RIO – Rio Alto Receives Environmental Nod for Copper/Gold Sulphide Concentrator in Peru

POSTED ON January 06, 2014 BY Travis McPherson
CATEGORY Copper, Finance, Gold, Investing, Mineral Exploration, Mining, Peru,

In 2012, Peruvians hit the streets to protest Newmont's Conga mine (Credit: Reuters/Enrique Castro-Mendivil)

While many mining companies in Peru have encountered governmental, environmental and social issues, Rio Alto (RIO:TSX) has been able to advance the environmental nod to develop a sulphide copper-gold flotation plant and concentrator to process sulphide ore once the bulk of oxide gold reserves are exhausted from the La Arena phase 1 project. The company has also been granted the environmental okay to expand current waste dumps and to use the Calaorco pit for tailings once mining is done there. The company announced this morning that they have received formal notification from the General Bureau of Environmental Affairs (DGAA) of the Ministry of Energy and Mines (MEM) of Peru of the approval of modifications to the current environmental impact study (EIA) for the La Arena project gold oxide mine.

Alex Black, president and chief executive officer, commented: "The approval to modify the existing EIA at La Arena took a total of seven months to complete. This is a great achievement by the Rio Alto environmental team and demonstrates their ability to work closely with the various government agencies in Peru to complete this process in the shortest possible time."

The company expects the feasibility study for the phase 2 copper/gold sulphide development to be completed by Q2/2014. The company's goal is to optimize initial capital for the expansion and to streamline it to production. The company is targeting $200-$250 million in start-up capital to build phase 2. They see an 18,000tpd operation producing 50 million pounds of copper and 40,000 ounces of gold annually. They have set the bar at a minimum of a 20% after-tax return for the project.

The company, like most gold producers, took it on the chin in 2013 and lost nearly two thirds of its value. The company expects to produce over 200,000 ounces in 2013 at an average all-in sustaining cost of $900 per ounce. So the company is in the lower end of the cost curve for gold production but will have to raise capital to build La Arena phase 2. The company has successfully paid off its debt (sitting on roughly $3 million in total debt) so it will likely be able to close the funding gap with another debt facility therefore dilution should be limited.

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Read: Rio Alto Receives Environmental Approval For An 18,000 tpd Copper Concentrator

Travis McPherson

trav@ceo.ca

Travis McPherson

trav@ceo.ca

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