Metminco Regulatory News (MNC)

LOS CALATOS PROJECT

Introduction

In March 2013 Metminco announced the results of an independent Scoping Study conducted by NCL Ingeniería y Construcción Ltda ("NCL") on Los Calatos located in southern Peru (Appendix 1).

The mining scenario evaluated as part of the Scoping Study provided for an open pit with a life of 7-years, and a subsequent underground block cave operation with a life of 24-years, at an average life of mine production rate of 60ktpd.

The Scoping Study confirmed the potential of Los Calatos as a long-life (+31 years), low cost (US$1.15/lb)1 mining operation producing approximately 83kt (184mm lbs) of copper in concentrate per annum.

Since the completion of the Scoping Study, additional work has been completed on the optimisation of the open pit, as well as the life of mine production schedule for the combined open pit and underground mining operation, in an endeavour to evaluate the opportunity to increase the production rate. The recent pit optimisation work completed by the Company, in conjunction with the underground production schedule previously modelled by NCL, was reviewed by RungePincockMinarco ("RPM"), who confirmed the potential to increase the mining rate for the open pit and underground block cave operations to 75ktpd and 70ktpd respectively (the "Optimised L3_Model").

Optimised L3_Model

Open Pit Operation

Metminco conducted a series of pit optimisation runs using Whittle 4D Lerchs-Grossman software to determine the approximate shape of a near-optimal pit shell based on applied cut-off grade criteria and pit slopes, with the objective of deepening the open pit within acceptable pit slope angles and strip ratios. Table 1 below summarises the results of this work.

Table 1: Open pit key results - Scoping Study and Optimised L3_Model.

RPM reviewed the results of the optimised pit, and resultant mining schedule, with the objective of determining whether the open pit could deliver a production rate of 75ktpd run-of-mine. In particular, RPM evaluated the ability to:

·; Maximise mineable resource extraction;

·; Minimise waste material movement;

·; Minimise bench turnover; and

·; Minimise fleet size.

A terrace mining method was adopted to allow for simultaneous access to multiple benches (up to 5 benches), and hence provide for flexibility in blending. Furthermore, provision was made for maintaining a minimum mining width of 100 metres on a 15 metre high bench.

The resultant mine schedule, which represents a balance between the delivery of product specification, mining practicality and compliance with key constraints established for the project, supports the achievability of a production rate of 75ktpd without any material issues.

1 Based on updated long term consensus commodity prices (Appendix 8).

Underground Block Cave

As is the case for the optimised open pit mining schedule, RPM also reviewed the production schedule developed by NCL for the underground block cave operation with the objective of achieving a production rate of 70ktpd, and to minimise up-front development in order to reduce capital expenditure - particularly in terms of pre-production underground development.

In order to achieve this, RPM endeavoured to optimise the mining schedule as it relates to the drawpoint, undercut and extraction sequence, albeit that a more detailed mine design and layout is ultimately required to facilitate this. Several assumptions were hence made:

·; Development target per drift: 125 metres per month;

·; Undercut drilling density: 4.5 dm per m²;

·; Undercutting rate: 6,700 dm per month per radial drill;

·; Maximum undercutting rate: 3,250 dm per drift per month (50% drilling and 50% drill and blast);

·; Maximum loading per drawpoint: 120tpd

·; Drawbell and drawpoint establishment: 60 days after development of extraction drift is complete; and

·; 5 drawbells opened up per month

Based on the work completed by RPM, a total of 449 million tonnes was scheduled over the life of the underground block cave operation of 21-years, with an average drawpoint extraction rate of 120tpd and a sustained underground production rate of 70ktpd. Tables 2 and 3 below summarise the key differences between the Scoping Study and the Optimised L3_Model.

Table 2: Underground Block Cave - Variance in extracted tonnes scheduled (Scoping Study and Optimised L3_Model).

Note:

i) Level 2005: Reduction in the tonnes scheduled by RPM largely attributable to the deepening of the open pit;

ii) Levels 1795 and 1300: Variance relates to the mining sequence and is within acceptable limits for a Scoping Study;

iii) RPM schedule is based on the mine design as per the NCL Scoping Study (El Teniente extraction layout).

Table 3: Block cave key parameters - Scoping Study and Optimised L3_Model.

Note:

i) Reduction in tonnes treated in the Optimised L3_Model largely relates to the fact that portion of Level 2005 is extracted via the deepened open pit.

However, from the work completed by RPM it is clear that further refinement of the production schedule is required, which necessitates detailed mine design and planning, that will be the subject of work undertaken during a pre-feasibility study. In addition, further exploration drilling, geotechnical and hydrological work is required to review the full potential of Level 1300.

