Tuesday, 26 June 2012

Exeter Resource to delay Caspiche feasibility study

Exeter Resource Corp (NYSE MKT:XRA)(AMEX:XRA)(TSE:XRC) unveiled Tuesday an update on activities at its Caspiche gold-copper project in northern Chile, saying it will have to delay the feasibility study in order to preserve cash.

The company has been conducting geotechnical and metallurgical drilling at Caspiche, as well as water exploration drilling north of the deposit, in an effort to commit to a feasibility study on the heap leachable portion of Caspiche.

On the sulphide portion of the deposit, lower order technical studies to advance the project are continuing, including process engineering, metallurgical improvements, and baseline environmental studies.

But Exeter said it is "cognisant of the difficult market conditions currently affecting equity markets", and to this end, a strategy has been established to cautiously advance the project in order to conserve its $61 million treasury.

As a result, project expenditures will be delayed, including the initiation of the heap leach project feasibility study.

"Exeter is in a unique position for a junior explorer. We have a world class gold-copper asset in an excellent jurisdiction and a very substantial treasury," said chairman, Yale Simpson.
"In my view the current depressed share price does not reflect the potential future value of the Caspiche deposit, a value that could well be a multiple of our current valuation.

"The timing will depend on metal prices and world economic conditions."

Last June, the company released the oxide gold prefeasibility study, showing the potential economics of developing the upper gold zone at Caspiche as a stand-alone mining project.
This was followed up by the release of a larger prefeasibility study of the project in January, covering the total deposit.

The company said the latter study unsurprisingly showed that the development of the larger project, with "relatively high capital costs", will likely require development by a major mining company or joint venture group.

The study from last year, however, on the oxide portion of the deposit, showed that the development of exclusively this zone was potentially within the financial reach of Exeter.

Therefore, the company said that a simple heap leach gold project could be developed as phase 1 followed by the development of the much larger sulphide gold-copper deposit as phase 2.

During phase 1, the company said it could continue the pre-development studies relevant to phase 2 of the project.

"The Board is determined to see a higher valuation and to that extent Caspiche is 'not for sale'," said Simpson.

"We have set aside the funds necessary to maintain the asset for the months or years necessary to bring value to our shareholders. We remind ourselves daily that no one has found another Caspiche-size deposit in Chile for years, simply because there aren't many left to be found.
"We have a treasury sufficient to consider the acquisition of another project however such an acquisition cannot jeopardise the security of our Caspiche asset.

"Our view is simply that there are some very interesting opportunities becoming available, potentially for joint venture or 'on sale'."
In January, the pre-feasibility study for the whole project showed a net present value, at a 5 per cent discount rate, of $2.8 billion with average operating costs of $606 per ounce gold equivalent.

The gold production cost drops to $18 per ounce when copper and silver by-product credits are considered. Total capital expenditure was pegged at $4.8 billion.

Since the release of the study, the company has completed drilling, trenching and sampling at the project. Drilling highlights include a modest extension of the oxide mineralization, Exeter said, and confirmation of modelled mineralization within the sulphide portion of the deposit.
The results will be included into an updated resource estimate, the company said, with the potential to upgrade resources into the measured and indicated category.

Caspiche itself is located in Chile's prolific Maricunga mineral belt which is currently undergoing massive expansion and investment from some of the world's largest gold miners.

Indeed, the project is located some 15 kilometres south of Kinross Gold's (TSE:K)(NYSE:KGC) Refugio mine, and 10 kilometres north of the very large Cerro Casale gold-copper deposit owned by Kinross Gold and Barrick Gold (TSE:ABX)(NYSE:ABX).

The pre-feasability study in January gave Caspiche an internal rate of return of 11.5 per cent. Proven and probable gold reserves were estimated at 19.3 million ounces, and copper reserves in the same category were seen at 4.6 billion pounds.

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