Lumina Copper Announces Positive Result of Preliminary Economic Assessment on Taca Taca Project
09.04.2013 | Marketwire
(all dollar figures in US dollars)VANCOUVER, 04/09/13 - Lumina Copper Corp ("Lumina") (TSX VENTURE: LCC) is pleased to announce the results of a Preliminary Economic Assessment (the "PEA" or the "Study") on its 100% owned Taca Taca copper/gold/molybdenum project located in the Puna region of Salta Province in northwestern Argentina. The results of the PEA show that a mining and sulfide concentrating operation at Taca Taca (the "Project") has favourable economic potential generating, at an 8% discount rate and $2.75/lb copper price, an estimated after tax net present value ("NPV") of $2.1 billion and an estimated after tax internal rate of return ("IRR") of 17.2%.
The PEA has evaluated the merits of constructing a mine and concentrator at Taca Taca to produce copper (including a gold by-product) and molybdenum concentrates. The Study was based upon a mine operating over a 28 year mine life delivering 120,000 tonnes per day of throughput (for an initial period of seven years) to an industry standard designed mill and concentration plant comprising two mill and flotation lines. An expansion of the concentrator, by way of a third line, to accommodate a total throughput of 180,000 tonnes per day from year eight onwards has been included in the evaluation.
Highlights of the Study's various estimates are as follows:
- Robust Project economics driven by a large mineral resource base, a higher grade starter pit (average plant feed grade of 0.72% copper for the first seven years of operation) and excellent regional infrastructure (railway line, available power and port) supporting a lower than average capital intensity ratio on initial capital.
- An estimated after tax NPV of $2.1 billion, at an 8% discount rate, and an estimated after tax IRR of 17.2%.
- Assumed long term metal prices of $2.75/lb copper, $1,200/oz gold and $12/lb molybdenum.
- Average life of mine ("LOM") copper production of approximately 244,000 tonnes per year over a 28 year mine life. LOM gold production will average 110,000 ounces per year, while molybdenum production will average 4,100 tonnes per year. Copper production over the first seven years of the mine's life will average 271,000 tonnes per year with a peak in year two of 349,000 tonnes of copper.
- C-1 LOM cash costs (net of by-product credits) estimated to average $1.11 per pound of copper sold.
- Initial capital of $3.0 billion and total LOM sustaining capital of $1.8 billion. The sustaining capital includes the addition of a third mill and flotation line and associated infrastructure and equipment to the concentrator during the sixth and seventh years of production ($431 million).
- A capital intensity ratio on initial capital of $11,090 per tonne of average annual copper produced for the first seven years of production.
- Capital payback on initial capital is expected to be 3.8 years after production begins.
- The Project is expected to generate approximately 1,100 full-time jobs. During the initial four years of pre-production, including 30 month concentrator construction period, approximately 1,300 direct jobs will be generated.
- The Project will potentially generate $9.5 billion in taxes and government royalties payable to the Argentine and Salta governments.
The salient details of the PEA are summarized in the table below:
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NPV (8% discount rate) $2.1 billion
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IRR 17.2%
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Metal Prices $2.75/lb Cu
$1,200/oz Au
$12/lb Mo
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Initial Capital Expenditure $3.0 billion
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LOM Total Sustaining Capital Expenditure $1.8 billion
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LOM C-1 Cash Costs (net by-product credits) $1.11/lb Cu sold
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LOM Average Annual Metal Production 244,000t Cu
110,000oz Au
4,100t Mo
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LOM Strip Ratio 1.57:1
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Mine Life 28 years
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Note: The PEA is preliminary in nature and includes the use of 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. Thus, there is no certainty that the PEA will be realized. Actual results may vary, perhaps materially. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Lumina will host a conference call on Tuesday, April 9th, 2013 at 11:00 am (Pacific Time) or 2:00 pm (Eastern Time) to discuss these results. Call-in information is provided at the end of this news release.
