AQM Copper Releases Positive Preliminary Economic Assessment for the Zafranal Copper Gold Project
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 12/11/12 -- AQM Copper Inc. (TSX VENTURE: AQM)(BVL: AQM) ("AQM" or the "Company") is pleased to announce the completion of a positive, independent Preliminary Economic Assessment ("PEA") of the Company's Zafranal Project located in the Southern Peru Porphyry Copper Belt. Using long-term forecasted copper and gold prices of US$3.00/lb and US$1,274/oz respectively; the Project is projected to yield the following financial results:
Summary of Financial Results (1)
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Description Pre-tax Post-tax(2)
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Initial Capital Cost (US$ million) 1,520 1,520
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Net Cash Flow (US$ million) 3,192 1,814
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Net Present Value at 5% discount rate (US$ million) 1,852 927
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Net Present Value at 8% discount rate (US$ million) 1,332 588
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Net Present Value at 10% discount rate (US$ million) 1,062 414
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Payback (years)(3) 1.9 2.6
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Internal Rate of Return (%) 26.7 17.4
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Notes:
(1) Valuation based on 100% Project and 100% Equity
(2) Includes mining royalty, special mining tax, corporate income tax and
workers' profit sharing
(3) From the start of concentrator operations
The PEA was completed by Tetra Tech WEI Inc., ("Tetra Tech"), and contains production parameters, capital costs, operating costs, pre-tax and post-tax financial projections for an open pit mine processing 80,000 t/d of mill feed and a leach operation based on the treatment of approximately 20,000 t/d of oxide and secondary sulphide material. The reader should be aware that the preliminary economic assessment is preliminary in nature, and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. The reader should also be aware that there is no certainty that the results forecast in the preliminary economic assessment will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
PEA HIGHLIGHTS
-- Measured and Indicated Resource is 557.2 Mt grading 0.36% Cu and 0.07
g/t Au.
-- The portion of the reported resource within an economic pit shell ("in-
pit mineral resource") suitable as feed to a concentrator totals 425.3
Mt grading 0.38%Cu and 0.07 g/t Au, and contains 3.5 billion pounds of
copper and 977,000 ounces of gold.
-- The in-pit mineral resource suitable as feed to a leach facility totals
87.3 Mt grading 0.23%Cu and containing 443 million pounds of copper.
-- Conventional open pit with mine life of approximately 15 years with a
strip ratio of 1.06.
-- Conventional porphyry copper concentrator rated at nominal 80,000 t/d
throughput.
-- Thickened tailings disposal in a natural basin approximately 10 km
downhill from the plant site.
-- Permanent heap leach pad and solvent extraction and electrowinning (SX-
EW) plant designed to produce a nominal 10,000 t/a of high quality
copper cathodes from oxide and secondary sulphide feed material.
-- Project development scenario considers fresh water supply from a
desalination plant on the coast; however, the Company is actively
talking with authorities and local communities to find alternative
arrangements that would provide benefits for the communities in exchange
for the use of local water sources by the Project.
-- The Zafranal Property lies outside areas of agricultural activity and
there are no communities located on the Property.
-- AQM has undertaken an extensive stakeholder relations program in an
effort to fully consult with local communities and regional authorities,
address their concerns and reduce or mitigate the potential political
and social risks that could affect the Project.
-- Additional exploration targets have been identified and drilling is
planned for the second quarter of 2013.
Bruce Turner, President and Chief Executive Officer of AQM states, "We are very pleased with the PEA for the Zafranal Project, as it indicates the economic viability of the Project in a jurisdiction favourable to mining. In the preparation of the PEA, we did not find any serious flaws in the selected development scenario or any significant technical challenges in the proposed design and construction of the facilities. We did identify alternative approaches that could significantly enhance the feasibility of the Project's development including a smaller, less capital-intensive project focused on the higher-grade supergene zone, and the elimination of the desalination option for water supply, which represents $275M in capital cost and $20M per year in operating costs. These alternatives and other opportunities will be fully explored in the next stage of engineering, which is already underway. Our in-depth knowledge of the geology and mineralization on the Property has also led us to identify other anomalous zones and these will be explored in our 2013 field program that is currently being permitted."
PEA SUMMARY
LOCATION:
-- The Zafranal Project is located in southern Peru about 150 km by road
(90 km straight-line distance) northwest of the city of Arequipa, 80 km
from tidewater and approximately 150 km by road from the Port of
Matarani.
-- The regional climate is dry, with average temperatures ranging between
12 degrees C in winter and 28 degrees C in summer. The elevation of the
Project ranges from 2,400 to 3,000 meters above sea level. Precipitation
is scarce and agriculture is generally possible only in river valleys
with accessible irrigation.
