Quarterly Activities Report

RNS Number : 1122L

Metminco Limited

30 April 2010

 

METMINCO LIMITED

QUARTERLY ACTIVITIES REPORT for the period ending 31 March 2010

 

Metminco lists on the AIM Market with A$20 million capital raising allowing control of Hampton to pass to Metminco

 

 Drilling extends mineralisation at Los Calatos

 

PROJECTS

Los Calatos:

·; phase 2 drilling significantly extends Cu-Mo mineralised envelope

·; drill intercepts include:

·; 427m @ 0.51% CuEq

·; 308m @ 0.93% CuEq

·; 723m @ 0.54 %CuEq

·; 680m @ 0.76% CuEq

·; surface exploration identifies new targets

·; positive metallurgical testwork completed for Los Calatos

·; molybdenum, gold and silver credits in Los Calatos concentrate

·; revised resources estimation & Scoping Study underway

Mollacas: metallurgical testwork

 

Vallecillo:

·; positive metallurgical testwork completed for Vallecillo

·; additional exploration drill targets generated

Camaron: major undrilled Au-Cu anomalies

 

CORPORATE

·; Listing achieved on the London AIM market

·; A$20 million raised on AIM Listing

PROJECTS

 

LOS CALATOS PROJECT

Phase 2 drilling program

The 10,000 metre phase 2 drilling commenced at Los Calatos during November 2009, employing two diamond drill rigs. Drilling concluded during March 2010 with a total of 9,518 metres drilled in 10 holes. Assay results for all holes have now been received and the main intersections are tabulated below.

 

Hole	From (m)	To (m)	Intersection (m)	Cu (%)	Mo (ppm)	CuEq (%) (1)	Comments
CD 14	665	1200	427	0.38	266	0.51	Cumulative intercept
includes	1170	1200	30	0.66	420	0.87
CD 15	796	1200	404	0.32	260	0.45
includes	1107	1200	93	0.69	710	1.05
CD 16	366	728	308	0.48	908	0.93	Cumulative intercept
includes	422	621	199	0.59	1280	1.23
CD 17	477	1200	723	0.35	380	0.54
includes	641	730	89	0.58	920	1.04
CD 18	119	799	680	0.52	478	0.76
includes	234	397	163	0.61	340	0.78
and	561	799	238	0.64	620	0.95
CD 19	60	705	531	0.25	137	0.32	Cumulative intercept
includes	497	567	70	0.36	260	0.49
CD 20	56	954	790	0.22	86	0.26	Cumulative intercept
includes	655	954	299	0.25	134	0.32
CD 21	437	777	340	0.34	126	0.40
includes	546	618	72	0.51	170	0.60
includes	648	700	52	0.46	570	0.75
CD 22	52	717	279	0.26	97	0.31	Cumulative intercept
includes	52	157	95	0.36	170	0.45
CD 23	203	416	213	0.20	30	0.22

 

Note: 1. Copper equivalent (CuEq) grades assume a ratio of Mo to Cu prices of 5.

 

The phase 2 drilling has broadly confirmed the geological model interpreted after the phase 1 drilling program. Every hole intersected significant mineralisation and the drilling has significantly extended the known mineralisation at Los Calatos above a cutoff of 0.2% Cu.

 

The mineralised envelope has expanded:

·; to the south(increasing the width of the main mineralised zone from approximately 200m to up to approximately 500m);

·; to the east and west (due to drilling on sections 286,400 and 287,100 East),

·; and at depthwhere drilling has confirmed strong mineralisation to a depth of at least 1,100m from surface.

 

A long section through the main mineralised zone at Los Calatos demonstrates that mineralisation has been intersected from approximately 50m below surface to over 1,000m from surface and section 286,500E, showing in particular the now estimated location of the 0.2% copper cut off mineralised envelope. The long section shows how this envelope rises closer to the surface towards the east. Further drilling is required to fully define these parameters within this mineralised envelope.

