Power Plant Coal Supply Analysis ............................................................. 90
6 PROJECT ECONOMICS ............................................................................................ 91
6.1 Modelling Assumptions ..................................................................................... 91
6.2 Value and Returns .............................................................................................. 93
6.3 Sensitivity Results .............................................................................................. 95
6.4 Cash Costs .......................................................................................................... 96
6.5 Net Smelter Returns ........................................................................................... 99
6.6 Project Cash Flows .......................................................................................... 1016.6.1 Debt Case ................................................................................................... 101
6.6.2 Debt plus Stream Case .............................................................................. 102
6.7 Upside of Resource Value Not Reflected in Traditional Discounted Cash Flow
Valuation ........................................................................................................... 103
7 PROJECT FINANCING ............................................................................................. 104
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8 RISKS AND OPPORTUNITIES ................................................................................. 107
8.1 Project Risk Management ................................................................................ 107
8.1.1 Special Considerations ............................................................................. 110
8.2 Opportunities .................................................................................................... 113
9 PROJECT EXECUTION ............................................................................................ 116
9.1 Project Background.......................................................................................... 116
9.2 Project Organization......................................................................................... 116
9.3 Health and Safety ............................................................................................. 119
9.4 Environmental Management Plan .................................................................... 119
9.5 Labour Relations, Training and Hiring ............................................................ 121
9.6 Sequence of Construction ............................................................................... 122
9.6.1 EPCM Scope Under JVP ............................................................................ 122
9.6.2 EPC Scope Yet to be Awarded .................................................................. 123
9.6.3 EPC Scope Under SK E&C ........................................................................ 123
9.7 Materials Management and Logistics ............................................................. 123
9.7.1 Logistics Strategy ...................................................................................... 123
9.8 Procurement ..................................................................................................... 124
9.9 Security ............................................................................................................. 124
9.10 Project Master Schedule and Key Milestones ................................................ 124
9.11 Independent Reviews ....................................................................................... 127
9.11.1 Independent Project Schedule Review .................................................... 1279.11.2 Independent Project Readiness Assessment .......................................... 127
9.11.3 Independent Project Controls Health Check ........................................... 127
10 OPERATIONAL READINESS ................................................................................... 129
11 MARKETING AND MARINE TRANSPORT OF CONCENTRATE ............................ 133
11.1 Scope and Summary ........................................................................................ 133
11.2 Composition of Revenue and Price Assumptions ......................................... 133
11.3 Copper Prices and Trends ............................................................................... 134
11.4 Concentrate Quality.......................................................................................... 135
11.5 Summary of Copper Concentrate and Freight Market Expectations ............ 13611.6 Preliminary Copper Concentrate Sales Plan .................................................. 137
11.7 Summary of Molybdenum and Freight Market Expectations ........................ 138
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List of Tables
Table 1-1 Tier 1 Characteristics ................................................................................... 15
Table 1-2 Metal Production .......................................................................................... 17Table 1-3 Cobre Panama Mineral Reserves ................................................................ 17
Table 1-4 Cobre Panama Mineral Resources .............................................................. 17
Table 1-5 Basic Engineering Capital Cost by Major Area ............................................. 20
Table 1-6 C1 Cash Costs($US/lb of Cu) at Copper Price Scenario of $US2.75/lb. ....... 20
Table 1-7 Summary of Operating Costs by Component ($US/t of ore milled) ............... 21
Table 1-8 After-Tax Economics: Debt Case ................................................................. 22
Table 1-9 After-Tax Economics: Debt plus Stream Case ............................................. 22
Table 1-10 Third Party Reviews ..................................................................................... 23
Table 1-11 Project Milestones ........................................................................................ 26
Table 2-1 Tier 1 Characteristics ................................................................................... 27
Table 2-2 Cobre Panama Mineral Resources .............................................................. 31
Table 2-3 Mine Production Schedule ........................................................................... 35
Table 2-4 Mining Schedule by Pit ................................................................................ 36
Table 2-5 Cobre Panama Mineral Reserve .................................................................. 39
Table 2-6 Recovery Forecast Algorithms ..................................................................... 40
Table 2-7 Mill Production Schedule .............................................................................. 42
Table 3-1 Cobre Panamas Progress in Implementing the IFC Performance Standards61
Table 4-1 Basic Engineering Capital Cost by Major Area ............................................. 78
Table 4-2 FEED Study to Basic Engineering Capital Cost Estimate Variances ............ 78
Table 4-3 FEED Study to Basic Engineering Variance Description .............................. 79
Table 5-1 Total Operating Cost Summary .................................................................... 83
Table 5-2 Summary of Operating Costs per Year ($US/t of ore milled)* ....................... 83
Table 5-3 Summary of Operating Costs by Component ($US/t of ore milled)* ............. 84
Table 5-4 FEED Study vs. Basic Engineering Operating Costs .................................... 85
Table 5-5 Operating and Input Cost Estimates at Selected Copper Price Assumptions86
Table 5-6 Years 2-16 C1 Cash Cost ($US/lb) .............................................................. 87
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Table 5-7 Life of Mine C1 Cash Cost ($US/lb) ............................................................. 87
