Far West Mining Ltd. Receives Conclusions From Scoping Study on the Santo Domingo Sur and Iris Copper-Iron-Gold Deposits in Chile

2008-04-01 07:27:00

Far West Mining Ltd. Receives Conclusions From Scoping Study on the Santo Domingo Sur and Iris Copper-Iron-Gold Deposits in Chile

VANCOUVER, BRITISH COLUMBIA–( EMWNews – April 1, 2008) – Far West Mining Ltd. (TSX:FWM) (the “Company”) is pleased to announce it has received conclusions from a scoping study/preliminary economic assessment conducted by AMEC International (Chile) S.A. (“AMEC”) on the Company’s Santo Domingo Sur and Iris copper-iron-gold deposits in Chile. AMEC has assessed the economic viability of two separate cases: (1) developing the Santo Domingo Sur deposit for the recovery of copper (“Cu”), gold (“Au”) and iron (“Fe”) from magnetite (Magnetite Option); and (2) the combined development of the Santo Domingo Sur and Iris deposits for the recovery of copper, gold and iron from magnetite and hematite (Hematite Option).

In reaching its conclusions, AMEC did not consider the satellite Estrellita oxide/sulphide deposit which has an Indicated Resource of 31.7 Mt grading 0.53% copper.

The base case commodity prices for copper, iron and gold which AMEC assumed in reaching its conclusions are $1.50/lb, $40/tonne (65%Fe concentrate) and $635/oz respectively. All prices and costs are expressed in US dollars. With capital and operating costs rising significantly over the past two years, the Magnetite Option requires $1.80/lb copper and $50/tonne iron to reach a Net Present Value of $50M. The Hematite Option achieves an NPV of $353M at the same pricing. All NPVs are calculated at an 8% discount rate.

Management believes the Hematite Option is a more attractive project, as it generates higher NPVs despite having higher capital and operating costs than the Magnetite Option. Using AMEC’s base case price assumptions, the cost to produce copper in the Hematite Option is reduced from $1.15/lb to $0.03/lb after the inclusion of the credit from iron (magnetite plus hematite), and is further reduced to $0.01/lb after the gold credit.

AMEC’s conclusions are that the NPVs of the Magnetite and Hematite Options rise to $417M and $753M respectively at prices of $2.40/lb copper and $50/tonne of iron concentrate at 65% Fe.

Tables included in this release provide NPVs for the two Options at varying prices for copper and iron concentrate.

Mineral Resources

Scott Wilson Roscoe Postle & Associates, in its NI 43-101 compliant mineral resource estimate report dated October 19, 2007 filed on SEDAR, made the following estimations of tonnage and grade of copper and gold resources on the Santo Domingo Sur and Iris deposits. For purposes of the Scott Wilson WPA Report, the copper and gold mineralization in the deposits satisfied criteria for classification as Indicated and Inferred Mineral Resources. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.



Indicated and Inferred Resources - Santo Domingo Sur and Iris Deposits

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Cut-off Tonnage Grade Grade
(% Cu) (Mt) (% Cu) (g/t Au)
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Santo Domingo Sur
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Indicated 0.30 171.5 0.57 0.08
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Inferred 0.30 16.6 0.49 0.06
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Iris
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Indicated 0.30 31.2 0.46 0.06
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Inferred 0.30 20.9 0.44 0.04
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The Company has been advised by AMEC that, in their preliminary economic assessment, they have assigned iron resources present in the deposits to the Inferred category due to uncertainties relating to iron recoveries and the magnetite/hematite iron oxide ratios. Additional metallurgical testing will be required to evaluate whether the iron resources can be elevated to the Indicated category. The elemental iron content of the deposits has been calculated from iron analysis of the same samples from which Indicated copper/gold resources were determined. The iron oxide content of the deposits and the magnetite/hematite iron oxide ratio was calculated using the elemental iron analysis and preliminary metallurgical tests performed on composites from the Santo Domingo Sur deposit.

AMEC further advised that, under established NI 43-101 principles, metals in the same resource block cannot be publicly reported with different resource classifications. To deal with this issue, AMEC assigned all resource blocks to the lowest level of confidence represented. Accordingly, for the purpose of this preliminary economic assessment, all of the resources have been assigned to the Inferred Mineral Resource category as tabled below:



Inferred Resources - Santo Domingo Sur and Iris Deposits

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Cut-off Tonnage Grade Grade Grade
(% Cu) (Mt) (% Cu) (% FeT(1)) (g/t Au)
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Santo Domingo Sur
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Inferred 0.30 188.1 0.56 26.21 0.08
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Iris
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Inferred 0.30 52.1 0.45 17.54 0.05
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(1) Total iron analyses

 