Comparison: Life of Mine - Scoping Study and Optimised L3_Model

The development and production schedules for the Scoping Study and Optimised L3_Model are graphically depicted in Appendix 2 and 3.

The key results for the two life of mine studies are summarised in Table 4 below. Of significance is the fact that, due to an increased production rate for the Optimised L3_Model (75ktpd for the open pit and 70ktpd for the underground block cave), the life of mine average annual tonnes milled increases to 23.9 million tonnes with a consequential 20% increase per annum in payable copper, and a 35% increase in payable molybdenum.

Further, one of the primary objectives of the optimisation work was to establish whether it is feasible to delay the commencement of the underground development as provided for in the Scoping Study, and thereby reduce the pre-production capital expenditure. With the deepening of the open pit, and hence increase in the life of the open pit from 7 to 14 years, the need to initiate underground development prior to the commencement of production from the open pit is negated. Accordingly, there is an estimated reduction in the pre-production capital of US$186 million or 12% from the Scoping Study (Appendix 4).

Table 4: Comparison - Life of Mine - Scoping Study and Optimised L3_Model.

Note:

i) Cash operating costs exclude government royalties, but include all other costs and royalties.

ii) By-product credits based on commodity prices summarised in Appendix 5.

iii) Revised commodity prices result in an increase in the C1 Cash Operating Costs from US$1.09/lb to US$1.15/lb in the case of the Scoping Study.

The envisaged development schedule for the Optimised L3_Model can be summarised as follows:

The project development schedule allows for construction of the surface infrastructure and the metallurgical plant to be undertaken simultaneously with the development of the open pit operation.

The life of the open pit is estimated to be 14-years, during which time a high grade stockpile will be established, which will supplement production from the underground operation during the underground ramp-up stage (Years 11 to 19).

The annual contained copper and molybdenum metal in concentrate is expected to average 100.1kt and 5.0kt respectively over the life of mine.

Cash operating costs, net of by-product credits, are expected to average US$1.06/lb of copper over the life of mine, and compares favourably with global cash costs, ranking in the lowest quartile of global producers. The projected mining costs have increased slightly from the Scoping Study due to the increase in strip ratio in the open pit. The revised commodity prices used in the derivation of the by-product credits are summarised in Appendix 5.

The initial capital requirement for the establishment of the open pit, surface infrastructure and metallurgical plant is estimated at US$1,320 million, which includes a contingency of 25% by virtue of the current developmental status of the project (Appendix 4). Hence, the maximum drawdown on capital pre-production from the open pit is estimated at US$1.32 billion. Sustaining capital as well as the development of the underground mining operation will be funded from cashflow.

The underground mine infrastructure will consist of a twin decline system, one for personnel and equipment, and an adjacent conveyor system for ore extraction. Four vertical raise-bored ventilation shafts will support the underground operations. Ore will be crushed through a primary crusher to be located underground.

Future Work

The Company continues with detailed investigations that are a pre-requisite for the commencement of a pre-feasibility study. To this end the Company is currently undertaking the following:

Ø Design of an in-fill drilling program for the identified supergene zone, as well as the sterilisation drilling required for the establishment of the requisite mining infrastructure;

Ø Geotechnical studies in support of the optimised pit and underground block cave operation (Optimised L3_Model);

Ø Follow-up on recommendations made by RPM in their Mine Production Study (09 August 2013) (Appendix 6);

Ø Phase 2, detailed, metallurgical, testwork;

Ø Oceanographic studies for the positioning of loading facilities at the coast;

Ø Positioning of an infrastructure corridor to the coast; and

Ø Identifying the optimal location for the planned tailings dam.

A detailed metallurgical testwork program has been planned using 9 geo-metallurgical samples that have been selected for the various ore-types identified at Los Calatos. This program will include both grinding and flotation testwork, and will confirm the relevant test metallurgical parameters for the planned Pre-Feasibility Study. All of the proposed metallurgical tests will be carried out using sea water, as this will be the fluid medium of choice for the extraction process in the main commercial plant.

William Howe

Managing Director

Company Background

Metminco is a dual ASX and AIM listed company with a portfolio of copper, molybdenum and gold projects in Peru and Chile.

Premier project - Los Calatos copper-molybdenum project

Two studies have recently been completed at Los Calatos by external consultants, namely NCL (March 2013), and RPM (August 2013). Both studies have focussed on the preferred mining scenario, which incorporates the estimated mineral resources identifies for Targets 1 and 2 at Los Calatos, confirming the potential of the project as a long-life, low cost, copper producer.

