Teck Resources (TSX: TECK.A) (TSX: TECK.B) (NYSE: TECK) and Agnico Eagle Mines Limited (TSX: AEM) (NYSE: AEM) are collaborating as equal partners in a joint venture to move forward with the development and permit acquisition of the San Nicolás project, a top-tier copper-zinc mining project situated in Zacatecas, Mexico.
The two companies announced the closure of its joint venture transaction to advance the San Nicolas copper-zinc development on Thursday.
The two companies plan to apply for an environmental impact assessment and permit by mid-2023. Then by early 2024, they aim to finish a feasibility study to help them determine how to build and operate the mine.
This is a positive step in Teck’s strategy to develop its copper growth portfolio and for Agnico Eagle to use its Mexican operational experience in pursuit of a high-quality, copper-zinc mineral deposit.
Agnico Eagle will invest $580 million for a 50 per cent stake in the JV, which will be a Mexican mining company called Minas de San Nicolás (MSN). This money will be used for research and development costs.
For purposes of governance, Agnico Eagle will be considered a 50 per cent owner of MSN, no matter how many shares they actually hold.
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San Nicholas mine expected to be profitable within 2.6 years of operation
San Nicolas is a huge underground deposit of valuable minerals like copper, zinc, gold, and silver located in Mexico. It’s one of the largest deposits of its kind in the world and is estimated to hold over 100 million tonnes of valuable minerals.
In March 2021, Tech commissioned a study showing that San Nicolas could be economically mined using an open-pit, processing, and flotation operation. The study estimated that the mine could produce copper and zinc concentrates with the first production expected in 2026.
The mine is expected to operate for 15 years, and there is a chance that it could operate for longer if exploration activities in the region identify new deposits.
During the first five years of production, San Nicolas is expected to produce 63,000 tonnes of copper and 147,000 tonnes of zinc per year. The mining operation is estimated to have an average grade of 1.13 per cent copper and 1.49 per cent zinc, and the costs to operate the mine are expected to be around USD$0.16 per pound of copper and USD$0.44 per pound of zinc.
The development capital cost estimate for the mine is USD$842 million, and the mine could be profitable within 2.6 years of operation.
Teck and Agnico estimate that the development capital cost could be around USD$1,000 million to USD$1,100 million, depending on the cost environment and the accuracy of the estimate.
If the cost is within this range, and the spot prices of copper and zinc are USD$3.57 per pound and USD$1.46 per pound, respectively, the mine could be profitable within 2.5 to 2.8 years of operation with an estimated after-tax internal rate of return of 33 per cent to 30 per cent.
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