GEOLOGY:
-- The occurrence of mineralized porphyries is structurally controlled by a
northwest trending series of strike-slip faults belonging to the
Incapuquio fault system, and regional east-west trending structures. The
intersections of these two fault systems appear to be the main
mineralization control on the Property.
-- Additional exploration targets have been explored along both main
structural trends, with new geophysical and geochemical anomalies found
on several of them. The Ganchos anomaly that lies 3 km to the south of
the Main Zone has a surface mapped alteration zone measuring
approximately 1,000 m by 500 m. Drilling is planned on these targets in
2013 to confirm the presence of additional mineralization.
MINERAL RESOURCE:
-- The Mineral Resource was calculated using ordinary kriging on 78,000
samples from 134,000 m of drilling that resulted from 399 diamond and
reverse circulation drill holes.
-- The resource considered mineralized material greater than 0.2% Cu from
four deposits on the Property: Main Zone, Victoria, Sicera Norte and
Sicera Sur.
-- Measured and Indicated Resource at a 0.2% Cu cut-off is 557.2 Mt grading
0.36% Cu and 0.07 g/t Au.
-- Inferred Resource is 57.3 million tonnes grading 0.27% Cu and 0.03 g/t
Au.
-- The Measured and Indicated Resource for the Main Zone at a 0.3% Cu cut-
off is 210.7 Mt grading 0.55% Cu and 0.09 g/t Au.
MINING:
-- An in-pit mineral resource suitable as feed to a concentrator was
identified in the Main Zone and Victoria porphyries totalling 425.3 Mt
grading 0.38% Cu and 0.07 g/t Au, containing 3.5 billion pounds of
copper and 977,000 ounces of gold.
-- An in-pit mineral resource suitable as feed to a leach facility was
identified in the Main Zone and Victoria porphyries totalling 87.3 Mt
grading 0.23% Cu, containing 443 million pounds of copper.
-- The in-pit mineral resources identified are amenable to open pit mining,
generating two contiguous pits with a combined strike length of 3.4 km,
an average width of 700 m, and a maximum depth of 555 m.
-- Strip ratio (including pre-production tonnage) is equal to 1.06 t of
waste to 1.0 t of mineralized material.
-- Pre-production stripping of 117 Mt will be required to ensure sufficient
mineral exposure prior to production.
-- Conventional open pit with mine life of approximately 15 years.
-- Pit slope design yielded an average overall slope angle of 41.5 degrees
for both pits.
-- Peak daily movement reaches 215,000 t/d of material.
MILLING:
-- The proposed flotation feed does not present any significant technical
difficulties for beneficiation and the Zafranal mill facility will
resemble other concentrators processing typical copper porphyry
mineralization.
-- Copper and gold recoveries are estimated to be 87.7% and 49%,
respectively.
-- Copper concentrate grade is expected to average 28% Cu and contain an
average of 3 g/t of gold. A total of 5,031,000 dmt of concentrate will
be produced over the life of the Project.
-- No deleterious elements in any significant concentration were found in
the copper concentrate produced from the test work, and all the impurity
elements were found to be below smelter penalty limits.
LEACHING:
-- A permanent heap leach pad and SX-EW plant have been designed to produce
a nominal 10,000 t/a of high quality copper cathodes from oxide and
secondary sulphide feed material grading in the range of 0.15 to 0.5%
Cu, with an average grade of 0.23% total copper.
-- The overall copper recovery is estimated to be 60% of total copper over
a 541-day leach and wash cycle.
SITE ACCESS:
-- The main access to the site will be via a new/upgraded 65 km paved road
from the plant site to Pedregal de Majes on the Pan American Highway.
-- Product will be transported approximately 150 km from the plant site to
the Port of Matarani via truck. An alternative truck/rail system for
transporting concentrate will be studied in the next phase of
engineering design.
-- A new 38 km gravel topped access road will also be constructed from
Corire to the plant site for transporting personnel and supplies.
FRESH WATER SUPPLY AND DISTRIBUTION:
-- Fresh water supply for the Project, as considered for this PEA, is from
a desalination plant on the Pacific Coast, approximately 115 km from the
plant site.
-- The Company is actively talking with authorities and local communities
to find alternative sources of water that would provide benefits for the
local communities in exchange for the use of local water sources by the
Project.
POWER SUPPLY AND DISTRIBUTION:
-- The power delivery and site power distribution systems are based on a
total installed power requirement of 140 MW and the peak demand of 135
MW.