Table 5-8 Power Costs at Selected Copper Price Assumptions ($US/kWh) ................. 89
Table 6-1 Modelling Assumptions ($US) ...................................................................... 91Table 6-2 Pre-Financing Sponsor Funding Requirement ............................................ 92
Table 6-3 Financing Assumptions ................................................................................ 93
Table 6-4 Metal Price Assumptions ($US) ................................................................... 94
Table 6-5 After-Tax Economics: Debt Case ................................................................. 94
Table 6-6 After-Tax Economics: Debt plus Stream Case ............................................. 95
Table 6-7 Years 2-16 Cash Costs Based on Payable Copper ($US/lb) ........................ 96
Table 6-8 Life of Mine Cash Costs Based on Payable Copper (US/lb) ......................... 96
Table 6-9 Year 2-16 C3 Costs ($US/lb)........................................................................ 98
Table 6-10 Life of Mine C3 Costs ($US/lb) ..................................................................... 98
Table 6-11 Life of Mine Revenues and NSR (Consensus LT Prices) ........................... 100
Table 6-12 Construction Period Funding RequirementDebt Case ($US) .................. 101
Table 6-13 Construction Period Funding RequirementDebt plus Stream Case ($US)
.................................................................................................................. 102
Table 7-1 Independent Funding Breakdown .............................................................. 104
Table 7-2 Inmets Funding Plan................................................................................. 104
Table 7-3 Total Project Funding ................................................................................. 105
Table 8-1 Key Project Risks and Treatment Plans ..................................................... 112
Table 8-2 Potential Reserves Should Indicated Resources at Balboa and Brazo be
Converted to Reserves .............................................................................. 114
Table 9-1 Project Milestones ...................................................................................... 125
Table 10-1 Elements of and Assurance of Operational Readiness .............................. 129
Table 11-1 Forecast Copper Concentrate Commercial Terms ..................................... 138
Table 11-2 Molybdenum Concentrate NSR Calculation* .............................................. 139
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List of Figures
Figure 2-1 Site & Infrastructure Map ............................................................................. 28
Figure 2-2 Mineral Deposits and Defined Resources Plan Map .................................... 30Figure 2-3 Increase in Resources Since FEED Study ................................................... 31
Figure 2-4 Contained Copper Endowment (resource proxy) for Undeveloped Copper
Deposits ....................................................................................................... 32
Figure 2-5 Contained Copper Endowment (resource proxy) for Undeveloped Copper
Deposits Not Controlled by >$10b Market Cap or Sovereigns ...................... 32
Figure 2-6 Summary of Mining Schedule ...................................................................... 34
Figure 2-7 Mining Schedule Shown by Type of Material Moved and by Pit ................... 34
Figure 2-8 Inferred Resource In-Pit ............................................................................... 37
Figure 2-9 Plan View of Site Infrastructure and Design Pits .......................................... 38
Figure 2-10 Plan View of TMF Including Dams ............................................................... 45
Figure 3-1 IHS Comparative Historical Risk Showing Panamas Risk Trending Down.. 55
Figure 3-2 Estimated Cobre Panama Job Additions ...................................................... 56
Figure 3-3 Pro-Mining Demonstration of 2,500 People March 10, 2012 ........................ 67
Figure 5-1 Breakdown of Operating Costs by Function and Input Cost ......................... 84
Figure 5-2 Comparison of Cobre Panamas C1 Cost on the 2020 Projected Brook Hunt
Cost Curve ................................................................................................... 88
Figure 6-1 NPV Sensitivities.......................................................................................... 95
Figure 6-2 Comparison of Project C1 Costs on the Projected 2020 Brook Hunt Cost
Curve ........................................................................................................... 97
Figure 6-3 Comparison of Project C3 Costs on the Projected 2020 Brook Hunt Cost
Curve ........................................................................................................... 99
Figure 6-4 Payable Cu Production and C1 Cash Cost by Year (Consensus LT Prices
Debt Case)................................................................................................. 100
Figure 6-5 Project Life After-Tax Cash Flows (Debt Case)* ........................................ 101
Figure 6-6 Project Life After-Tax Cash Flows (Debt + Stream Case)* ........................ 102
Figure 8-1 Plan of Distribution of Resources 2012 ...................................................... 113
Figure 8-2 Plan of Distribution of Resources 2012 ...................................................... 115
Figure 9-1 Project Schedule ........................................................................................ 126
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Figure 11-1 Cobre Panama NSR by Metal Based on Long-term Consensus Prices ...... 133
Figure 11-2 Gap Between Base Case Mine Production and Demand that Needs to be
Filled with Capacity Additions .................................................................... 134
Figure 11-3 Forecast vs Actual Sources of Supply 2003-2010 ...................................... 135
Figure 11-4 Historical Trends in Treatment and Refining Changes in Real 2011 Dollars137
k thousand
m million
b billion
oz troy ounceslb pounds
kt thousand tonnes
kTon thousand tons
ktpd thousand tonnes per day
mt million tonnes
mt/a million tonnes per annum
US$/t US dollars per tonne
Cu Copper
Au Gold
Ag Silver
Mo Molybdenum
bbl barrel
l litre
mW megawatt
kWh kilowatt hour
dmt dry metric tonne
wmt wet metric tonne
LOM life of mine
g/t grams per tonne
GLOSSARY
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1 INTRODUCTION
The Mina de Cobre Panama Project (Cobre Panama; the Project) consists of a conventional
open pit mine and the associated infrastructure to produce copper-gold and molybdenumconcentrates. The concession for the Project covers an area of 130 square kilometres (km2) and
is located in the Donoso District, Coln Province in north central Panama.
Cobre Panamasprojected significant annual production at first quartile cash costs, long mine
life, extensive mineral reserves and resources, and high proportion of net revenues from copper
all provide exceptional exposure to copper. With the Environmental and Social Impact
Assessment (ESIA) regulatory approval for the Project already received, a strong social license
and Basic Engineering completed, the Project is construction-ready. It is essentially the only
Tier 1 copper asset not in the hands of a senior mining company.
Table 1-1 Tier 1 Characteristics
Tier 1 Characteristic
Life of Mine 31 years
Capital Cost $US6.18b
Annual production (Yr 2-16)
Annual production (LOM)
298 kt
266 kt
C1 cash costs (Yr 2-16)
C1 cash costs (LOM)
$US0.72/lb Cu
$US0.82/lb Cu
Strip Ratio 0.58
Scale 160 ktpd to 240 ktpd throughput with further expansion capacity
IRR (debt financing)
NPV @ 8% ($m)
IRR (debt plus stream financing)
NPV @ 8% ($m)
Consensus Long-Term
14.3%
3,200
16.7%
3,500
Forward Curve
(declining to
consensus)
18.5%
4,800
21.9%
5,000
3YR Trailing Avg.
