The PEA includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is no certainty that the PEA results will be realized. The PEA is preliminary in nature and is not a preliminary feasibility study or feasibility study. The mining study for the PEA was developed by NCL. The parameters of the mining study were used to develop the constrained resource.
The PEA considers that water will be transported by pipeline from Atacama Pacific's water exploration concessions, under option from AMX de Chile S.A., located approximately 100 km north to the Cerro Maricunga project. Atacama Pacific has received a quote of $85 million for the construction of the pipeline. Power for the pumping stations will be supplied by leased generators.
Water requirements of 100 litres per second are projected. Atacama Pacific is presently completing water exploration drilling and has encountered significant water flows in the first two holes drilled on the exploration concessions. The acquisition of other water sources is also being considered.
Chile has an established and clearly defined and regulated permitting process for development projects. In order to develop a mining and processing operation at the Cerro Maricunga project, an Environmental Impact Assessment ("EIA") must be obtained from the Chilean environmental authority, Servicio de Evaluation Ambiental ("SEA"). The EIA process takes 6 to 18 months to complete and takes into consideration all aspects of a proposed development. Once permits of this nature are granted, Atacama Pacific would have a five year period to start construction of the project.
Atacama Pacific has been gathering baseline environmental information for more than two years and has contracted Arcadis Chile S.A. to prepare baseline study documentation. Further works, including basic engineering, geotechnical drilling, approval of water extraction rights, are necessary before an EAI application can be submitted for approval.
Project Opportunities and Risks
Atacama Pacific has identified a number of opportunities that may positively impact the economics of the Cerro Maricunga project which will be evaluated. These opportunities include but may be not be limited to the following:
-- Expansion of the current resource and reduction of the strip ratio through positive results from the current drilling program;-- Examining the impact of increasing the crush size from 19 mm to coarser crush sizes including run of mine;-- Evaluating contracting crushing and conveying operations,-- Sale and leaseback of water supply; and-- Adoption of valley fill heap leach processing within a valley adjacent to the deposit.
Aside from the risks typical of all large scale mining projects, such as, but not limited to, confidence in mineral resource estimates, metallurgical performance, capital and operating cost increases, commodity price decreases, securing reasonably priced project financing, etc., principal project risks specific to Cerro Maricunga include the following:
-- Identification or acquisition of sufficient water resources for the project;-- Ability to acquire water rights and mining and other permits while maintaining a reasonable development timeline; and-- The ability to attract and retain experienced professionals given the competitive state of the global mining industry.