-- Power will be delivered from the 220 kV Socabaya Substation located in
Arequipa and will require the installation of an approximately 120 km
transmission line to a new 220 kV substation adjacent to the proposed
concentrator.
SOCIAL AND ENVIRONMENT:
-- Environmental and social baseline studies for the Project have been
conducted to compile a Semi-Detailed Environmental Impact Assessment
(EIAsd) in order to obtain environmental certifications and permits for
the exploration programs of the Project. A second modification to the
EIAsd has been filed for the 2013 exploration campaign on the Property.
-- Formal baseline studies for the Project will commence in the next phase
of engineering and these will form the basis of the Environmental Impact
Assessment (EIA) for the Project.
-- A number of potential environmental impacts associated with the Project
have been identified. However, the Company believes that proper design
and operation of the planned facilities will mitigate or eliminate these
impacts.
INITIAL CAPITAL COSTS:
-- The initial capital cost for the Project is estimated at US$1,519.7
million with an expected accuracy range of +/-35%.
-- The capital cost summary and its distribution by area is shown below:
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Labour Manhour Labour Cost Material Cost
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1 - Direct Costs
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15 Open Pit Mining 3,264,828 33,853,935 89,652,778
20 Process Plant 2,265,690 19,575,564 57,581,043
21 Leach area 182,393 1,575,876 13,239,939
30 Tailings and
Water Management 25,932 224,049 49,318,009
35 Infrastructures 606,387 5,239,184 58,021,637
40 Fresh Water
supply 147,294 1,272,619 61,360,570
50 Power Supply and
Distribution 8,978 77,566 49,675,910
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Subtotal 6,501,502 61,818,794 378,849,887
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2 - Indirect Costs
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91 Project
Indirects 41,760 4,066,099 173,894,873
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Subtotal 41,760 4,066,099 173,894,873
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3 - Owner's Costs
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98 Owner's Costs 0 0 67,777,915
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Subtotal 0 0 67,777,915
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4 - Project
Contingency
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99 Contingencies 0 0 202,912,212
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Subtotal 0 0 202,912,212
PEA Total 6,543,262 65,884,893 823,434,887
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Construction Mechanical Total Cost
Equipment Cost Equipment Cost (USD)
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1 - Direct Costs
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15 Open Pit Mining 34,082,832 210,099,771 367,689,316
20 Process Plant 16,054,396 147,783,856 240,994,860
21 Leach area 3,705,163 18,578,436 37,099,415
30 Tailings and
Water Management 164,128 5,402,184 55,108,370
35 Infrastructures 41,971,267 10,107,649 115,339,737
40 Fresh Water
supply 20,453,523 121,448,522 204,535,234
50 Power Supply and
Distribution 60,725 441,000 50,255,201
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Subtotal 116,492,035 513,861,418 1,071,022,133
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2 - Indirect Costs
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91 Project
Indirects 0 0 177,960,973
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Subtotal 0 0 177,960,973
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3 - Owner's Costs
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98 Owner's Costs 0 0 67,777,915
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Subtotal 0 0 67,777,915
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4 - Project
Contingency
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99 Contingencies 0 0 202,912,212
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Subtotal 0 0 202,912,212
PEA Total 116,492,035 513,861,418 1,519,673,233
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PRODUCTION QUANTITIES:
-- The average life of project material tonnages, grades and metal
production are shown below:
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Description Value
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Mine Life (Years) 15(4)
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Material Milled/Leached
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Total Tonnes to Mill ('000) 425,310
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Average Annual Tonnes to Mill ('000) 28,354
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Total Tonnes to Leaching ('000) 87,256
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Average Annual Tonnes to Leaching ('000) 6,712
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Average Grade
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Copper (%) - Mill 0.378
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Gold (g/t) - Mill 0.071
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Copper (%) - Leaching 0.230
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Gold (g/t) - Leaching 0.085
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Total Production
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Copper ('000 lb) - Mill 3,105,452
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Gold ('000 oz) - Mill 479
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Copper ('000 lb) - Leaching 265,863
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Average Annual Production
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Copper ('000 lb) - Mill 207,030
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Gold ('000 oz) - Mill 32
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Copper ('000 lb) - Leaching 20,451
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Note: (4) Leaching is active for 13 years.
OPERATING COSTS
-- Average life of mine operating cost is estimated to be $8.29/t of plant
feed material processed, including mining, re-handling, milling and
leaching.