(SEC case)
19.2%
6,000
22.5%
6,300
Annual free cash flow
(Yr 2-16, debt financing)
Annual free cash flow
(LOM, debt financing)
$US0.90b
$US0.81b
Copper reserves*
Copper resources (M&I)*
Copper resources (Inferred)*
9.3 mt
14.7 mt
8.7 mt
Concentrate Clean concentrate not expected to draw penalties
Logistics Proximity to tidewater and Panama Canal
*See Table 1-3 and Table 1-4
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Cobre Panama would be developed as a conventional truck and shovel open pit mine with a
concentrator that uses the direct application of proven technology (crushing, grinding, flotation)
to produce copper-gold and molybdenum concentrates. A 300 mW coal-fired power plant and
ship loading port facilities are also part of the Project.
Basic Engineering was conducted by Joint Venture Panama Inc. (JVP), a joint venture led by
SNC-Lavalin Group Inc. (70%) with partners GyM S.A. (a member of Graa y Montero Group)
(15%) and Techint International Construction Corp. (15%) between November 2010 and March
2012. The purpose of Basic Engineering was to further develop the scope and execution plan
for the Project, and to serve as the basis for detailed engineering, procurement and construction.
This work builds on the March 2010 Front End Engineering Design Study (FEED) Study. Basic
Engineering provides:
A capital cost estimate with an accuracy of +10%/-10%
A Project Execution Plan in readiness for the full Notice to Proceed
A detailed Level 3 Project Master Schedule
Detailed engineering for site capture and civil works and
Initial Work Packages and contracting strategy to support procurement activities.
The total estimated capital cost to bring the Project into operation is $US6.2b (expressed in Q3
2011 dollars), over half of which is based on firm quotes. Sustaining capital is estimated to be
$US2.9b required over the mine life. This includes an expansion in the form of adding a third
crushing and grinding line to the process plant to increase capacity from 160ktpd to 240ktpd,
which would to be ready for production in Year 10. Operating costs are estimated to be$US6.88/t of ore milled, with mining costs benefitting from a life of mine strip ratio of 0.58 tonnes
waste per tonne of ore. The power cost of $US1.01/t of ore milled is an endorsement of the
decision in 2011 to undertake the capital cost to build a coal-fired power plant. Assuming a full
Notice to Proceed in May 2012, first concentrate would be scheduled for early 2016.
Reconciliations to the 2010 FEED Study can be found in Sections 4 (Capital Costs) and 5
(Operating Costs).
1.1 A Tier 1 Copper Asset
The Project has the key attributes of a Tier 1 copper asset with substantial exposure to copper,
projected long life, low operating costs and significant expansion potential in a geopolitically
favourable jurisdiction.
Cobre Panamas projected average annual copper production of 298kt for Years 2-16 and 266kt
over the life of operations are indicative of a world class asset. The expected 31 year life with
these levels of output would provide exceptional exposure to copper.
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Table 1-2 Metal Production
Annual AverageYears 2-16
Annual AverageLife of Operations
TotalLife of Operations
Copper (kt) 298 266 8,237Molybdenum (kt) 3.1 2.9 90.2Gold (koz) 106 87 2,705Silver (koz) 1,572 1,545 47,899
Estimated C1 cash costs (see Section 5 for definition) of $US0.72/lb for Year 2-16 and
$US0.82/lb for the life of the operation would put the Project in the very favourable position of
being in the first quartile of the projected industry cost curve.
Table 1-3 Cobre Panama Mineral Reserves
Category Tonnes
(x 1000)
Cu
%
Au
g/t
Ag
g/t
Mo
%
Cu
(x1000)
Tonnes
Au
(x1000)
ounces
Ag
(x1000)
ounces
Mo
(x1000)
tonnes
Proven 258,000 0.57 0.14 1.6 0.010 1,478 1,126 13,020 25
Probable 2,061,000 0.38 0.06 1.4 0.007 7,781 4,041 91,008 145
Total 2,319,000 0.40 0.07 1.4 0.007 9,258 5,167 104,028 169
Table 1-4 Cobre Panama Mineral Resources
Category Tonnes
(x 1000)
Cu
%
Au
g/t
Ag
g/t
Mo
%
Cu
(x1000)
Tonnes
Au
(x1000)
ounces
Ag
(x1000)
ounces
Mo
(x1000)
tonnes
Measured 262,000 0.56 0.13 1.5 0.009 1,476 1,118 12,979 24
Indicated 3,905,000 0.34 0.06 1.2 0.005 13,237 7,845 155,392 214
Total 4,167,000 0.35 0.07 1.3 0.006 14,715 8,963 168,454 238
Inferred 3,749,000 0.23 0.04 1.0 0.004 8,660 4,805 120,534 156
Notes to mineral reserves and resources tableMineral reserves and resources are shown on a 100 percent basis for each property. Except as stated, mineral resources areexclusive of mineral reserves.The mineral reserve and resource estimates are prepared in accordance with the CIM Definition Standards On Mineral Resourcesand Mineral Reserves, adopted by CIM Council on November 14, 2004, and the CIM Estimation of Mineral Resources and Mineral
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Reserves Best Practice Guidelines, adopted by CIM Council on November 23, 2003, using geostatistical and/or classical methods,plus economic and mining parameters appropriate to each project. You will find the definitions and guidelines at www.cim.org.Estimates for all operations are prepared by or under the supervision of a qualified person as defined in National Instrument 43-101(usually an engineer or geologist).There are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the
estimates of the mineral reserves.Mineral resources which do not form part of the mineral reserves do not have demonstrated economic viability.Mineral resources as at March 5, 2012, were estimated by Robert Sim, P. Geo., of SIM Geological Inc. Mineral reserves as atDecember 31, 2011 were estimated by William Rose, P.E., of WLR Consulting, Inc., a qualified person under National Instrument 43-101.Reserve estimates are based on the following assumptions:- copper price: $US2.25 per pound- gold price: $US1,000 per ounce- silver price: $US16 per ounce- molybdenum price: $US13.50 per pound- Mining costs : $US1.66 per tonne of ore mined, $US 1.96 per tonne of waste mined and- Milling and general and administration cost: $US 5.27 per tonne of ore milled, average life of mine metallurgical recoveries: 89percent for copper, 52 percent for gold, 46 percent for silver and 53 percent for molybdenum.Mineral resources include mineral reserves.Resource grades are estimated using ordinary kriging with a nominal block size of 25 metres by 25 metres by 15 metres. Resourcesare limited inside a pit shell defined by a copper price of $US2.60 per pound, $1.75 per tonne mining cost and $7.02 per tonne totalsite operating cost, and are tabulated at a cut-off grade of 0.15 percent copper
Measured and Indicated (M&I) resources have grown to approximately 32.4b lb of copper and
9.0m oz of gold. This represents a 26% increase of 6.6b lb of copper and a 37% increase of
2.4m oz of gold over the FEED Study. In addition, inferred mineral resources have grown to
19.1billion lbs of copper and 4.8m oz of goldan increase of 2.5b lb of copper (15 percent) and
an increase of 0.8m oz gold (20 percent) over the FEED Study.