 

Geological model

Hampton management have also continued to develop an overall geological understanding of the most likely geological model applying to the main Los Calatos area, and a regional picture which depicts the extent of the porphyry system. The model suggests mineralising phases associated with the multi phase injection of the porphyry system.

 

The main Los Calatos geology and mineralising events can be described as follows;

1. The earliest porphyry was regional in extent and was not mineralised.

2. The second phase of porphyry injection ¨stoped out¨ most of the original porphyry and was accompanied by a low grade copper mineralising event (0.1 to 0.3% Cu and less than 100ppm Mo).

3. The third phase of porphyry injection resulted in significant brecciation of the earlier porphyry and was accompanied by high grade copper and molybdenum mineralisation (>0.4% Cu and >200ppm Mo)

4. The fourth phase of porphyry injection was accompanied by brecciation of previous phases and introduced a molybdenum mineralising phase with or without copper present. Upgrading of the phase 3 event with pervasive molybdenum veining may have occurred.

5. The fifth and final phase is seen as porphyry dykes cutting through the entire system. The dykes are generally vertical, limited in width and are generally barren.

Regional setting

Porphyry deposits typically occur in clusters or belts, such that all such deposits within a belt generally share the same approximate age and geological characteristics. Thus the Los Calatos project lies within the major Paleocene / early Eocene belt of copper-molybdenum porphyry deposits (mineralization approximately 55 million years old), located in far south Peru and generally near the coast:

·; The Cuajone and Toquepala deposits to the south east (both large existing mines, owned by Southern Copper Corporation, which also owns smelting and refining operations near the port of nearby Ilo),

·; the Quellaveco deposit (now seeking permitting for development, owned 81.6% by Anglo American) also southeast, and

·; Cerro Verde to the northwest (large existing mine, owned 53.6% by Freeport McMoran), close to and SW of Arequipa.

This major northwest-southeast structural trend includes the major Incapquio Fault.

 

Surface exploration

At Los Calatos Hampton continues to undertake a comprehensive surface geological mapping and sampling program, focused on a major northwest-southeast trending zone of alteration that includes the mineralized zone being drilled and which parallels the regional structural trend.

 

This work has identified seven zones of prospective exploration interest, in addition to the area of current drilling. These areas will be followed up in due course, seeking to define additional drilling targets. Note that volcanic ash from geologically recent eruptions is obscuring underlying geology across significant tracts of the tenements.

 

 

 

 

Los Calatos metallurgical testwork

The Los Calatos phase 1 metallurgical testwork has been completed. The results are summarised below. The averages for the most promising tests (predicted results from each of the locked cycle tests) are shown in the following table:

 

Concentrate grades Concentrate recoveries

Cu % Mo % Cu % Mo %

24.0 2.5 87.5 79.1

 

It should be noted that the molybdenum grades are exceptionally high in virtually all of the composite samples and this is reflected in the results of the locked cycle tests. An overall molybdenum recovery of 65 - 68 % would be expected for a commercial grade molybdenum concentrate.

 

The concentrate grades for copper are a little below average, but it is believed that this can be improved by modifying the conditions and procedures of the flotation tests. Both gold and silver on average are above payable limits for copper concentrates and should contribute as credits to any revenue stream from operations at Los Calatos.

 

Los Calatos resource estimation and scoping study

The Company has retained SRK Consulting, Chile to undertake a revised resources estimation for Los Calatos following the completion of the phase 2 drilling. The resource calculation will commence during April and is anticipated to be completed by the end of May, 2010.

 

This estimation will feed into the Los Calatos Scoping Study which is required under the Barrick agreement with Minera Cerro Norte and the Hampton agreement with North Hill Holdings Group Inc.

 

The Company has decided to appoint SRK to undertake the study. The study is due to commence within the next few weeks and is anticipated to be completed within 3 months from commencement (completion date expected mid July 2010).

 

Mollacas Project

 

Metallurgical testwork

In November 2008, Hampton completed a 3,970 metre infill drilling program to upgrade the resource classification from Inferred to Measured and Indicated, and to provide material for further detailed leach testing.