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Area Unit Cost (US$/t processed)
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Mining 2.56
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Milling 4.23
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Tailings and Water Management 0.07
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G&A 0.49
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Leaching 0.94
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Total Operating Cost 8.29
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-- Average life of mine operating cost is estimated to be $1.26/lb Cu
produced from plant feed material processed, including mining, re-
handling, milling and leaching as shown below:
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Cost Item Unit Unit Cost ($)
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Mining $/t mined 1.40
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Mining $/t milled 3.08
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Milling $/t milled 5.10
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Tailings Management $/t milled 0.08
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G&A $/t milled 0.60
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Subtotal Flotation $/t milled 8.86
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Subtotal Leach $/t leached 5.54
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Total Flotation & Leach $/t processed 8.29
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Subtotal Flotation $/lb Cu Produced 1.21
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Subtotal Leach $/lb Cu Produced 1.82
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Total Flotation & Leach $/lb Cu Produced 1.26
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-- The average C1 cash cost is estimated at $1.14 and $1.49 per payable
pound of copper(5), for the first five years of production and for the
life of mine, respectively (as defined by Wood Mackenzie).
(5) Produced pounds of copper net of transport losses and smelter deductions.
FINANCIAL SENSITIVITIES:
-- In addition to the Base Case pre-tax evaluation using a copper price of
$3.00/lb, Initial Capital Cost of US$1,520 million and a discount rate
of 8%, two alternate case scenarios were developed as a function of
varying copper price. The following sensitivity table provides net
present value, internal rate of return and payback period for the base
case and two alternate case scenarios:
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Item Description Alternate Case 1 Base Case Alternate Case 2
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Copper Price (US$/lb) 2.70 3.00 3.30
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Gold Price (US$/oz) 1,274 1,274 1,274
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Net Present Value (US$ million) 814 1,332 1,849
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Internal Rate of Return (%) 20.4 26.7 32.5
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Payback (years) 2.3 1.9 1.6
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Qualified Persons
The NI 43-101 Technical Report is being prepared by an integrated engineering team led by Tetra Tech in Vancouver, British Columbia, Canada. The Technical Report will be filed on SEDAR within 45 days. Further information regarding geology, sampling methods, data verification, QA/QC and assay lab is provided in the NI 43-101 Technical Report dated May 7, 2012, filed on SEDAR at www.sedar.com or the Company's website at www.aqmcopper.com.
The following Qualified Persons have reviewed and approved the technical disclosure contained in this press release:
-- Alvaro Fernandez-Baca, P.Geo., a Consulting Geologist, regarding the
contents of this news release on behalf of the Company
-- Gregory Z. Mosher, P.Geo., a Tetra Tech employee, regarding geological
setting, deposit types, exploration, drilling data verification and
mineral resource estimates
-- Carlos Guzman, a NCL employee, regarding mining methods and mining
capital and operating costs
-- Marinus Andre De Ruijter, P.Eng., a Tetra Tech employee, regarding
mineral processing and metallurgical testing, recovery methods and
process capital and operating costs
-- Hassan Ghaffari, P.Eng., a Tetra Tech employee, regarding
infrastructure, and capital and operating cost estimate
-- Sabry Abdel Hafez, Ph.D., P.Eng., a Tetra Tech employee, regarding the
economic analysis
-- Wilson Muir, P.Eng., a Knight Piesold employee, regarding tailings and
water management design and TMF capital and operating costs
-- Monica Danon-Schaffer, Ph.D., P.Eng., a Tetra Tech employee, regarding
environmental studies and permitting.
On Behalf of the Board
AQM COPPER INC.
Bruce L. Turner, President and Chief Executive Officer
Forward-Looking Information
This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, that address events or developments that AQM Copper Inc. (the "Company") expects to occur, are forward-looking statements. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward-looking statements. Factors that could cause the actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, and continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Forward-looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. The Company undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors, should change.
About AQM Copper
AQM Copper Inc. is a Canadian based mineral exploration company exploring and developing copper deposits in South America. Through its wholly owned Peruvian subsidiary, Minera AQM Copper Peru S.A.C., the Company is developing the Zafranal Copper-Gold Porphyry Project located in Southern Peru. Minera AQM Copper Peru S.A.C. is the operator of a 50/50 JV with Teck Resources Limited through a sole purpose Peruvian company formed for Zafranal as announced in its press release on July 8, 2010. Management and directors have extensive experience working for the world's largest mining copper producers. Please refer to the Company's website at www.aqmcopper.com, for further information regarding the Company and its projects.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE
Contacts:
To speak with an Investor Relations representative:
Pinnacle Capital Markets LTD.
Spyros P. Karellas
(416) 433-5696 or (416) 800-8921
spyros@pinnaclecapitalmarkets.ca