Currently there are 12b lb of contained copper in M&I mineral resources and some 19b lb of
copper in inferred mineral resources not exploited in the mine plan. While mineral resources do
not have demonstrated economic viability, based on commonly used market precedent, these
additional units of copper could potentially be valued at between $US0.03 and $US0.06/lb in theground, suggesting an option value on those copper units of between $US0.9b and $US1.8b.
This is especially true once the infrastructure is in place and the mine is operating.
If work progresses to allow us to move these resources into reserves, it would provide
opportunities to:
extend mine life beyond the current 31 years; and/or
accelerate the addition of a third line to the process plant that would increase
production in Years 3 to 9; and/or
justify expanding the planned operation beyond 240ktpd throughput.
Cobre Panama would enjoy a number of other positive attributes. In an industry with a trend of
increasing presence of deleterious elements in concentrates, the Project would have a clean
concentrate. The port, located on tide water, would be only 30 km from the mine site, allowing
for ease of exporting concentrates as well as importing supplies. This would provide a unique
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opportunity to potentially enhance profitability through swaps to reduce transportation costs and
to share the benefit of reduced penalties with swap counterparties.
1.2 Concession, Permits and Socio-Environmental Commitments
The Project exploration and mining concession was granted under Law 9 of February 26, 1997,
promulgated by the Legislative Assembly of Panama. This, in addition to an amended Mineral
Resources Code in Panama, provides clarity on the fiscal framework for Cobre Panama. The
ESIA approval was received in December 2011 and gives the Project the right to obtain the
balance of the permits required to commence operations. Several such construction permits
have already been obtained.
MPSA has created an existing privilege to operate locally by building relationships with local
communities, an intention to comply with the International Finance Corporation sPerformance
Standards on Environmental and Social Sustainability and by meeting its responsibility to ensurethat the benefits of the Project are shared with the people of Panama.
1.3 Capital Costs
The estimated capital cost of $US6.18b is based on a comprehensive estimate comprised of
over 9,000 lines and 800 pages as well as third party reviews of the process and outcome.
Adding further to the confidence in the figures is the inclusion of lump sum turnkey contracts,
firm price estimates and vendor quotes for well over ninety per cent of the capital cost.
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Table 1-5 Basic Engineering Capital Cost by Major Area
AreaCAPEX Total
($US)% of Project
Mining 760 12
Process Plant 1,184 19
Site & Services 550 9
Port Site Facilities 543 9
Power Plant 646 10
Total Direct Costs 3,682 59
Construction Indirects 844 14
Total Field Costs 4,526 73
EPCM Services 355 6
Owner Costs 885 14
Contingency* 415 7
Project Total Costs 6,181 100
Note:Totals may not add due to rounding*Contingency: The contingency table provided to the estimate reviewers had an overall Project contingency of 9.63% (as apercentage of Total Installed Cost (TIC)). When owners costs (mine preproduction, mine equipment and Owners ProjectManagement (PM)) and contingency on owners costs are removed, the remaining value is 11.18%. The percentage is in line withwhat might be expected of an Authority for Total Cost Management (AACE) Class 2 engineering estimate which is described inSection 4.4.
1.4 Operating CostsC1 cash costs during Years 2-16 of operation are expected to average $US0.72/lb of copper and
for the life of operations average $US0.82/lb (see Section 5 for further details). These costs
should put Cobre Panama in the first quartile of the projected industry curve and support the
economic robustness of the operation under most foreseeable market conditions.
Table 1-6 C1 Cash Costs($US/lb of Cu) at Copper Price Scenario of $US2.75/lb.
Cost Item Average Yr 2-16 Life of Operations
Mine 0.30 0.32
Plant 0.37 0.44G&A 0.11 0.12
Site services 0.03 0.04
Offsite costs 0.30 0.30
By-product credits (0.40) (0.40)C1* 0.72 0.82
Note: Totals may not add due to rounding
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Table 1-7 Summary of Operating Costs by Component ($US/t of ore milled)
Cost Centre Total Labour Material Power Other
Mine 2.44 0.27 1.87 0.05 0.24
Process Plant 3.29 0.24 2.13 0.91 0.01
G&A 0.88 0.15 0.01 0.04 0.69
Site Services 0.28 0.11 0.07 0.01 0.09
Total 6.88 0.77 4.08 1.01 1.03
A third party review of process plant operating costs concluded that the estimate of operating
costs was realistic and consistent with other operating concentrators. A separate reviewer
concluded that the Projects mining productivity ratios were at the average or slightly
conservative as compared to other similar open-pit mining operations.
Analysis of costs for input commodities such as oil (diesel), freight, steel (grinding media),
ammonia (explosives) and coal (power) has demonstrated a strong correlation to the historical
price of copper. When prices of oil and other raw materials are relatively high, statistically
significant correlations demonstrate that it is reasonable to expect that the economic
environment is robust and, likewise, so presumably would be the price of copper. The cost
assumptions for these commodities can therefore linked to price assumptions for copper over
the long term. The life of mine operating costs estimate of $US6.88/t of ore milled is based on a
long-term copper price assumption of $US2.75/lb. Table 5-5 shows the various input costs used
for each metal price scenario in the $US2.75/lb copper case oil is $US68.68/bbl, diesel is
$US0.62/l, coal is $US82.54/t, steel grinding media is $US935.25/t, explosives are $US936.21/tand concentrate freight cost was $US41.21/t. In the $US3.42/lb copper case oil is
$US80.53/bbl, diesel is $US0.72/l, coal is $US96.93/t, steel grinding media is $US1,143.62/t,
explosives are $US1,011.18/t and concentrate freight cost was $US48.32/t.
