Oroco Resource Corp. has announced a significant boost in the value of its Santo Tomas copper project in western Mexico, following a newly revised preliminary economic assessment (PEA). The updated study reveals a 23% increase in the project’s net present value (NPV), now approaching $1.5 billion, compared to the previous October 2023 estimate of $1.2 billion. This valuation is based on an 8% discount rate.
The new PEA also marks a reduction in initial capital expenditures, decreasing from $1.3 billion to $1.1 billion. The internal rate of return (IRR) has improved to 22.2%, up from 17.3% in the earlier assessment. However, sustaining and expansion capital costs have increased to $1.7 billion, up from $1.1 billion, over the extended 22.6-year mine life, which is 2.6 years longer than previously estimated. Despite this, the payback period has improved from five years to 3.8 years.
The revised plan involves a 20-stage open pit mine and processing plant in Sinaloa state, starting at 60,000 tonnes per day (tpd) in the first year, with an expansion to 120,000 tpd now scheduled for the eighth year, rather than the second. This shift from the initial four-pit stages to a more phased expansion approach has contributed to the project’s enhanced value.
John Lock, CEO of Oroco, highlighted the efficiency of the new plan, stating, “A staged approach to the mine expansion and a focus on exploiting the higher-grade near-surface material in the early years of mining has unlocked a considerable increase in value. We have established a plan that invokes a very efficient use of capital.”
The updated PEA positions Santo Tomas as highly efficient compared to other large-scale copper projects. Oroco cited a metric of after-tax NPV per initial capital spending of $1.48 billion/$1.1 billion, which surpasses the efficiency of comparable projects such as Ivanhoe Electric’s Santa Cruz in Arizona, McEwen Mining’s Los Azules in Argentina, and Los Andes Copper’s Vizcachitas in Chile.
Following the announcement, Oroco’s shares surged nearly 11% in early trading in Toronto, reaching C$0.39, giving the company a market valuation of C$94 million. The stock has fluctuated between C$0.32 and C$0.74 over the past year.
The new PEA maintains the project’s total payable copper production at approximately 4,774 million pounds, while reducing the average annual life-of-mine cash cost to $1.54 per pound of copper, down from $1.66. The projected copper production averages 207.5 million pounds per year, with by-products including 138.7 million pounds of molybdenum, 55.2 million ounces of silver, and 753,400 ounces of gold.
The resource update for Santo Tomas now includes 540.6 million indicated tonnes at 0.33% copper, 0.008% molybdenum, and 0.03 grams gold per tonne. Additionally, there are 530.3 million inferred tonnes grading 0.31% copper, 0.007% molybdenum, and 0.002 grams gold per tonne. This compares to the previous year’s figures of 561 million indicated tonnes at 0.37% copper-equivalent and 549 million inferred tonnes at 0.34% copper-equivalent.
The new PEA is based on updated commodity prices of $4 per pound for copper, $13.50 per pound for molybdenum, $1,700 per ounce for gold, and $22.50 per ounce for silver. Production is set to follow two years of construction and pre-stripping.
Located in northern Sinaloa and southwestern Chihuahua, the 90-square-kilometer Santo Tomas project is 85.5% owned by Oroco in the central concessions, with an 80% interest in the surrounding area. The new assessment incorporates data from over 43,000 meters of drilling by Oroco and more than 21,000 meters of legacy drilling.
