Mercator Gold reports ‘highly encouraging’ new NI43-101 resource at Copper Flat project

Mercator Gold (AIM: MCR, OTC: MTGDY) has reported a new NI43-101 Resource Estimate for the Copper Flat project in New Mexico, USA, with 107 million short tons grading an average of 0.303% copper in the Indicated resource category and 46 million short tons grading an average of 0.240% copper in the inferred category.

The resource estimate, which was conducted by SRK Consulting, is stated above a 0.12% copper cut-off and contained within a potentially economic open pit.

“We are highly encouraged by the results of the SRK resource estimate for the Copper Flat deposit, which is stated at a cut-off grade that reflects current expectations”, Mercator Gold MD Patrick Harford said. “[it] will underpin the preliminary assessment being completed by SRK in advance of the Copper Flat project’s listing on the TSX Venture Exchange through the proposed transaction with THEMAC Resources Group Limited”.

Mercator noted that, after a review of several scenarios considering different metal prices, design criteria and operating cost assumptions, SRK assumed a copper price of US$3.50/lb; a metallurgical recovery of 90.9%; mining costs of US$1.72/short ton mined; processing and G&A costs of US$5.49/short ton processed; and slope angles of 45º in all areas.

Copper Flat is a former producing mine with substantial infrastructure still in place. The Copper Flat deposit has historic reserves of 50.21 million short tons at an average grade of 0.45% copper, 0.1244 g/t gold, 2.053 g/t silver and 0.015% molybdenum, based on a cut-off grade of 0.23% copper.

On the basis of current historic reserves and assuming metal prices of US$3/lb copper, US$10/lb molybdenum, US$900/oz gold and US$13/oz silver, the Copper Flat project is estimated to have an NPV (net present value) of US$348 million and an IRR (internal rate of return) of 45%, assuming initial capital costs of US$115 million for the recommencement of production and a discount rate of 8%. The current price of copper is US$3.53/lb.

Mercator’s new business model is focused on acquiring interests in promising assets, adding value, then either spinning them into new vehicles or vending into other companies while retaining a material stake. “The market has a limited tolerance for small cap companies...” Patrick Hartford said to Proactiveinvestors in March “…we are aiming to spot the value in projects and make them go faster…”

In March, Mercator agreed the sale of its entire interest in the New Mexico Copper Company Inc (NMCC), which holds the rights over the project, to THEMAC Resources Group (TSX-V: MAC.H). As a result of the sale, Mercator will acquire a substantial interest in THEMAC to retain a very significant interest in Copper Flat project’s future development.

The company told investors in April that it had fulfilled its objectives in relation to the copper flat, primarily confirming the historic resource. Previously a seven hole drilling programme, totaling 5,041ft was concluded in February.