1.5 Project Economics
Three metal price scenarios were used to evaluate the Project economics: Consensus Long-
Term ($US2.75/lb), Forward Curve, and Three Year Trailing Average ($US3.42/lb). It is our
belief that the Consensus Long-Term price is conservative and does not reflect anticipated
supply-demand dynamics (see Section 11 Marketing for additional discussion). Two financing
structures were considered in the Project economic analysis:
1. a levered case with third party and subordinate shareholder debt, and
2. a levered case with third party and subordinate shareholder debt, plus a gold and silver
stream sale.
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These structures represent Inmet Mining Corporations (Inmets) financing assumptions applied
to 100% of the Project. All scenarios and cases appear to provide solid returns that range from
14.3% to 22.5% after-tax IRR.
Table 1-8 After-Tax Economics: Debt Case
Metal Price Scenario
($USm) Consensus Long-Term
Forward Curve
(declining to
consensus)
3-Year Trailing Average (SEC
case)
IRR 14.3% 18.5% 19.2%
NPV @ 8% 3,200 4,800 6,000
NPV @ 9% 2,400 3,900 4,900
NPV @ 10% 1,800 3,200 4,000
Table 1-9 After-Tax Economics: Debt plus Stream Case
Metal Price Scenario
($USm) Consensus Long-Term
Forward Curve
(dropping to
consensus)
3-Year Trailing Average (SEC
case)
IRR 16.7% 21.9% 22.5%
NPV @ 8% 3,500 5,000 6,300
NPV @ 9% 2,800 4,200 5,200
NPV @ 10% 2,200 3,600 4,400
However, readers should be aware that the static Discounted Cash Flow valuation methodology
employed in the analysis does not capture the value of the optionality embedded in a long-life
asset and additional mineral resources that may be incorporated into the mine plan.
1.6 Third Party Reviews
Many recent projects in the mining industry have been impacted by unreliable capital estimates.To ensure the reliability of Cobre Panamas capital estimate, third party reviews of key aspects
of the Project overall were undertaken to mitigate risks and improve the confidence of estimates.
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Table 1-10 Third Party Reviews
Scope Reviewer Outcome
Overall Project Chlumsky, Ambrust & Meyer(CAM)Independent
Engineer
Confirmative
Capex Legico-CHP ConfirmativeOpex AMEC ConfirmativePower Sunrise Americas & Wood
MackenzieConfirmative
Tailings URS Corporation ConfirmativeTailings ITRB ConfirmativeProject Controls KPMG ConfirmativeProject Readiness IPA Confirmative
1.7 Risks and Opportunities
Cobre Panama stakeholder risks and opportunities were identified and risk mitigants put in place
as part of Basic Engineering.
Cost Escalation Quotes to build the power plant and the process plant (together a significant component
of Project capital expenditures) were and are being written on a Lump Sumand Not to
Exceed basis in order to reduce the likelihood that these components will bring the
Project over budget. These quotes will be received from audited vendors with the
sophistication and balance sheet to manage costs and deliver on budget.
The advanced stage of engineering for the Project (currently 38% completed) in
combination with the large portion of firm bids received to-date (58%) should furtherreduce the potential for unforeseen costs.
Panamas use of the US currency is another positive characteristic of the Project that
should reduce the potential for material cost escalation due to foreign exchange
fluctuation.
The manner in which the Request for Quotationprocess was conducted should reduce
the potential for cost overruns. The Projects Engineering, Procurement and
Construction (EPC) and Engineering, Procurement, Construction and Management
(EPCM) contracts are designed to incent contractors to stay on budget and on schedule.
We believe the quotes obtained are materially conservative in some cases the labour
multiplier (unit of work over unit of time) used for work on the Project is as high as threetimes what would normally be employed and some of the quotes for individual work
packages have small overlaps in scope (which could potentially reduce costs).
By the end of 2012, 50% of the Project expenditures are expected to be committed
against firm quotes currently in hand.
Overall Project contingency is 9.6% (as a percentage of TIC). When owners costs (mine
preproduction, mine equipment and owners project management (PM)) and contingency
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on owners costs are removed, the remaining contingency level is 11.2%. This
percentage is in line with what might be expected of an AACE Class 2 engineering
estimate.
The Project is actively considering early group purchase of bulk commodities (to lock insome costs of steel, diesel, cement) for construction and passing out to suppliers.
Low Cost Production from a Low Grade Mine Cobre Panama is amenable to large scale, open pit mining methods that should result in
the efficient handling of ore and waste.
Mining costs should benefit from a very low strip ratio, roughly one fifth of the average
(0.58 vs 2.53Source: Brook Hunt) for all open pit copper mines in 2011.
The Projects proximity to the coast and the low altitude of the Project should allow the
mine and the port to be located close together, thus decreasing linear maintenance and
allowing for integrated management of remote facilities.
The project would have access to low-cost, self-generated power that takes advantage ofproximity to a coal source.
Management Depth Inmet has developed three mines within the tenure of the current management; the Las
Cruces, ayeli and Troilus mines.
For the Project, Inmet has recruited a strong owners team (detailed in Section 9) that
has relevant experience in construction and operations. Further, reputable Engineering,
Procurement and Construction contractors with a proven history of quality have been
selected.
Support for the Project Approval of the ESIA is in our view indicative of governmental support for the Project.
Permits post-ESIA approval are being received.
Extensive engagement and cooperation at both the government and community levels.
At the community level, the current level of support in the Project area indicates that
community engagement efforts are working and a recent study shows overwhelming
support for the Project (Section 3.3.3).