The prospectivity of the broader tenement holding position remains largely untested, and as such has the potential to contribute additional material to any future mining operation developed in context of the preferred mining scenario. That is, the Company has only drill tested two of the eight targets identified to-date over a total project area of 224 km², where the latter is located in a recognised mining district characterised by the development of porphyry clusters.

Peru is proving to be an investment friendly jurisdiction, in which the Government is actively encouraging responsible mine development with a projected, significant, increase in long term copper production supported by competitive power costs. Mining investment in Peru over the period 2012 to 2020 is estimated to be US$53 billion, of which 70% relates to new copper mines, and extensions to existing mines. Los Calatos remains highly deliverable, being located on State-owned land in a desert environment without competing land usage, its status as Project of National Interest, and its proximity to existing infrastructure and the coast. Metminco's strategy to access seawater for metallurgical processing purposes has been widely accepted by both local and regional authorities.

From a commodity perspective, the long-term fundamentals of the copper market remain sound, and it is anticipated that global copper production will struggle to keep pace with demand growth. With the support of a funding partner, Los Calatos has the ability to deliver copper into the global market at a time when incremental supply-demand dynamics will be dictated by production emanating from new 'possible' projects, the success of which will be heavily influenced by factors such as socio-political issues, restrictive legislation and technical issues (e.g. unit operating costs). Against the global backdrop of diminishing long life copper projects in mining friendly jurisdictions, and with the benefit of low unit operating costs, Los Calatos is well placed to command significant strategic interest.

Projects and mineral resources

The Los Calatos Project, located in southern Peru, has an open pittable mineral resource of 304 million tonnes at 0.44% CuEq (at cut-off grade of 0.15% CuEq) to a vertical depth of 500 metres below surface and an underground bulk mining mineral resource of 1,058 million tonnes at 0.61% CuEq (at a cut-off grade of 0.35% CuEq) commencing at an elevation of 2,500 metres (approximately 500 metres below surface).

The Chilean assets include the Mollacas Project with a mineral resource of 34.3 million tonnes consisting of a measured resource of 19.4 million tonnes at 0.45% Cu and 0.16g/t Au, an indicated resource of 9.4 million tonnes at 0.34% Cu and 0.16g/t Au, and an inferred resource of 5.5 million tonnes at 0.26% Cu and 0.15g/t Au (at a 0.2% copper cut-off); and the Vallecillo Project with a mineral resource of 8.9 million tonnes consisting of a measured resource of 5.5 million tonnes at 0.84g/t Au, 9.99g/t Ag, 1.12% Zn and 0.32% Pb, an indicated resource of 2.6 million tonnes at 0.80g/t Au, 10.23g/t Ag, 0.94% Zn and 0.35% Pb and an inferred resource of 0.8 million tonnes at 0.50g/t Au, 8.62g/t Ag, 0.48% Zn and 0.17% Pb (at a cut-off grade of 0.2g/t Au).

The Company also has a number of early stage exploration projects where initial exploration activities have identified anomalous copper, molybdenum and gold values.

Competent Persons Statement

The information in this report that relates to Exploration Results and Mineral Resources is based on information compiled by Colin Sinclair, BSc, MSc, who is a Member of the Australasian Institute of Mining and Metallurgy and is a full-time employee of the Company as Executive General Manager.

Colin Sinclair has sufficient experience (over 30 years) which is relevant to the style of mineralisation, type of deposit under consideration, and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results'. Mr Sinclair, as Competent Person for this announcement, has consented to the inclusion of the information in the form and context in which it appears herein.

SRK Consulting (Chile) S.A.

Metminco supplied SRK with a geological model and the drill data. Copper and molybdenum grades were estimated into a block model using ordinary kriging with GEMCOM software.

The information provided in this ASX Release as it relates to Exploration Results and Mineral Resources is based on information compiled by George G. Even, Principal Geologist of SRK Consulting in Santiago, Chile. Mr Even, a Qualified Person for JORC compliant statements, reviewed the technical information presented in this document. Mr Ernesto Jaramillo, Principal Resource Geologist with SRK Santiago, performed the resource estimation. Mr Even has sufficient experience that is relevant to the style of mineralisation and type of mineral deposit under consideration, and to the activity which was undertaken, to make the statements found in this report in the form and context in which they appear.

Mr Even and Mr Jaramillo have consented to be named in this announcement, and have approved of the inclusion of the information attributed to them in the form and context in which it appears herein.

NCL Ingeniería y Construcción Ltda

NCL, an engineering company with 30 years of experience in the development of mining projects, both open pit and underground, was commissioned by Minera Hampton Peru SAC ("Hampton") to develop a conceptual mining study for the Los Calatos copper - molybdenum project.

