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 As at December 31, 2007.

Petaquilla is a large open-pit copper project in Panama that’s in the pre-development phase. The property is located 120 kilometres west of Panama City, 20 kilometers from the Caribbean coast. We have a 48 percent interest in Minera Petaquilla S.A. (“MPSA”), the Panamanian company that holds the Petaquilla concession. Petaquilla Copper (PTC) now holds a 26 percent interest in MPSA since Teck Cominco announced its election on March 26, 2008 to acquire half of PTC’s 52 percent or 26 percent of the joint venture in accordance with an existing MPSA shareholder agreement between Inmet, Teck Cominco and PTC.

A United Nations Development Program team discovered copper, gold and molybdenum porphyry mineralization during a regional survey in 1968. Since then a significant amount of work on the project has been carried out including a number of feasibility studies. In 1998, AMEC Americas Limited (AMEC) (then H. A. Simons) prepared a feasibility study on Petaquilla. The study determined that over a potential 23 year life, the Petaquilla mine could produce 4.4 million tonnes of copper, 1.6 million ounces of gold and 59,500 tonnes of molybdenum.

In April 2006, Inmet, PTC and Teck Cominco engaged AMEC to update the 1998 feasibility study by re-estimating the capital and operating costs for the project and to review opportunities for optimization. The cost update of the feasibility study was completed in January 2007. In May 2007, Inmet, PML, Petaquilla Copper and Teck Cominco approved a comprehensive work program to facilitate the rapid development of the Petaquilla Copper Project in Panama. The agreed work program will advance the project through to completion of a Front-end Engineering and Design (“FEED”) Program and an updated Social Environmental Impact Assessment for the project. The work will include programs to advance the dialogue with local communities and other affected stakeholders. The budget for the work plan was approximately US$24 million. Apart from certain minor shared costs, the work plan was funded by Teck Cominco.

AMEC Americas Limited was awarded the contract for Front End Engineering and Design (FEED) services and Golder Associates was awarded the work on the Social and Environmental Impact Assessment (SEIA).

The interim FEED study was completed in January 2008 and estimated that the capital cost required to develop the Petaquilla project would be US $3.5 billion (including a contingency of $515 million but not working capital or escalation). The capital cost estimate includes approximately $500 million for the construction of an oil-fired power plant and approximately $280 million for port facilities. Cash costs, including operating and realization costs net of by-product credits, in years 1 to 10 of the project are estimated to average US $0.85 per pound of copper produced. The study is based on the mine plan developed in 1998, which contemplates a 23-year mine life. The project includes a concentrator capable of processing 120,000 tonnes per day of ore. Construction would take approximately 44 months from issuance of construction permits. Permitting would follow the submission of a social and environmental impact assessment, expected to be completed in the first quarter of 2009.

Capital costs for the project have increased substantially over previously published estimates because of scope changes, including enhancements in erosion control, water management and other environmental protection measures, and increases in equipment and construction costs that have been affecting projects worldwide. Despite the increase in capital costs required to develop Petaquilla, the shareholders believe that the project still has the potential to be a world-class mining operation.

Work is continuing on the final FEED study. A project review team is currently studying opportunities to reduce the capital costs from the interim FEED study estimate. Several possible opportunities have already been identified in the area of the grinding circuit, power supply and port infrastructure. The project review team is evaluating these opportunities and, where appropriate, will incorporate them into the capital cost estimate.

Inmet, Teck Cominco announced an arrangement under which they would proceed with the project. Under the arrangement, Teck Cominco elected to acquire from PTC a 26 percent interest in MPSA by committing to participate in work plans and budgets and to fund up to 52 percent of development costs for the project through to commercial production. Teck Cominco would receive 52 percent of the project cash flow until it has recouped its entire investment plus interest on amounts advanced on behalf of Petaquilla Copper.

Inmet and Teck Cominco agreed to make the commitments to proceed with the project contemplated by the MPSA shareholders agreement and also agreed that on an interim basis Inmet will fund project expenditures on behalf of Teck Cominco. At the end of the interim period, Teck Cominco may elect either to continue participating in the project and resume funding or sell its interest.

The specifics of the arrangement for Inmet and Teck Cominco to work together on the Petaquilla project are as follows: 

Teck Cominco will transfer its 26 percent interest in MPSA into a new wholly owned subsidiary and will engage Inmet to provide management services to that subsidiary. Teck Cominco and its affiliates will assign to its new subsidiary all rights and obligations under the management services agreement with MPSA so that the subsidiary becomes the operator of the Petaquilla project. Inmet will indemnify the new subsidiary and Teck Cominco in respect of any failure of the subsidiary to perform its obligations under the management services agreement with MPSA.

• Inmet will commit to provide project funding on behalf of Teck Cominco for its 26 percent interest and to fund Petaquilla Copper’s 26 percent interest provided that if Petaquilla Copper elects to fund its own portion, then Inmet will only fund Teck Cominco’s 26 percent interest. Inmet will indemnify Teck Cominco against any failure by Inmet to fund Petaquilla Copper’s share of development costs on behalf of Teck Cominco. Inmet will receive a fee of US$3 million for providing the indemnity.

• At the earlier of September 30, 2009 or the date on which Inmet has provided project funding of at least US$50 million, Teck Cominco must elect whether it will fund for its own account its share of development costs. Should Teck Cominco decide to so fund, it will reimburse Inmet for any project funding provided by Inmet on Teck Cominco’s behalf to that date plus interest. After Teck Cominco has elected to fund its share of development costs, Teck Cominco and Inmet will jointly participate in the governance of the new Teck Cominco subsidiary as operator of the project and the indemnity provided by Inmet in respect of that subsidiary would terminate.

• If on the election date described above Teck Cominco elects not to fund its share of development costs, then Inmet would offer to purchase, and Teck Cominco would sell, Teck Cominco’s interest in MPSA, subject to the provisions of the MPSA shareholders agreement. The purchase price for Teck Cominco’s interest would be equal to the funding provided by Inmet under the arrangement for development costs plus accrued interest plus the fee payable to Inmet for providing the indemnity in respect of Teck Cominco’s final commitment. In such event Teck Cominco will reimburse Inmet for any project funding provided by Inmet on Teck Cominco’s behalf to that date plus interest.

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Access any of our news releases in this section

Petaquilla Press Release February 8, 2008
Petaquilla Press Release May 7, 2007
Petaquilla Press Release January 10 2007

Petaquilla Feasibility Study Update- Volume 1
(PDF English - 13.3 MB)

Petaquilla Feasibility Study Update - Volume 2
(PDF English - 6.3 MB)

Petaquilla Feasibility Study Update - Mine Plan
(PDF English - 32 KB)