The El Morro copper-gold project in Chile represents an early stage development project. We own a 30% interest in the project with our joint venture partner and project operator, Goldcorp Inc. owning the remaining 70%.
Goldcorp Inc. has agreed to fund 100% of the development capital for the project which will be repaid through 80% of the company’s share of cash flow once the project is in production. Once repaid, the company will receive its proportionate 30% share of the cash flow.
Two principal zones of copper-gold mineralization referred to as the El Morro area and La Fortuna area have been identified to date. Mineral resource estimates have been prepared for both of these deposits in accordance with National Instrument 43-101.
El Morro has entered the permitting stage with the submission of the Environmental Impact Study in November 2008.
Project History
The El Morro project is 3,600 hectares and is located approximately 650 km north of Santiago and 80 km east of the city of Vallenar in northern Chile, along one of the most prolific copper belts in the world.
BHP Chile S.A. began work on the La Fortuna deposit area in the early 1990s and completed limited drilling on the La Fortuna and Cantarito copper-gold targets, and on the El Negro gold target.
In 1999 the Company acquired a 100% interest in the La Fortuna area exploitation concessions from BHP, after having purchased 50% in 1998. The El Morro deposit area, located five kilometers northwest of the La Fortuna deposit area, was acquired by staking in 1998. In 1998, the Company entered into an option agreement to acquire a 100% interest in some adjacent concessions in the La Fortuna area. In 1999, New Gold completed 3,713 meters of drilling in 18 holes targeting El Morro, La Fortuna, El Negro and Cantarito areas.
In 1999, Falconbridge (formerly Noranda Inc. and now Xstrata Plc.) entered into an agreement with New Gold to earn up to a 70% interest in the El Morro project. Falconbridge agreed to make aggregate exploration and property acquisition expenditures of US$10 million, over a five-year period, as well as make a US$10 million payment to New Gold by September 2005. Xstrata completed the requirements necessary to earn a 70% interest in the El Morro project.
In January 2010, the Company exercised a right of first refusal and acquired 100% of the project. Subsequently, the company entered into a joint venture with Goldcorp Inc. under revised joint venture terms. Goldcorp is now the 70% owner and operator of the project. Goldcorp continues to work through the permit review process for the project with a target to begin construction in early 2011. A project team has been assembled to advance exploration and development at the site during 2010 and plans to further optimize the existing feasibility study are underway. Goldcorp Inc. has stated that exploration expenditures at El Morro during 2010 are estimated to be approximately $10 million.