Preliminary Economic Assessment of the Magnetite and Hematite Options

Magnetite Option

The mining assessment for the Santo Domingo Sur deposit for the recovery of copper, gold and iron from magnetite (a magnetic iron oxide mineral), is based on typical industry standards for a preliminary economic assessment with regard to the nature and mineability of the resource. AMEC’s assessment assumes conventional truck-shovel open pit mining will be employed, with the material being fed to a 50,000 tonne per day processing plant using standard mineral flotation technology for the extraction of copper. Under the Magnetite Option, which does not include material from the Iris deposit, the flotation tailings from the copper circuit are fed into a low intensity magnetic separation circuit for magnetite recovery. The magnetite concentrate produced is subjected to second stage grinding followed by magnetic separation to produce a final concentrate. Testing indicates that over 80% of the magnetite recovered in the process. Preliminary screening indicates acceptable levels for the most common deleterious elements such as phosphorous, silica, and aluminum. More detailed test work will be conducted on both the magnetite and hematite concentrates.

Hematite Option

Under the Hematite Option, which also includes the mining of the Iris deposit, the mining and mineral processing is the same as the Magnetite Option with the exception that it is assumed the tailings from the magnetic separation circuits will be subjected to hematite (a non-magnetic iron oxide mineral) flotation followed by regrinding and cleaner flotation stage to produce a saleable concentrate.

AMEC estimated capital expenditure and recovery costs for the hematite with their knowledge of existing operations and processes. Although hematite flotation is a known industry practice, metallurgical testing of the hematite material at Santo Domingo must be carried out to better determine the capital and operating costs required for producing a concentrate that meets industry standards. This approach is consistent with the scoping level of the study performed.

It is important to note that the amount of hematite contained in the combined Santo Domingo Sur and Iris deposits is approximately three times the amount of magnetite. AMEC’s calculation of NPVs for the Hematite Option in the table below demonstrates that the recovery of hematite could significantly increase the economic viability of the mining operation, particularly in light of the recent escalation in iron pricing. The calculation also illustrates the importance of reviewing the potential of a large number of iron-rich mantos on the Santo Domingo property that have been drilled by the Company, which could represent a significant iron resource.

AMEC’s assessments below are preliminary in nature, and include inferred mineral resources that are too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves. There is no assurance the preliminary assessments will be realized.



Key Parameters - Magnetite Option

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Copper $/lb $ 1.50 to 3.00
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Metal Price Range Iron $/t conc. $ 40 to 70
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Gold $/oz $ 635
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Resources
at 0.3% Cu cut-off Inferred 188.1 Mt @ 0.56% Cu
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Material Milled (life of mine) 166.8 Mt
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Design Annual Throughput 16.8 Mt
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Daily Production 50,000t
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Strip Ratio 2.43:1
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85% copper
Mining & Production Recoveries ---------------------
80% magnetite
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Average annual Cu production 69,000t metal
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Average annual Cu production 152 Mlbs
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Average annual Fe production
(tonnes of concentrate) 985,000t
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Capital Cost Million $ $ 685
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$/t $ 8.54
Operating Cost -------------------------------------------------------
$/lb Cu $ 0.57(1)
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Life of Mine Years 11
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(1) net of Fe (@$40/t conc.), Au credits


NPV (8% Discount Rate) - Magnetite Option

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Metal Prices Fe $40/t Fe $50/t Fe $60/t Fe $70/t
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Cu $1.50/lb -174 -133 -92 -55
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Cu $1.80/lb 8 50 93 135
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Cu $2.10/lb 188 229 270 311
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Cu $2.40/lb 376 417 458 499
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Cu $2.70/lb 552 592 632 672
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Cu $3.00/lb 734 774 814 854
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Key Parameters - Hematite Option

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Copper $/lb $ 1.50 to 3.00
-------------------------------------------------------
Metal Price Range Iron $/tonne of conc. $ 40 to 70
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Gold $/oz $ 635
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Resources
at 0.3% Cu cut-off Inferred 240.2 Mt @ 0.54% Cu
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Material Milled (life of mine) 226.0 Mt
-------------------------------------------------------
Design Annual Throughput 16.8 Mt
-------------------------------------------------------
Daily Production 50,000t
-------------------------------------------------------
Strip Ratio 2.01:1
-------------------------------------------------------
85% copper
---------------------
Mining &Production Recoveries 80% magnetite
---------------------
80% hematite
-------------------------------------------------------
Average annual Cu production 65,500t metal
-------------------------------------------------------
Average annual Cu production 144 Mlbs
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Average annual Fe production
(tonnes of concentrate) 4,065,000t
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Capital Cost Million $ $ 941
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$/t $ 10.32
Operating Cost -------------------------------------------------------
$/lb Cu $ 0.01(1)
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Life of Mine Years 14
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(1) net of Fe (@$40/t conc.), Au credits