The PEA was supervised by Kevin Scott P.Eng., an independent qualified person. Mr. Scott has reviewed and approved the contents of this news release. The PEA was managed by MTB Project Management Professionals, Inc. (project management, infrastructure, ancillary capital and operating costs and cash flow modeling) and comprised several studies prepared by: SIM Geological Inc. and BD Resource Consulting, Inc. (mineral resource estimate and model, quality assurance, quality control program); CH Plenge & Cia S.A. (metallurgical and ARD test work); Wyllie & Norrish Rock Engineers Inc. and Fisher & Strickler Rock Engineering, (rock mechanics and pit slope design); WLR Consulting, Inc. (mine plan, production schedule, mining capital and operating costs); Ausenco (process engineering, infrastructure, capital and operating costs); TFP Construcciones SRL (rail study, capital and operating costs); Ausenco (tailings and waste rock storage, hydrogeology, capital and operating costs); Hugo Gil Figueroa & Asociados (power supply capital and operating costs); Schlumberger (water treatment capital and operating costs); H&H Metals Corp. (marketing study); RungePincockMinarco (metallurgical and mining peer reviews); Gochnour & Associates, Inc. (environmental management); and Social Capital Group (socioeconomic studies).
The National Instrument 43-101 technical report summarizing the results of the PEA will be available on the Lumina's website (www.luminacopper.com) and SEDAR (www.sedar.com) by May 25, 2013.
Project Economics
A cash flow valuation model for the Project has been developed based upon the geologic and engineering work completed to date for the PEA. The model was developed using a long term forecast copper price of $2.75/lb. This price forecast is consistent with the current, consensus long term price forecast of $2.89/lb copper made by 21 banking analysts (source: Thomson One Analytics, March 2013). In addition, long term by-product metal prices of $1,200/oz gold and $12/lb molybdenum were used.
The following table shows the estimated after tax NPV for the Project's cash flows at various discount rates:
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Discount Rate NPV
(Real) (millions)
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4% $4,610
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6% $3,120
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8% $2,090
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10% $1,350
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12% $820
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The following figure shows the sensitivity of the estimated after tax NPV (8% discount rate) and estimated after tax IRR to changes in the copper price:
To view the figure associated with this release, please visit the following link:
http://media3.marketwire.com/docs/lcc409i.jpg
Mineral Resources
The most recent mineral resource estimate for the Project (effective date of October 30, 2012) completed by Sim Geological Inc. and BD Resource Consulting, Inc., and the corresponding block model, has been used to develop the mine plan and production schedule for the PEA.
The Project's current mineral resource estimate (at a 0.3% copper equivalent cutoff grade) is shown in the table below:
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Size(1) Grade Contained Metal
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Tonnes CuEq(3) Cu Au Mo Cu Au Mo
(Million) (%) (%) (g/t) (%) (B lb) (M oz) (M lb)
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Indicated Resources
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2,165 0.57 0.44 0.08 0.013 21.15 5.56 615.8
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Inferred Resources(2)
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921 0.47 0.37 0.05 0.012 7.55 1.57 235.4
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Notes:
(1) Mineral resources have been estimated as at October 30, 2012. Totals may
not add up due to rounding.
(2) Inferred mineral resources have a great amount of uncertainty as to
their existence and as to whether they can be mined legally or
economically. It cannot be assumed that all or any part of inferred
mineral resources will ever be upgraded to a higher category.
(3) Copper equivalent (CuEq) calculated using $2.00/lb Cu, $800/oz Au and
$12.00/lb Mo and is not adjusted for mining and metallurgical recoveries
as these remain uncertain. The formula used is as follows: CuEq = Cu% +
(Au g/t x 0.583) + (Mo% x 6).
The Project's quality assurance/quality control ("QA/QC") program was monitored by independent consultant Dr. Bruce M. Davis, FAusIMM of BD Resource Consulting, Inc. Logging and sampling were completed at Lumina's secure facility located at the Project. Drill core was mechanically split on site before being sent to either ALS Chemex's or Alex Stewart Argentina's preparation facilities in Mendoza, Argentina. Lumina established a QA/QC protocol that comprised the use of reject duplicates, standards, and blanks inserted into the sample batches at regular intervals. Fine material duplicates were inserted during sample preparation (independent from the assay laboratory) by splitting of the pulps. A range of copper-gold-molybdenum standard reference materials (SRMs) of suitable matrix composition, together with blanks, were inserted by Lumina during the core sampling procedure. The structure of this QA/QC program follows accepted industry standards. Irregular or suspect results were addressed in a timely manner in order to ensure the integrity of the database. The results of this QA/QC program indicate that the Project's database of sampling, analytical and test data is of sufficient accuracy and precision to be used for the generation of mineral resource estimates.
