Chinese Consortium Gains Control of Monterrico Metals


The Rio Blanco project is located in precipitous terrain in northern Peru, as is evidenced
by this photo of a mountain-top exploration camp
Three Chinese companies led by Zijin Mining reported on April 11, 2007, that they acquired 50.17% of London-listed Monterrico Metals as the result of a share offer initially launched on Feb. 5, 2007. Monterrico’s key asset is its Rio Blanco open-pit copper-molybdenum project in northern Peru near the Peru/Ecuador border (E&MJ, July-Aug. 2006, p. 16). The offer valued Monterrico at £94.6 million. The consortium initially set a minimum acceptance condition of 70% for its offer but abandoned that goal after acceptances passed 50%. The Monterrico board has recommended the offer to its shareholders. Greater Europe Fund, which owns 7.27% of Monterrico, has rejected the offer. The offer was extended to April 27.

Zijin Mining is China’s second-largest gold miner—with additional interests in copper, molybdenum, zinc, tin, iron ore, and coal—and holds a 45% interest in the Monterrico purchase consortium. Other participants are Tongling Nonferrous Metals, 35%, and Xiamen C&D, 20%. Tongling is a copper smelting and refining company. Xiamen C&D is a state-owned investment company that has interests in more than 40 companies, some wholly owned and some as a share-interest participant.

Monterrico released the results of a detailed feasibility study of the Rio Blanco project on Feb. 5, 2007, the date of the Zijin consortium’s initial offer. The study assumes mine production of 25 million mt/y over a 20-year mine life and average annual production of 191,000 mt/y of copper in concentrates. Total cost to develop the project is estimated at $1.44 billion, including indirect costs and contingencies. Operating costs are estimated at $0.41/lb of copper, net of by-product credits. The mine production plan is based on proven and probable reserves totaling 498 million mt at a 0.38% copper cut off.

Mining would be by conventional open-pit methods, using 61-yd3 shovels and 240-mt haul trucks. The concentrator would produce separate copper and molybdenum flotation concentrates.

Zijin expects to take a year to review the Rio Blanco feasibility study and environmental issues related to the project. A minimum of an additional two years would be required for project construction, allowing for a possible start of production in 2010 or 2011.