NPV (8% Discount Rate) - Hematite Option

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Metal Prices Fe $40/t Fe $50/t Fe $60/t Fe $70/t
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Cu $1.50/lb -33 158 338 531
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Cu $1.80/lb 174 353 546 738
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Cu $2.10/lb 368 560 739 927
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Cu $2.40/lb 575 753 941 1,129
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Cu $2.70/lb 766 954 1,142 1,330
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Cu $3.00/lb 968 1,156 1,344 1,532
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Capital and Operating Costs

The fact that AMEC was recently involved in the development of a copper mine in Chile of similar size and with equally favourable logistics, provides a level of confidence that the capital and operating costs employed in the study are realistic in the current environment. AMEC’s capital and operating costs have been estimated to a level considered appropriate for a preliminary economic assessment. The economic analysis includes sustaining capital costs and closure costs. Capital and operating costs for the Magnetite and Hematite Options are summarized in the tables below:



Capital Cost Comparison ($M)

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Category Magnetite Option Hematite Option
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Mine 197 280
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Plant 180 231
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Infrastructure 45 48
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Tailings Dam 52 50
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Transport/Port 7 69
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Indirect Costs 107 149
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Contingency 96 114
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Total 685 941
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Operating Cost Comparison $/t Processed and $/lb Cu Produced

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Category Magnetite Option Hematite Option
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$/t $/lb Cu $/t $/lb Cu
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Mining 4.05 0.40 4.14 0.46
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Process 3.44 0.34 5.08 0.57
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G&A 1.05 0.10 1.10 0.12
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Total 8.54 0.85 10.32 1.15
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$/lb Cu N/A 0.57(1) N/A 0.01(1)
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(1) net of Fe (@$40/t conc.), Au credits

 

Analysis

It is clear from the results that the project is highly sensitive to the price of copper and iron. Management believes the Hematite Option (copper, magnetite, hematite and gold) provides the greater economic potential for the development of the Santo Domingo copper-iron-gold deposits and intends to pursue it. Additional work will be conducted to define the iron oxide resources on the property and on metallurgy, to optimize magnetite and hematite recovery.

AMEC’s conclusions illustrate that the increased capital and operating costs and the long lead time for delivery of mining and milling equipment is having a pronounced impact on the mining industry. AMEC’s base case metal price assumptions establish that higher metal prices are required. It should be noted that copper futures contracts through to June, 2013 are above the equivalent of $2.70/lb and the long term price for iron concentrate at 65% Fe is $60/t. Management of the Company believes that as the project is moved forward through additional environmental and engineering work, it will see significant enhancement as risks are removed and/or mitigated and the scope is defined.

AMEC’s Preliminary Assessment will be filed on Sedar.com within 45 days of the date of this release.

More detailed project information is available on the Company website at www.farwestmining.com.

The in-house qualified persons are Robert Hindson, P.Eng., CEO and director of Far West and Richard Zimmer, P.Eng., COO and director of Far West who have reviewed and approved the contents of this news release.

AMEC’s conclusions were prepared under the supervision of Tony Maycock, who is an Independent Qualified Person within the meaning of NI 43-101. The Scott Wilson WPA Technical Report on which AMEC’s conclusions are based was prepared by Peter A. Lacroix, P.Eng. and David W. Rennie, P.Eng., both of whom are Independent Qualified Persons.

Far West Mining Ltd. is an international mineral exploration company engaged in the evaluation, acquisition, exploration and development of mining properties. The Company has current operations in Chile (100% Far West) and is exploring in Argentina and Australia in a joint venture relationship with BHP Billiton.

FAR WEST MINING LTD.

Robert E. Hindson, President and C.E.O.

For further information investors should review the Company’s filings that are available at www.sedar.com.

This news release contains certain statements that may be deemed “forward-looking statements”. All statements in this release, other than statements of historical fact, that address future production, reserve potential, exploration drilling, exploitation activities and events or developments that the Company expects to occur, are forward looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward-looking statements. Factors that could cause the actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, and continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. The Company does not assume any obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

This news release uses the terms “Inferred Resource”, “Indicated Resource” and “Mineral Resource”. The Company advises readers that although these terms are recognized and required by Canadian securities law under National Instrument 43-101, the U.S. Securities and Exchange Commission does not recognize these terms. “Inferred Resources” are very uncertain as to existence and economic and legal feasibility. Readers should not assume that all or part of an Inferred Resource exists, is economically or legally mineable, or that any part of an Indicated or Inferred Resource will ever be upgraded to a higher category. The Mineral Resources discussed in this news release are not Mineral Reserves and have no demonstrated economic viability.

The TSX does not accept responsibility for the adequacy or accuracy of this news release.

For more information, please contact

Far West Mining Ltd.
Robert Hindson, P.Eng.
President and C.E.O.
(604) 602-9144

or

Far West Mining Ltd.
Rick Zimmer, P.Eng.
Vice President and C.O.O.
(604) 602-9144
Email: info@farwestmining.com
Website: www.farwestmining.com

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