Floating cone analyses were used at varying copper prices to determine the best sequence for potential economic development. The floating cone run used for the ultimate pit was based on a copper price of $2.00/lb, gold price of $1,100/oz, and a molybdenum price of $12/lb. The resulting pit limits were then used to develop the Project's mine plan and production schedule, as well as total waste. This mine plan resulted in a LOM stripping ratio of 1.57:1.
The following table shows the classification of the mill feed that forms the basis for the mine plan and production schedule used in the PEA:
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Classification of Mill Feed - PEA Production Schedule
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Tonnes Cu Mo Au
Classification (Millions) (%) (%) (g/t)
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Indicated 1,545 0.46 0.013 0.09
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Inferred 106 0.43 0.005 0.09
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The oxide gold mineral resource estimate defined within the Project's leached cap was treated as waste in the PEA production schedule. Metallurgical test work completed to date on the oxide gold resource has been limited. Preliminary test results indicate, however, that future studies should be considered and performed in sufficient detail to support an economic analysis.
Mining & Processing
The proposed Project will utilize conventional open pit mining methods and assumes a concentrator throughput of 120,000 tonnes per day (43.2 million tonnes per year) for an initial seven year period. In year eight, production is forecast to increase to 180,000 tonnes of throughput per day (64.8 million tonnes per year), with the addition of a third mill and flotation line, for the remaining 21 years of the mine's life. The increase in throughput corresponds with a decline in head grade as higher grade supergene mineralization is replaced by lower grade primary mineralization as the predominant material mined.
Mineralized material will be trucked from the open pit to two primary crushers located outside the pit before being conveyed to the coarse ore stockpile ahead of two semi-autogenous grinding and ball mill lines (three lines from year 8 onwards). Thereafter, material will be concentrated using conventional copper and molybdenum flotation technologies to produce a copper concentrate containing gold as a by-product and molybdenum concentrate. Based on the metallurgical test work completed to date, LOM metal recoveries are expected to be approximately 90% for copper, 64% for gold and 57% for molybdenum.
Concentrate Transportation
Both copper and molybdenum concentrates will be transported by rail from the Project to the port of Mejillones, near Antofagasta, in Chile for export by ship to Asian customers (the molybdenum concentrates are assumed to be sold in Chile). The railway line connecting Antofagasta and the city of Salta is located approximately ten kilometers from the Project. The railway line has the capacity to handle the transportation of all of the concentrates produced at the Project and the construction of a loading facility and rail spur near the concentrator has been included as part of the capital cost estimate. It has been assumed that the Project will operate its own fleet of locomotives and rolling stock to transport the concentrates and consumables between the mine site and port.
Capital Cost Estimates
Capital cost estimates for the Project have been completed. As previously discussed, the concentrator will begin operations with two milling and flotation lines before a third line is added and begins operation in year eight. Approximately 242 million tonnes of preproduction stripping will be required prior to mining operations commencing. It has been estimated that it will take approximately 2.5 years to complete preproduction stripping at a capitalized cost of $416.1 million The cost of preproduction stripping, including removal of the leach cap, has been included in the initial capital cost estimate.
The following table summarizes the capital cost estimates in the PEA:
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Estimate
Description (millions)
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Mine $581.5
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Preproduction stripping $416.1
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Plant and Processing $685.5
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Infrastructure $215.3
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Tailings Dam and Waste Rock Storage $139.5
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Other $581.0
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Contingency $386.5
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Total $3,005.5
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Startup Working Capital $54.9
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Capital costs for 3rd mill and flotation line and
associated ancillary costs $431.2
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LOM Sustaining Capital Costs $1,375.5
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Note: Figures above may not add up due to rounding.
The capital cost estimates have been compiled with an accuracy level of -25% to +35%.
The initial capital cost estimate for the Project in the PEA compares favourably to the initial capital costs cited for comparable copper projects under development. The capital intensity ratio on initial capital (initial capital divided by average annual copper production) is a measure of the amount of investment in initial capital infrastructure required to produce a tonne of copper at a project. The Project's capital intensity ratio on initial capital is estimated to be $11,090/tonne of copper production (for production prior to the expansion in year eight). The term "capital intensity ratio" does not have a standard meaning and may not be directly comparable to capital intensity ratios presented by other issuers.
