Quadra FNX Mining and Sumitomo have entered into a definitive agreement to form a joint venture company to develop Quadra FNX's Sierra Gorda copper-molybdenum project in Chile. The joint venture company will be held 55% by Quadra FNX and 45% by Sumitomo and will be called Minera Quadra Chile Ltd.

Under the agreement, Sumitomo will contribute the next $724 million of joint venture equity after closing and will arrange a minimum of $1 billion in project financing, non-recourse to Quadra FNX, or if such financing is not available will provide an $800-million loan to the project. Quadra FNX plans to provide its proportional share of the remaining project funding.

Quadra FNX will earn a service fee for operational and technical support over the life of the mine. Sumitomo has the right and obligation to purchase 50% of the copper concentrate produced at Sierra Gorda, and Quadra FNX has the right to direct the sale of the remaining 50%.

Concurrent with the announcement of the joint venture, Quadra FNX announced the results of a positive feasibility study that confirms the viability of a large-scale, low-cost, long-life mine at Sierra Gorda. The study was based on current sulphide reserves and calls for production of 483 million lb/y of copper, 25 million lb/y of molybdenum, and 64,000 oz/y of gold over a 20-year mine life. Molybdenum production will total 54 million lb/y during the first three years of operation. First production is scheduled for 2014.

Initial capital cost to develop Sierra Gorda is estimated at $2.9 billion. Cash costs of copper produced, net of byproduct credits, are estimated at $0.56/lb during the first five years of operation and $1.15/lb life of mine.

The mine will be a conventional open-pit operation using drilling, blasting, loading with rope shovels and truck haulage. Initial plant throughput is planned at 110,000 mt/d, expanding to 190,000 mt/d after three years of operation. Expansion capital of $818 million is expected to be funded from project cash flow. Oxide mineralization will be stockpiled separately for treatment in a possible future heap-leach operation.

The plant flowsheet includes crushing by high-pressure grinding rolls, ball milling, and conventional flotation to produce both a copper and a molybdenum concentrate. Except for specific plant areas, the process plant has been designed to operate with seawater. Quadra FNX has contracted BRASS Chile S.A. to develop the seawater delivery system through a 140-km pipeline from the port of Mejillones to the plant site, with a maximum transport capacity of 1,200 l/sec. A contract is also in place for 30 l/sec of fresh water for the site.

Fluor has been appointed EPCM contractor for the on-site process and ancillary facilities. In advance of the project start date, confirmatory metallurgical and pilot plant test work will continue to further develop the flotation model, with a focus on the molybdenum-rich transition ores and on optimizing reagent and blend strategies.

The bulk of the copper concentrates produced at Sierra Gorda will be sent to the port of Mejillones for shipment to global smelters. Molybdenum concentrate will be bagged on site for sale locally and overseas.

Power for the Sierra Gorda project will be supplied by a 140-km overland power line from a coal-fired plant at Mejillones that will provide 220 kV of power at 50 Hz to an on-site substation. The power plant will be developed by a local power company.