Minera Panama, S.A. (MPSA) has received free prior and informed consent of the
indigenous communities who will be physically and economically displaced by the
Project.
MPSA has continuous engagement with the local communities and a broad range ofstakeholders and is delivering employment to local residents.
Mine Life Current mineral resources are in excess of the Basic Engineering mine plan and point to
the potential for mine life extension and expansions beyond the currently planned
addition of a third crushing and grinding line to the process plant.
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Acceleration of Third Line Moving the third line addition forward could enhance the mill throughput by approximately
50% in Years 3 to 9 and would make Cobre Panama one of the ten largest copper mines
in the world in terms of annual production.
Further Expansion under Extended Resource There is a significant mineral resource under the Basic Engineering plan, exclusive of
mineral reserves, that is largely near surface and proximal to the planned plant. This
could potentially support future expansion.
Exploration Potential In late 2010 MPSA initiated a concession-wide exploration program via airborne
geophysical survey. This survey identified known shallow mineralization and generated
numerous targets. One of the first targets tested in early 2011 resulted in the discovery of
the Balboa deposit. An extensive exploration program for 2012 is underway with 36holes testing additional targets on the concession.
1.8 Project Execution
A project execution plan has been developed to move Cobre Panama from completion of Basic
Engineering through design, construction and commissioning phases all the way to shipment of
the first concentrate anticipated in the first quarter of 2016. The MPSA Project team would grow
from 50 today to 107 members at its peak in 2013.
Milestones from the Project master schedule are presented below.
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Table 1-11 Project Milestones
Milestone Date
(Estimated)
Notice to Proceed 2Q12
Mine/Process Plant Construction Start 2Q12
Port Site Construction Camp Complete 4Q12
Process Plant Bulk Earthworks Complete 4Q13
Coast Road Open (Plant to Port Site) 4Q13
Port Dock Facility Construction Complete 2Q14
230 kV Power Transmission Line Construction Complete 3Q14
Tailings Starter Dam Construction Complete 3Q15
Introduction of Ore to Grinding Line No. 1 4Q15Power Plant CompleteUnit No. 1 Operational 4Q15
Introduction of Ore to Grinding Line No. 2 4Q15
Power Plant CompleteUnit No. 2 Operational 4Q15
Start of Production 4Q15
Shipment of Concentrate 1Q16
Commercial Production 2Q16
1.9 Conclusions
With Basic Engineering completed, detailed engineering underway, key permits in process, and
continued efforts to maintain and enhance its privilege to operate locally, Cobre Panama is a
construction-ready Tier 1 project. With few such assets in a construction-ready position and not
already in the hands of a senior mining company, we believe the Project has potential value
beyond what is estimated in the NPV analysis.
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2 TECHNICAL SUMMARY
2.1 Project Description
Cobre Panama would be a world-class Tier 1 asset based on projected mine life, annual
production, cash costs, scalability and annual cash flow.
Table 2-1 Tier 1 Characteristics
Tier 1 Characteristic
Life of Mine 31 years
Annual production (Yr 2-16)
Annual production (LOM)
298 kt
266 kt
C1 cash costs (Yr 2-16)
C1 cash costs (LOM)
$US0.72/lb Cu
$US0.82/lb Cu
Strip Ratio 0.58
Scale 160 ktpd to 240 ktpd throughput with
further expansion capacity
Annual free cash flow (Yr 2-16) at $US2.75/lb Cu, debt financing
Annual free cash flow (LOM) at $US2.75/lb Cu, debt financing
$US0.90b
$US0.81b
Copper reserves*
Copper resources (M&I)*
Copper resources (Inferred)*
9.3 mt
14.7 mt
8.7 mt
Concentrate Clean concentrate not expected to draw
penalties
Logistics Proximity to tidewater and Panama
Canal
*See Table 1-3 and 1-4
Cobre Panama would be developed as a conventional truck and shovel open pit mine with a
concentrator employing proven technology (crushing, grinding, flotation) to produce copper-gold
and molybdenum concentrate. A 300 mW coal-fired power plant and ship loading port facilities
would also be part of the Project.
The Project would be within an exploration and mining concession covering 130 km2located in
the Donoso District, Coln Province in north-central Panama. The development would be close
to tidewater and would be advantaged by its proximity to the Panama Canal which provides
increased flexibility in sourcing supplies from both the Gulf of Mexico (North America) and South
America as well as providing convenient shipping of mine concentrates to global markets.
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Figure 2-1 Site & Infrastructure Map
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The Project infrastructure, ancillary support facilities and systems would include:
Three open pits (the Botija, Colina and Valle Grande deposits) which would be
progressively developed; Ore crushing, conveying and stockpiling facilities, consisting of two gyratory crushers,
belt conveyors and a pad for crushed ore stockpiling for the initial Botija pit; Provisions for a second crusher and associated conveying and stockpiling facilities to
handle ore from the Colina and Valle Grande pits A 160 ktpd process plant consisting of two lines; Provisions for an addition of a third line in the concentrator expanding its capacity to 240
ktpd throughput in Year 10 with negligible infrastructure modifications; A slurry pipeline to transport concentrate to the port facility; A port facility including concentrate loading and coal offloading facilities; A 300 megawatt coal-fired power plant; A coast access road, connecting the process plant with the port facility; Plant and truck repair shop; Warehouse and tank farm; Camp and administrative offices; Facilities and systems for environmental monitoring and management of effluents in
compliance with Project commitments; and Transmission line from the power plant at the port facility to the process plant and
switchyard, continuing south to connect with the Panamanian grid at the Llano Sanchezsubstation.
2.1.1 Geology and Mineral Resources
Copper-gold-molybdenum porphyry-style mineralization was discovered in central Panama
during a regional survey by the United Nations in 1968. Exploration has since outlined five large
deposits and several smaller ones on the concession. Drill programs have been conducted by
the United Nations Development Program (1968-1969), Panama Mineral Resources
Development Company (PMRD), a Japanese consortium (1970-1980), Inmet-Adrian Resources-
Teck as MPSA (1990-1997), Petaquilla Copper (2006-2008), and Inmet and Teck and then
Inmet as MPSA (2007-2009). A total of 1,275 diamond drill holes (230,555 m) have been
completed.
