Metminco Regulatory News (MNC)

MOLLACAS PROJECT

Introduction

The Mollacas Project is located in the IV Region, Chile, at an altitude of 1,200 to 1,500 metres above sea level. It is situated approximately 65 km east of the city of Ovalle, and can be accessed from Ovalle via 53 km of asphalt road to the town of Rapel, and then by 12 km of a well-maintained dirt road east of Rapel.

The Company holds title to 20 Exploitation Concessions covering the Mollacas deposit and surrounding area, as well as 179 ha of surface rights adjacent to the proposed open pit operation. The infrastructure for the mine will be located on Company owned land including the leach pads, processing plant, administration facilities and mine workshops. Metminco also owns water rights to approximately 175 litres/sec from two canals which traverse the properties. The estimated water usage for the operation will be 40 litres/sec.

Metminco has recently updated the original 2008 Scoping Study to incorporate the results of the pit optimisation study completed by the Company in 2013, as well as the updated mining and processing costs, which provide for contract mining and the results of the recent metallurgical testwork. Capital estimates were updated and adjusted for the revised production profile, in addition to providing for the use of mining contractors.

Pit Optimisation Study

The pit optimisation study completed in 2013 by the Company was based on the most recent Mineral Resource Estimate completed by SRK Consulting, Chile (Table 1), as well as the input parameters summarised in Table 2.

Table 1: Mineral Resource Statement for the Oxide and Secondary Mineralisation for Las Mollacas Copper Project, Ovalle, Chile, SRK Consulting (Chile) S.A., July 06, 2012.

Note: Reported at a 0.2% TCu cut-off.

Table 2: Modelling Parameters - Pit Optimisation Study (2013) and Revised Financial Model (2014).

* Includes updated mining and processing costs based on work completed by the Company in Q1 2014.

The pit optimisation work, using a 0.15% TCu cut-off, resulted in a provisional production profile comprising 14.5 million tonnes at 0.52% CuT (0.42% CuSol) over the life of the pit, with an in-situ soluble copper content of 60,753 tonnes.

As the pit optimisation study completed in 2013 does not provide for the latest copper recovery rates, as well as the updated mining and processing costs, further optimisation work will be conducted as part of the planned Feasibility Study. This work will result in the definition of a Mineral Reserve Estimate in accordance with the JORC Code (2012 Edition).

Metallurgy

The primary leach design parameters resulting from the recent metallurgical testwork have been incorporated into an updated Life of Mine production schedule. When compared to the original Scoping Study, it is clear that the reduction in acid consumption rates per tonne of ore leached (derived from Phase 3 metallurgical testwork) has more than offset the higher prevailing acid price, as well as the increase in power costs in Chile. The primary leach design parameters resulting from the recently completed metallurgical testwork are:

· Ore crush size: P80 12 mm to 16 mm

· Agglomeration acid addition: 10 kg/t (may be reduced after further testing)

· Stacked ore depth: 6 metres

· Stacked dry-bulk density (maximum): 1.7 t/m³

· A two-stage leach:

i) 90-day Primary Leach Stage @ 5 L/hm² at 6 g/L H2SO4

ii) 210-day Secondary Leach Stage @ 2.5 L/hm² at 3 g/L H2SO4

· Solution Management Scheme: The staged leach and acid concentration values can be met with a series/parallel SX configuration, where the Primary Leach PLS feeds the two in series SX extraction stages, and the Secondary Leach PLS feeds the parallel extraction stage

Additional column leach testwork has been initiated to determine the lowermost limit of acid addition in the agglomeration stage with the objective of ascertaining whether acid consumption can be reduced further.

Life of Mine Financial Model

At a mining rate of 6,108 tonnes per day, the Project has a Life of Mine of some 7 years producing up to 8,000 tonnes of cathode copper per annum. Table 2 lists the operating costs used in the revised financial model.

Capital costs for the Life of Mine, including sustaining capital and an allowance for the purchase of further surface title, is estimated to be US$52.3 million.

The results of the Life of Mine Financial Model are summarised in Table 3 below, and support the robust nature of the economics for the Project, and hence the decision to progress with the development of the Project.

Table 3: Summary of results from Life of Mine Financial Model.