 

Initial leach test work on representative samples from Mollacas drill core commissioned produced good leach results and copper recovery. Hampton is currently proceeding with further and more detailed metallurgical leach test work on oxide and supergene ores for the Mollacas deposit, to provide information for leaching and solvent extraction/electrowinning design as part of a final feasibility study. The additional work will refine copper recoveries and provide more accurate estimates of operating and capital costs.

Column leach testwork has commenced using CIMM laboratories in Santiago and is planned for completion by September 2010.

 

 

 

 

 

 

 

 

Vallecillo Project

 

Surface exploration

Hampton's exploration of the La Colorada gold-zinc deposit, including two drilling campaigns, together with a recent detailed surface geological and structural mapping and sampling program across most of the 54 km2 of tenements, suggest:

·; the presence of a number of high priority exploration targets including three well defined lead (Pb) surface geochemical targets similar to the La Colorada target and immediately north of the resource outlined at La Colorada, and

·; a Cu and Au surface geochemical porphyry target at Vallecillo.

 

The Company will develop a detailed exploration and development program over the next few weeks to outline the following;

1. Information requirements for undertaking a scoping study for the La Colorada project

2. Infill and immediate extension drilling requirements at La Colorada to bring the resource to Measured and Indicated JORC status.

3. Exploration of the anomalies to the north of La Colorada including geophysics and RC drilling.

4. Exploration of the anomalous areas within the defined copper-gold porphyry system identified at Vallecillo.

 

Metallurgical testwork

The metallurgical testwork carried out by Plenge laboratories in Lima using Vallecillo core has demonstrated that excellent recoveries can be obtained for gold, zinc and lead, while silver recoveries are dependent on production of a lead concentrate.

 

Gold recoveries above 90% can be achieved through the cyanidation of a gravity concentrate and the zinc concentrate, with bullion produced on site. Some gold reports into the lead concentrate which will be payable by smelters.

 

The second issue crucial to potential economic exploitation of the La Colorada resource was the ability to produce saleable concentrate grades for both zinc and lead. The testwork has confirmed that excellent recoveries of both metals will be achievable into commercial grade concentrates. The table below shows the main findings of the testwork.

 

Metallurgical testwork results - locked cycle tests.

 

Locked Cycle tests	Assays					Distribution, %
	g/t Au	g/t Ag	% Zn	% Pb	% Fe	Au	Ag	Zn	Pb	Fe
Composite 7452
Head grade	1.85	10.40	1.95	0.24	9.2	92.5	20.6	92.6	44.7	2.2
Zinc concentrate	105.63	0.23	54.59	3.28	6.25	0.4	33.5	92.6	44.7	2.2
Composite 7458
Head grade	2.68	23.93	2.79	1.59	6.16	91.8	76.2	93.0	88.0	6.9
Lead concentrate	31.26	692.02	4.92	63.84	5.96	25.6	63.5	3.9	88.0	2.1
Zinc concentrate	0.31	96.47	56.48	1.15	6.42	0.5	18.5	93.0	3.3	4.8

 

Gold recovery; Gold recovery in the locked cycle tests was excellent at greater than 90% for both tests, including recovery of >50% of the gold by intensive cyanidation of the gravity concentrate. When no lead concentrates are produced then the remainder of gold is recovered by intensive cyanidation of the zinc concentrate (eg composite 7452). Where lead concentrates are produced then up to 25% of the gold reports into the lead concentrate which is payable.

Silver recovery; Silver recovery was poor in composite 7452 and acceptable in composite 7458, likely due to 63.5% of the silver reporting into the lead concentrate which is payable. It appears that acceptable silver recovery is linked to production of a lead concentrate.

Zinc recovery; Zinc recovery and concentrate grade was excellent at approximately 93% and 55% respectively.

Lead recovery; Lead recovery and concentrate grade was excellent in composite 7458 at approximately 88% and 64% respectively. Due to a low head grade for lead in composite 7452 no lead concentrate was produced in the test.

 

Camaron surface exploration

Hampton has undertaken an extensive surface geological mapping and sampling exercise across its Camaron tenements over the last 18 months. The tenements have never previously been drilled.

