The San Nicolás property encompasses 8,888 hectares of mineral claims in Zacatecas State in central Mexico, approximately 60 km southeast of the city of Zacatecas at an elevation of 2,150 metres above sea level.
In addition, various surface rights and water rights in the immediate project area are held by the San Nicolas project. A fully permitted drill core storage, field office and camp facility have been maintained at the San Nicolas project site since 2001.
Agnico Eagle acquired an effective 50% interest in San Nicolas in April 2023 by committing to fund the first US$580 million of post-closing costs with subsequent funding to be contributed according to each partner’s ownership percentage. The Company’s contributions will be made as study and development costs are incurred – there is no up-front payment from Agnico Eagle (see the Company’s and Teck’s joint news releases of September 16, 2022 and April 6, 2023 for transaction details).
The San Nicolas copper-zinc volcanogenic massive sulphide (VMS) deposit was discovered by Teck in November 1997 through geological mapping, geophysical surveys and drilling. Drilling on the property has intersected two massive sulphide deposits, the largest of which is San Nicolas which is divided into upper and lower zones. Additional base metal mineralization and alteration has been identified elsewhere on the property.
The primary ore deposit at San Nicolas was defined by 46,750 metres of diamond drilling completed from 1997 through 2016, and a scoping study was completed in 2016.
Environmental and social baselines studies were initiated in 2017 and in 2018 a 30,226-metre multi-purpose drilling program, including geotechnical, hydrogeological, delineation and metallurgical drill holes, was completed.
As at December 31, 2021 on a 100% basis, Teck estimated San Nicolas to contain 105.2 million tonnes of proven and probable mineral reserves at average grades of 1.12% copper, 1.48% zinc, 0.40 g/t gold and 22 g/t silver.
A prefeasibility study completed by Teck in March 2021 describes attractive economics and project parameters:
• The project contemplates a modern truck-and-shovel open pit, processing, and flotation operation
• First production expected in 2026, with an estimated mine life of 15 years and meaningful potential for mine life extension and regional exploration upside
• Expected to produce 63 thousand tonnes per annum (ktpa) of copper and 147 ktpa of zinc in concentrate over its first five years of production
• Average life of mine head grades of 1.13% copper and 1.49% zinc
• Average C1 operating costs of US$(0.16)/lb copper and US$0.44/lb copper over the first five years of production and life of mine, respectively, net of by-product metals.
• US$842 million development capital cost estimate
• 2.6 year payback and 33% after-tax Internal Rate of Return (IRR) based on US$3.50/lb copper and US$1.15/lb zinc
Teck and Agnico Eagle anticipate that development capital costs could be in the range of US$1,000 million to US$1,100 million, based on current cost environment and estimate accuracy. With development capital costs in this range, and assuming spot prices of approximately US$3.57 per lb. copper and US$1.46 per lb. zinc, the estimated payback period would be 2.5 to 2.8 years with an estimated after-tax IRR of 33%.
Geology & Mineralization
The San Nicolas mineralization is hosted in a felsic volcaniclastic unit, flanking flows and breccias of a felsic flow-dome complex. Mafic flows, sills and dikes dominate the footwall lithologies. Alteration consists of common calcite stringers, iron-carbonate and barite in the footwall with localized intense chlorite plus quartz-sericite alteration of the felsic and mafic host rocks.
The upper sulphide zone (Cap Zone) is dominated by fine-grained pyrite with high concentrations of sphalerite and chalcopyrite that range from massive to semi-massive to laminated and strongly brecciated.
The lower sulphide zone (Feeder Zone) is dominated by fine-grained pyrite and chalcopyrite with local sphalerite. Mineralization is generally massive to semi-massive sulphide with well-developed sulphide stringers developed below and lateral to the massive sulphide.
Development
A detailed plan to complete a feasibility study, permitting, and community engagement has been developed, with initial work underway since January 2022. Further, an environmental and social baseline survey, including in-depth archaeological surveys and clearances, was carried out by Teck from 2018 to 2021. Well-developed community engagement and investment programs have resulted in strong support for development from stakeholders near the project and more broadly in Zacatecas.
The joint venture partners are planning to submit an Environmental Impact Assessment and Permit application for San Nicolas in the first half of 2023 and are targeting completion of a feasibility study in early 2024.
Agnico Eagle’s funding of the project in the first two years is expected to be approximately US$50 million.