1 Tonnes delivered to leach pad.

2 Effective tax rate of 20% assumes profits are not repatriated.

Legal

The surface rights which cover the planned open pit are held by a Chilean company, Agrícola Bauzá Ltda. Appendix 1 shows the extent of the Company's Exploitation Concessions, surface rights, Original Easement (or "Servidumbre"), as well as the extent of the First Easement Extension.

Since 2004 Agrícola Bauzá Ltda has filed various actions against Metminco's wholly owned subsidiary, Minera Hampton Chile Limitada ("Hampton Chile"), and the previous owners of the Exploitation Concessions, with respect to access and environmental matters, all of which have been vigorously defended. The Chilean judiciary have ruled in favour of Hampton Chile and the previous owners of the Exploitation Concessions in respect of all matters heard by the judiciary prior to March 2014.

In March 2014 Metminco was advised that the Court of Appeal of the IV Region, Chile, (the "IV Region Court of Appeal") had ruled that the Company's First Easement Extension (the "First Extension") was invalid on technical grounds. The First Extension was initially granted by the Third Court of Ovalle on 11 November 2011.

The IV Region Court of Appeal did however confirm that the Original Easement permitting access to the Company's Mollacas Copper Project (viz. exploration and exploitation concessions), granted in 2004 by the FirstCourt of Ovalle, remains current and is in full force and effect.

Based on legal advice received by Metminco, the Company believes that the ruling by the IV Region Court of Appeal is inconsistent with the current Mining Legislation of Chile, and that the ruling contained several judicial flaws. Hampton Chile, as a holder of the relevant Exploitation Concessions, lodged an appeal with the Supreme Court of Chile on 3 April 2014.

Way Forward

As the Original Easement remains in full force and effect, the Company is permitted to continue with its plans to progress the Feasibility Study and Environmental Impact Study at Mollacas.

Should Hampton Chile's appeal to the Supreme Court regarding the Court of Appeal's ruling on the First Extension Easement be unsuccessful, the Company has various alternatives under the Chilean Mining Legislation and Mining Code to obtain the requisite permitting for mining activities.

LOS CALATOS PROJECT

Introduction

In March 2013, NCL Ingeniería y Construcción Ltda ("NCL") completed a Mining Scoping Study on Los Calatos, which resulted in a Preferred Mining Scenario comprising an open pit operation to a depth of 500 metres below surface with a life of 7-years, and an underground bulk mining operation below this depth with a life of 24-years.

The Company subsequently commissioned Runge Pincock Minarco ("RPM") to review the Preferred Mining Scenario, as well as subsequent pit optimisation work completed by Metminco, with the objective of optimising production and reducing operating costs and capital expenditure. This work resulted in an open pit that mines to a depth of 700 metres below surface with a life of 14-years, followed by an underground mining operation with a life of 20-years (Optimised L3_Model). The results of the RPM work were announced by Metminco on 12 August 2013, and presently constitute the reference base for the project going forward.

During the past quarter, the February 2013 Mineral Resource Statement was updated to correspond with the Optimised L3_Model, so as to provide for those mineral resources that are amenable to open-pit mining to a vertical depth of 700 metres below surface (viz. above an elevation of 2,300 metres above sea level), and those resources amenable to underground bulk mining below this depth (Appendix 2 Tables A2-1 to A2-4). It must be emphasised that the updated Mineral Resource Statement merely reflects an adjustment in the elevation at which the Mineral Resource is reported (and accompanying cut-off grades) to better reflect the Optimised L3_Model (Life of Mine Model) developed by RPM, and as such does not impact on the production profile.

Mineral Resource Estimate

The Mineral Resource Estimate completed by SRK (Chile) in February 2013, which was originally reported using the cut-off grades and elevations that formed the basis of the work completed by NCL, is summarised in Table 4 below.

Table 4: Total Mineral Resource (February 2013).

Note:

i) SRK Mineral Resource Estimate of February 2013.

ii) Open Pit (above 2,500m amsl): Mineral Resource Estimate reported at a 0.15% CuEq cut-off grade.

iii) Underground (below 2,500m amsl): Mineral Resource Estimate reported at a 0.35% CuEq cut-off grade.

iv) Includes Measured, Indicated and Inferred Mineral Resource categories.

The Mineral Resource Statement that was updated in support of the Optimised L3_Model is summarised in Table 5 below.

Table 5: Total Mineral Resource (January 2014).

