Amerigo Resources Reaches New Agreement with Codelco for Increased Colihues Extraction
AMERIGO RESOURCES LTD. (Vancouver, British Columbia) is pleased to advise that it has entered into an agreement in principle with the El Teniente unit (ET) of Codelco in Chile to increase the rate of agreed extraction of feed material from the Colihues deposition site from the present 10,000 tonnes per day to 45,000 tonnes per day. At this increased rate of recovery, Colihues is estimated to provide source material for over 10 years. A detailed agreement will be finalised in the next few months.
The Company expects to increase production in 2005 under existing Phase II expansion plans to approximately 42 million pounds of copper, an increase of 100% since acquisition of the MVC project just over a year ago.
Engineering can now be finalised for the Phase III expansion, which will include the installation of 4 additional mills, recently purchased in advance if this agreement, and presently under refurbishment to shorten construction lead time, plus additional flotation and copper recovery equipment at the MVC plant. Additional dredging and pumping equipment for the increased rate of recovery from the Colihues site will also be necessary. Capital cost estimates will now be finalised and released in the next 3 months, but are likely to be in the range of US$20 - 24 million, approximately US$4 million of which has already been invested in the purchase of the additional mills.
Under the agreement with ET, MVC will pay a royalty for production from Colihues on a similar basis to the existing royalty arrangement for fresh tailings material, with the exception that a nominal 3% royalty will be payable at copper prices below $0.80 per pound, and increasing on a sliding scale, capped at 15% if the copper price is $1.35 per pound or higher. Given that the copper content is more than twice that of the fresh material, this arrangement represents a fair basis for compensation to ET under this agreement. Molybdenum production from this material will attract a royalty of a flat 10%.
It is expected that increased production from this new agreement for Phase III will commence in 2006 with a steady ramp up from that date over the following 12 months. Original estimates of expanded production capacity at MVC were constrained to approximately 42 million pounds. Under this new agreement the Company expects to achieve a fully expanded production capacity of approximately 65 million pounds of copper, an increase of over 50% from the original estimate.
Amerigo Resources Ltd. is a Canadian junior copper producing company forecasting 14,000 tonnes of copper production in 2004 from its MVC operations near Santiago, Chile. Tel: (604) 681-2802; Fax: (604) 682-2802; Web: www.amerigoresources.com; Listing: ARG:TSX
For further information, please contact:
Jeffrey Giesbrecht, Secretary
Amerigo Resources Ltd.
The Toronto Stock Exchange has not reviewed nor accepted responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management. Statements contained in this news release that are not historical facts are forward-looking statements as that term is defined in the private securities litigation reform act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from estimated results. Such risks and uncertainties are detailed in the Company’s filings with the TSX and on SEDAR.