The relevant deposits are all porphyry copper deposits and include Botija, Colina, Medio, Valle
Grande, Brazo and Balboa. All of the porphyry-style mineralization on the property is hosted in
granodiorite, feldspar-quartz-hornblende porphyry, and adjacent andesitic volcanic rocks. Thescope of the Basic Engineering, as well as the approved ESIA, only covers the development of
the Botija, Colina, Medio and Valle Grande deposits.
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Figure 2-2 Mineral Deposits and Defined Resources Plan Map
Cobre Panama mineral resources (inclusive of reserves) were re-estimated in early 2012 to
incorporate the 171 holes completed since the 2010 FEED Study (see Table 2-2). The increase
in measured and indicated resources reflected conversion of inferred resources into indicated
resources on the Brazo deposit and the addition of the Balboa resource. Most of the increase in
inferred resources came from Balboa.
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Table 2-2 Cobre Panama Mineral Resources
Contained Metal (x1000)
Category Tonnes
(x 1000)
Cu
%
Au
g/t
Ag
g/t
Mo
%
Cu
Tonnes
Au
ounces
Ag
ounces
Mo
tonnes
Measured
Indicated
262,000
3,905,000
0.56
0.34
0.13
0.06
1.5
1.2
0.009
0.005
1,476
13,237
1,118
7,845
12,979
155,392
24
214
Total 4,167,000 0.35 0.07 1.3 0.006 14,715 8,963 168,454 238
Inferred 3,749,000 0.23 0.04 1.0 0.004 8,660 4,805 120,534 156
Mineral resources which do not form part of the mineral reserves do not have demonstrated economic viability.Mineral resources as at March 5, 2012 were estimated by Robert Sim, P. Geo., of SIM Geological Inc.Mineral resources include mineral reserves.Resource grades are estimated using ordinary kriging with a nominal block size of 25 metres by 25 metres by 15 metres. Resourcesare limited inside a pit shell defined by a copper price of $USUS2.60 per pound, $US1.75/t mining cost and $US7.02/t total siteoperating cost, and are tabulated at a cut -off grade of 0.15 percent copper.
Figure 2-3 Increase in Resources Since FEED Study
Cobre Panama has one of the largest undeveloped resources in the Metals Economics Group
(MEG) and Brook Hunt databases (see Figure 2-4). As a copper deposit not held by a major
(>$US10b market cap or sovereign), Cobre Panama stands out even more (Figure 2-5).
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Figure 2-4 Contained Copper Endowment (resource proxy) for Undeveloped Copper
Deposits
Based on MEG, Brook Hunt and in the case of Cobre Panama, Inmet databases.
Figure 2-5 Contained Copper Endowment (resource proxy) for Undeveloped
Copper Deposits Not Controlled by >$10b Market Cap or Sovereigns
Based on MEG, Brook Hunt and in the case of Cobre Panama, Inmet databases.
-
5
10
15
20
25
30
35
40
CuContainedin
total
endowment(resourceproxy)(mt)
Undeveloped Copper Deposits
Pre-feasibility
0
5
10
15
20
25
KSM Galore
Creek
Haquira Casino Schaft
Creek
Red Chris Cobre
Panama
Sentinel
CuContainedin
totalen
dowment(resourceproxy)(mt)
Copper Deposits not controlled by >$10b Mkt Cap or SovereignsPre-feasibility Feasibility Construction Ready
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2.1.2 Mine Plan and Mineral Reserves
The mine production schedule has been developed to maximize early revenues and improve overall
Project returns utilizing a conventional mining fleet. The economics of Cobre Panama would benefit
from a low life of mine strip ratio of 0.58 tonnes of waste for every tonne of ore. Mine operationswould be scheduled for two 12-hour shifts per day, 365 days per year.
A series of analyses were conducted for Basic Engineering to determine economic pit limits and the
mining phase development sequence for three mineral deposits in the concession area: Botija,
Colina, and Valle Grande. The concentrator site would be centrally located within 2 km of all threedeposits as well as the stockpile (Figure 2-9). A fourth smaller deposit, Medio, is about 500 m
northeast of the Colina pit. The new block model incorporates a small Medio pit which was targeted
by recent drilling and is part of the mine production schedule in Years 11-14.
The economic pit limit evaluations, open pit development sequence plans, and reserve estimates are
based on metal prices of $US2.25/lb Cu, $US13.50/lb Mo, $US1,000/oz Au, and $US16.00/oz Ag.
Over the life of the Project, forecast concentrator recoveries used are based on the revised BasicEngineering flow sheet forecasts and should average about 89% for Cu, 53% for Mo, 52% for Au,
and 46% for Ag. Weighted average mining costs of $US1.77/t were used in the pit limit analyses,
along with base ore processing and general/administration costs of $US3.83/t and $US1.44/t,
respectively. The costs used to estimate mineral reserves are conservative compared to the Basic
Engineering final operating cost summarized in Section 5.2.
The ultimate pit plans and mining phase designs have not changed from the FEED Study of March
2010, with the exception of the Medio pit extension. The open pit development sequence has been
adjusted to reflect slightly lower effective cut-off grades that have resulted from increased copper
recoveries and higher metal prices used to define ore in the Basic Engineering Study. These minorreserve changes resulted in an increase in ore tonnages of about 8%.
2.1.2.1 Mine Production Schedule
A third grinding circuit is planned to be added to the concentrator, which would commence operationin Year 10, increasing the base ore processing rate capacity from 160ktpd to 240ktpd. Mine
operations would be scheduled for two 12-hour shifts per day, 365 days per year. Mining department
manning levels should vary between about 850 and 956 people during the operating years, includingboth salaried and hourly workers, expatriates, and nationals. Four rotating crews would provide
continuous operator and maintenance coverage in the mine. The concentrator is anticipated to
operate an estimated 31.1 years, including the processing of about 193 mt of stockpiled ore during
Years 28 to 31 (Figure 2-6 below and Table 2-3).