Note:

i) SRK Mineral Resource Estimate of February 2013.

ii) Open Pit (above 2,300m amsl): Mineral Resource Estimate reported at a 0.15% CuEq cut-off grade.

iii) Underground (below 2,300m amsl): Mineral Resource Estimate reported at a 0.35% CuEq cut-off grade.

iv) Includes Measured, Indicated and Inferred Mineral Resource categories.

From Table 5 it is evident that the estimated tonnes that are amenable to open pit mining have increased by 62%, whereas the estimated tonnes amenable to undergound bulk mining have reduced by 12%. Overall, however, the revised total tonnage has increased by 4%. Of note is the fact that the copper grade for the mineral resources amenable to open pit mining to a depth of 700 metres has increased from 0.36% to 0.38%, which relates to the fact that the potential open pit now includes the upper sector of a prior, higher grade, block cave stope (Appendix 2).

Way Forward

Work continues in preparation for the planned Pre-Feasibility Study, key to which will be the ability to find a funding partner.

OTHER PROJECTS

During the quarter, a site visit was conducted by senior exploration management to the Camaron and Isidro Projects, as a follow-up to targets that had been identified by earlier exloration work, principally in the form of field mapping, remote sensing and soil geochemistry. Following the conclusion of the visit, and a re-appraisal of all exploration results acquired to-date, the decision was made to terminate further exploration activities on these projects.

CORPORATE

Cash Position and Funding

Metminco's cash position as at 30 March 2014 was A$5.5 million (US$5.1 million).

Expenditure for the March 2014 quarter totalled A$1.8 million, as per forecast.

In January 2014 the Company terminated its engagement with its Strategic Advisor who had been contracted to assist with the identification of a suitable Strategic Partner for the development of Los Calatos. However, the Company continues to hold discussions with a number of parties who have expressed an interest in investing in Los Calatos.

The Company is currently reviewing its plans going forward, and in particular, is evaluating opportunities to fund the development of the Los Calatos and Mollacas projects.

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.

Projects and Mineral Resources

The Los Calatos Project, located in southern Peru, has an open pittable Mineral Resource of 493 million tonnes at 0.38% Cu and 0.023% Mo (at cut-off grade of 0.15% CuEq) to a vertical depth of 700 metres below surface and an underground bulk mining Mineral Resource of 926 million tonnes at 0.51% Cu and 0.022% Mo (at a cut-off grade of 0.35% CuEq) commencing at an elevation of 2,300 metres (approximately 700 metres below surface).

The Chilean assets include the Mollacas Copper Project with a Mineral Resource of 15.5 million tonnes consisting of a Measured Resource of 11.2 million tonnes at 0. 55% Cu and 0.12g/t Au and an Indicated Resource of 4.3 million tonnes at 0.41% Cu and 0.14g/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 employed by the Company in Chile.

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.

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.

APPENDIX 1

Mollacas Project - Mineral and surface rights held by Metminco.

Please click on the link below to view Appendix 1

http://www.rns-pdf.londonstockexchange.com/rns/9870F_-2014-4-30.pdf 

APPENDIX 2

Los Calatos Project: Section 10300E showing the Los Calatos Block Model, the planned Open Pit and certain of the underground Block Cave Stopes.

Please click on the link below to view Appendix 2

http://www.rns-pdf.londonstockexchange.com/rns/9870F_1-2014-4-30.pdf

Updated Mineral Resource Statement

Table A2-1: Mineral Resources to a vertical depth of 700metres below surface (above 2,300 masl).

Note:

i) Open Pit: Mineral Resource Estimate reported at a 0.15% CuEq cut-off grade.

ii) Modified after SRK Consulting (Chile) S.A. February 2013 Mineral Resource Statement.

Table A2-2: Mineral Resources sub-700 metres below surface (below 2,300 masl).

Note:

i) Underground: Mineral Resource Estimate reported at a 0.35% CuEq cut-off grade.

ii) Modified after SRK Consulting (Chile) S.A. February 2013 Mineral Resource Statement.

Table A2-3: Total Mineral Resource Estimate: Open Pit and Underground Block Cave.

Table A2-4: Optimised L3_Model - Total Tonnes Mined (RPM August 2013).

Note:

i) Based on the Preferred Mining Scenario modelled by NCL.