Victorian-based Rex Minerals has upgraded its plans for its low grade but huge Hillside copper prospect on Yorke Peninsula in South Australia, potentially doubling the original production forecasts.
The news comes five days after the company reported a number of significant assays from the project.
These included: 44 metres (m) @ 1.2% copper and 0.5g/tonne (t) gold; 23m @ 1.3% copper and 0.3g/t gold; 27m @ 1.1% copper and 0.1g/t gold; 64m @ 0.6% copper; 18m @ 1.0% copper and 0.1g/t gold, according to the statement issued last week.
These results seem to have been better than expected and boosted the company’s confidence to move to a more ambitious production target of around 15 million tonnes of ore a year, compared to the previously announced first stage plan of 7.5 million in an announcement in July.
Rex estimates the Hillside deposit has more than 170 million tonnes of ore at 0.7% copper and 0.2g/t gold for 1.2 million tonnes of contained copper and 1.1 million ounces of gold.
Rex estimates that 50 to 60% of the target area has been tested and has a total target size of 1.5 to 2.8 million tonnes of contained copper.
Rex’s Hillside project is one of another that is allowing South Australia to close the gap on Queensland as a major copper exploration and mining state in the country.
There’s the Prominent Hill mine of OZ Minerals, as well as at least one other brownfields project at the same mine, and the huge Olympic Dam project of BHP Billiton which is already producing gold, copper, uranium and other metals, and could see the greenlight for a huge expansion next year (See next story).
Several other small prospects are also being worked on, especially in the Gawler Craton in the west of the state.
OZ Minerals bought a major prospect called Carrapateena (a copper-gold project) earlier this year and has started work on further outlining the big deposit with a view to starting mining later this decade.
And yesterday Rio Tinto revealed it was buying into Tasman Resources Vulcan prospect next door to Olympic Dam at a cost of up to $92 million.
The prospect will drilled next year. Rio can earn up to an 80% stake in Vulcan with Tasman keeping its 20% stake or selling it to Rio.
That saw Tasman’s shares jump 72% to 10.5c.
Rex’s new plan, released yesterday will see a $200 million boost in the cost of the plan to $900 million.
"Recent exploration success at Hillside, has led to the view that project returns would be enhanced by moving straight to a 100 ktpa copper equivalent (CuEq) production rate rather than previously announced two-stage development outlined in the concept study," Rex said in yesterday’s statement.
Rex said it was leaving open the potential for further expansion options depending on the results over the next six months of its regional large-scale exploration targets in close proximity to Hillside.
To ensure expeditious project development, Rex said it has also commenced preliminary financing discussions to ensure an alignment of sponsor, developer, and financier interests when the pre-feasibility study moves to a bankable study next year.
Rex’s Managing Director Mr Steven Olsen said in yesterday’s statement "The move from a staged development to an immediate 15 mtpa operation is an improvement to the project. With the positive drilling results of recent months it makes sense to focus on a larger immediate scale.
“Of particular importance to us is that the initial test work indicates that Hillside will produce high quality copper-gold and iron-ore concentrates. This should give Rex a number of strong financing options that do not rely on equity markets.
"The key to project development is to involve potential financiers early to ensure they have followed the project from the (pre-feasibility study) to (bankable feasibility study) which is what we will now do."
The concept study was based on resource scoping and work received up until April 2011 and provided broad capital and operating costs estimates based on a two-stage development (Stage One 7.5-9 million tonnes per annum, Stage 2, 15- 18Mtpa).
However, since April 2011, and in particular over the past 3 months, there has been a significant number of highgrade and shallow copper results such as at Leprena which have given confidence to now focus the pre-feasibility study on a 15 Mtpa processing plant from the commencement of operations.
Rex said last week it currently has four drill rigs focusing on the Leprena area and another two drill rigs targeting other parts of the Hillside project area. A seventh drill rig is testing a number of regional targets that are situated in close proximity to the Hillside project.
This change delivers substantially higher production and hence revenues in the first six years compared to the two staged approach adopted in the concept study.
At 15 million tonnes of ore a year Rex says Hillside would produce over 100,000 tonnes (t) copper equivalent (copper of 70,000t, gold of 50,000ozs and iron ore of 1.3 million tonnes) for a minimum of 10 years.
"The final mine life is dependent on how much ore is discovered over the next six months and regionally beyond that.
"The current scale and mine life of the Hillside project along with the significant regional potential offer a