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Figure 2-6 Summary of Mining Schedule
Figure 2-7 Mining Schedule Shown by Type of Material Moved and by Pit
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Table 2-3 Mine Production Schedule
Time Period Ore to ROM
Stockpile
or Mill
(kt)
To Saprock
Ore
Stockpile
(kt)
To
Low-Grade
Ore
Stockpile
(kt)
Waste
Rock
& Saprolite
(kt)
Total
Material
(kt)
Strip Ratio Contractor
(kt)
Owner
(kt)
Cu-Au (Cu
26%)
Concentrate
Production
(k dmt)
Prior to M-15* 214 1,751 766 47,552 50,282 234.41 50,282 - -PP M-15 to M0 1,227 7,643 9,478 50,406 68,755 55.02 12,912 55,843 -
Y1 50,241 5,382 14,006 47,089 118,718 1.27 7,351 111,367 789
Y2 58,062 2,108 23,897 31,762 115,829 0.99 376 115,452 1,077
Y3 58,400 739 23,592 21,099 103,831 0.78 6,476 97,355 1,114
Y4 58,654 4,331 18,520 22,135 103,640 0.77 5,614 98,026 1,137
Y5 58,400 9,519 14,424 21,493 103,837 0.78 8,680 95,157 1,122
Y6 57,950 4,843 4,844 37,793 105,429 0.82 9,806 95,623 1,161
Y7 58,400 11,391 4,167 32,884 106,842 0.83 13,019 93,823 1,185
Y8 58,400 4,167 2,489 45,337 110,392 0.89 10,138 100,254 1,111
Y9 57,360 7,085 1,961 62,567 128,973 1.25 3,119 125,854 933
Y10 85,407 1,378 - 49,906 136,691 0.60 586 136,106 1,344
Y11-Y15 437,152 1,291 - 247,902 686,345 0.57 38,422 647,923 5,830
Y16-Y20 438,001 5,571 - 251,978 695,550 0.59 44,565 650,985 5,858
Y21-Y25 411,876 8,216 - 128,054 548,147 0.33 28,895 519,252 4,702
Y26-Y31** 428,310 - - 55,953 484,263 0.13 - 484,263 4,318
Total 2,320,054 75,414 118,145 1,153,910 3,667,523 0.58 240,238 3,427,284 31,681*M denotes months e.g. M minus fifteen**Includes 147,957 kt of ore stockpile reclamation in Years 26 to 31
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Table 2-4 Mining Schedule by Pit
Time Total Ore Milled or to ROM Ore Stockpile To Saprock Ore Stockpile To Lowgrade Ore Stockpile Waste Rock and Saprolite Total
Period B C VG M B C VG M B C VG M B C VG M Ktonnes
Prior to M-15 214 - - - 1,751 - - - 766 - - - 47,552 - - - 50,282
PP M-15 to M-0 1,227 - - - 7,643 - - - 9,478 - - - 50,406 - - - 68,755
Y1 52,241 - - - 5,382 - - - 14,006 - - - 47,089 - - - 118,718
Y2 58,062 - - - 2,108 - - - 23,897 - - - 31,762 - - - 115,829
Y3 58,400 1 - - 49 691 - - 23,591 1 - - 9,520 11,579 - - 103,831
Y4 56,595 2,059 - - - 4,331 - - 16,818 1,702 - - 4,834 17,301 - - 103,640
Y5 46,412 11,988 - - - 9,519 - - 10,767 3,657 - - 1,507 19,986 - - 103,837
Y6 35,332 22,617 - - - 4,842 0 - 1,022 3,797 25 - 9,542 23,039 5,212 - 105,429
Y7 23,731 33,084 1,585 - - 9,814 1,577 - - 3,377 790 - 5,452 11,552 15,880 - 106,842
Y8 13,585 40,686 4,129 - 27 429 3,710 - 199 352 1,938 - 27,200 3,411 14,726 - 110,392
Y9 7,036 39,753 10,571 - 36 3,532 3,517 - 171 577 1,214 - 49,903 3,353 9,311 - 128,973
Y10 16,219 63,426 5,762 - - 690 689 - - - - - 41,006 4,050 4,850 - 136,691
Y11-Y15 164,073 164,432 91,316 17,331 49 339 903 - - - - - 147,894 74,758 5,359 19, 891 686, 345
Y16-Y20 272,047 164,402 1,552 - - 5,001 570 - - - - - 24,950 147,678 79,351 - 695,550
Y21-Y25 16,342 284,198 111,337 - - - 8,216 - - - - - 331 35,825 91,898 - 548,147
Y26-Y31 77,599 84,587 266,124 - - - - - - - - - - 2,023 53,930 - 484,264
Total 899,114 911,233 492,375 17,331 17,044 39,187 19,182 - 100,715 13,462 3,968 - 498,948 354,555 280,516 19,891 3,667,523
B = Botija Pit, C = Coli na Pit, VG = Valle Grande Pit, M = Medio Pi t
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The Cobre Panama pit design used for mineral reserve estimates is based only on M&I
resources. Inferred mineral resources, which amount to 321 Mt at 0.26% Cu within current pit
design, are treated as waste. An increased confidence level on the inferred mineral resources
could result in those being converted to mineral reserves and integrated into a revised mineplan, which would significantly improve Project economics by both lowering the strip ratio and
benefiting from increased tonnage. Figure 2-8 illustrates the inferred resources in the current
mine plan pits.
Figure 2-8 Inferred Resource In-Pit
Note: Inferred mineral resources highlighted in pink.
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Figure 2-9 Plan View of Site Infrastructure and Design Pits
Total material within the designed ultimate pits is estimated to be 3.501bt. Contained metal from
proven and probable mineral reserves is projected to be approximately 20.4b lb of copper, 373m
lb of molybdenum, 5.17m oz of gold, and 104m oz ounces of silver.
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Table 2-5 Cobre Panama Mineral Reserve
Category Tonnes
(x 1000)
Cu