 

Exploration results to date suggest that Camaron presents a large intensely leached gold-copper porphyry complex, also containing anomalous molybdenum. It expresses as a large alteration system (argillic / chloritic / silicification) covering approximately 10km x 6km and oriented northwest-southeast. Sampling reveals large zones anomalous in gold (and copper) associated with the geology and the alteration.

 

Geological surveying and geochemical analysis suggests the gold anomalies are associated with low sulphidation 'Hot Springs' type gold mineralisation. Hampton has selected three main areas for drilling.

 

CORPORATE

AIM listing and £12 (A$20) million capital raising

On 1 April 2010 trading in Metminco shares commenced on the AIM market, operated by the London Stock Exchange (AIM Admission).

 

As announced 1 April 2010, Metminco entered into arrangements to raise £12 million (approximately A$20 million), by way of a placing of 103,795,569 fully paid ordinary shares (Placing Shares) at a price of 9p (A$0.15) and through the issue of US$4 million of Convertible Loans. Metminco issued a further 7,998,273 fully paid ordinary shares in the Company (Shares) at an issue price of 9p ($A0.15) per Share in lieu of fees and transaction cost associated with the AIM Listing.

 

The Placing Shares include 25 million Shares issued to Lanstead Capital L.P. (Lanstead), an institutional investor, to raise £2,25 million (A$ 3.75 million). In addition, the Company entered into an equity swap agreement with Lanstead so the Company will retain much of the economic interest in the Shares issued to Lanstead. The equity swap agreement will allow the Company to secure much of the potential upside arising from near term news flow. The equity swap agreement provides that the Company's economic interest will be determined and payable in 24 monthly tranches as measured against a price of 12p (A$0.20) per Share and funds will used by the Company to fund corporate overheads over the next 2 years.

 

The Company entered into convertible agreements with three parties to raise a total of US$ 4 million (A4.5 million) The loans are repayable within two years with interest at 16% per annum to be capitalised quarterly at A$0.12 per Share. The principal may be capitalised at the lender's option at any time after six months following drawdown at A$0.12 per Share. The lender may convert earlier on a change of control of the Company, upon the disposal of a material asset or a capital raising other than on Admission of US$ 2 million. The Company paid a fee to the lender of 4% of funds borrowed on drawdown.

 

Hampton Rights Issue

On 22 January 2010, Hampton announced a pro-rata rights issue to raise $1.4 million at an issue price of

$0.28 per Hampton Shares.

 

Metminco subscribed for 4,547,000 Hampton Shares, its full entitlement under the first and second round pro rata rights issue offer, at a cost of A$1,273,160 increasing its interest in Hampton to approximately 37.8%.

Director Appointments

On 1 April 2010, on being granted AIM Admission, the Company appointed Mr Tim Read and Mr Francisco Vergara-Irarrazaval to the Board of Metminco to fill casual vacancies.

 

Mr Tim Read, who is based in the United Kingdom was formerly an investment banker and corporate executive and has over forty years experience in the mining and metals sector.

 

Mr Francisco Vergara-Irarrazaval, who is senior partner of a law firm in Santiago, Chile, has extensive experience in the resources sector in South America.

Lock-In (Escrow) Agreements

All of the Directors have undertaken to the Company and to Daniel Stewart (AIM Nomad) not to sell, charge or grant any interests over any Ordinary Shares held by them (subject to certain exemptions) during the twelve months following dated of AIM Admission.

 

The Directors on AIM Admission, in aggregate, held an interest in 131,397,504 Shares on issue.

 

 

 

 

John Fillmore

Chairman

Metminco Limited 

29 April 2010

 

 

For further information please contact:

 

Metminco Limited	Tel: +61 (0)407 524 235
John Fillmore
Daniel Stewart and Company plc	Tel: 020 7776 6550
Andrew Edwards / Oliver Rigby
Buchanan Communications	Tel: 020 7466 5000
Tim Thompson / James Strong / Katharine Sutton

 

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