In accordance with Metminco's requirements, the work developed by NCL consisted of analysing different alternatives for the exploitation of the deposit and to carry out, at a conceptual level, the design and mine planning of the selected option. Moreover, NCL calculated the operating costs and capital cost of the mining works, in addition to the capital costs for the process plant and infrastructure, using an estimation model of CAPEX and OPEX for flotation plants.

The study was based on the block model and economic information provided by Hampton, as well as NCL data from similar projects in the region. In the calculation of the economic resources, measured, indicated and inferred mineral resources were considered, with 23% of mineralised material reporting into the mining plan having been derived from inferred mineral resources.

NCL certify that the results reported by Hampton correspond to those obtained by NCL in the conduct of the study.

The reader is cautioned that the mining study, which is an integral part of this report, is of a preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorised as mineral reserves. There is no certainty that the preliminary economic assessment will be realised. No mineral reserves have been estimated.

NCL's experience from a consultancy perspective has included block cave mining projects in Chile, Colombia, Papua New Guinea and Australia. The nature of the work conducted by them includes aspects such as mine design and planning, mining methods, material handling and infrastructure and has been conducted at levels varying from Conceptual Studies, through Scoping Studies to Pre-Feasibility Studies, and where required, detailed engineering design. Recent work undertaken by NCL has involved mining operations such as La Colosa (AngloGold Ashanti Colombia S.A.), Golpu (Newcest Mining Ltd.), El Teniente (Codelco) and Rosario Oeste (Cía Minera Doña de Collahuasi SCM), with historical involvement in projects the size of Chuquicamata (Codelco).

RungePincockMinarco

RungePincockMinarco ("RPM") is the world's largest publicly listed independent group of mining technical experts, with a history going back to 1968.

Listed on the Australian Securities Exchange on 27 May 2008 (ASX: RUL), RPM is a global leader in the provision of advisory consulting, technology and professional development solutions to the mining industry.

The RPM global team of more than 200 specialist advisors and mining consultants is regarded as one of the most experienced and trusted teams in the industry, with wide-ranging operational and technical expertise across commodities, continents and mining methods.

Further, the RPM global team's knowledge base has been gained through the conduct of work in over 118 countries, and their approach to the business of mining is strongly grounded in economic principles.

The company's cutting-edge mining software technology has been at the forefront for more than 30 years and continues to be sought after globally for mine planning including scheduling, simulation and financial analysis solutions. Their software continues to be used by miners, mining contractors, financial institutions and other service providers to the mining sector.

At present, RPM operate offices in 18 locations across 12 countries on five continents.

In accordance with Metminco's requirements, RPM conducted a high level review of the life of mine production schedule developed for Los Calatos by NCL and Metminco. This included a review, and refinement, of key inputs relating to the production schedule as well as associated costs (operating costs and capital expenditure) and a financial analysis, in order to confirm that the planned increase in production to 75ktpd for the open pit operation and 70ktpd for the underground operation is technically achievable, economically viable, and is legally compliant.

The review was conducted under the direction of Mr David Pires, Bsc,Msc,GCert. Mr Pires is a Chartered Professional Member of the Australasian Institute of Mining and Metallurgy and is a full-time employee of RPM as Regional Consulting Manager - Latin America.

RPM certify that the results reported by Hampton correspond to those obtained by RPM in the conduct of their study on Los Calatos entitled "Los Calatos Mine Production Study" dated 05 August 2013.

The reader is cautioned that the actual operating costs, production and economic returns may differ materially from those anticipated by the Mine Production Study, and depend on a variety of factors, some of which are outside the control of RPM.

Forward Looking Statement

All statements other than statements of historical fact included in this announcement including, without limitation, statements regarding future plans and objectives of Metminco are forward-looking statements. When used in this announcement, forward-looking statements can be identified by words such as ''anticipate", "believe", "could", "estimate", "expect", "future", "intend", "may", "opportunity", "plan", "potential", "project", "seek", "will" and other similar words that involve risks and uncertainties.

These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding future events and actions that, as at the date of this announcement, are expected to take place. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, its directors and management of Metminco that could cause Metminco's actual results to differ materially from the results expressed or anticipated in these statements.

The Company cannot and does not give any assurance that the results, performance or achievements expressed or implied by the forward-looking statements contained in this announcement will actually occur and investors are cautioned not to place undue reliance on these forward-looking statements. Metminco does not undertake to update or revise forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this announcement, except where required by applicable law and stock exchange listing requirements.

For the Appendices please click on the link below:

http://www.rns-pdf.londonstockexchange.com/rns/4522L_-2013-8-12.pdf