Operating Cost Estimates
The PEA estimates that the C-1 cash costs (net of by-product credits) over the life of the mine will average $1.11/lb copper sold. C-1 cash costs include at-mine cash operating costs, treatment and refining charges, royalties, mine reclamation and closure costs, and copper and molybdenum concentrate transportation and freight costs.
The following LOM operating costs have been forecast for the Project:
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Site Operating Costs (per tonne of mineralized
material mined and fed to the concentrator)
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Mining $4.67
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Processing $4.26
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Infrastructure Maintenance $0.06
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Railroad Operations $0.19
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General & Administration $0.57
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Mine Closure Costs $0.02
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Total Site Operating Costs ($/tonne mineralized
material mined and fed to the concentrator) $9.77
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Other Key Costs
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Copper Concentrate Treatment Charges $70/dmt Cu concentrate
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Copper Refining Charges $0.07/lb Cu
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Ocean Freight, Port handling & Other Costs $79.67/wmt Cu concentrate
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Infrastructure
While the Project is located in a remote area of Argentina, it benefits from substantial regional infrastructure. The Project is located within ten kilometers of the railway line that connects Salta with the port city of Antofagasta in Chile. This rail infrastructure will be used to transport concentrates and select consumables to and from the port of Mejillones, 60 kilometers to the north of Antofagasta and other consumables from within Argentina. The Mejillones port has completed the design for, and plans to develop, the required infrastructure to handle the transfer of copper concentrates from rail cars to ships.
The cost to construct a 144 kilometer long high tension power line has been included in the initial capital cost estimate. This power line will connect the Project to a 1,000 Megawatt ("MW") capacity line that was previously used to export power from the TermoAndes S.A. power plant located near the city of Salta into northern Chile. TermoAndes S.A. is an Argentine subsidiary of AES Corporation, a global utility company. The Salta power plant is comprised of two 365 MW gas fired generating units that use gas sourced from the gas fields located in northern Salta Province. The plant currently has approximately 200 MW of excess generating capacity that is considered to be sufficient for the Project's power requirements as defined in the PEA.
Ausenco completed a water supply and water balance analysis for the Project. This analysis, supported by metallurgical test work using water with varying salinity levels, derived a processing make-up water flow sheet comprising a combination of high salinity water from the neighbouring salar, fresh water derived from wells and desalinated brackish well water. Conceptual design, capital and operating costs for the construction and operation of a water treatment plant were completed by Schlumberger and have been included in the PEA. Based on current studies, the processing water flow sheet shows that there are adequate sources of water available for the Project. Additional prospective areas have recently been identified near the Project that may be sources of additional fresh water which could further optimize the process water flow sheet.
Environmental
The Project has been designed to meet World Bank Guidelines for social and environmental management practices. Baseline studies completed to date have included surface and ground water quality, acid rock drainage, meteorological, and social. Provisions have been made within the mine plan and operating costs to account for the environmental protection and rehabilitation of the site once mining has been completed to meet the World Bank Guidelines.
Next Steps
On June 15, 2012, Lumina announced that it had entered into a strategic review process to enhance shareholder value. The completion of the PEA is an important step in the progress of the strategic review process. Additional site visits to the Project are planned for the 2nd quarter of 2013 to allow interested parties to complete their technical review of the Project.
Conference Call
Call-in details for the conference call to be held on April 9, 2013 at 11:00am (Pacific Time) are:
North American toll-free: 1-800-769-8320
International: 1-416-695-6616
A replay of this conference call will be available from Tuesday, April 9 until Tuesday, April 23 and will be posted on Lumina's website atwww.luminacopper.com. The replay numbers are:
North American toll-free: 1-800-408-3053
International: 1-905-694-9451
Pin: 9494892
LUMINA COPPER CORP
David Strang
President & CEO
CAUTION REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS: Information and statements contained in this news release that are not historical facts are "forward-looking information" or "forward-looking statements" within the meaning of Canadian securities legislation and the U.S. Private Securities Litigation Reform Act of 1995 (hereinafter collectively referred to as "forward-looking statements") that involve risks and uncertainties. This news release contain forward-looking statements, such as estimates and statements that describe Lumina's future plans, objectives, or goals, including words to the effect that the Lumina or management expects a stated condition or result to occur. Examples of forward-looking statements in this news release include information and statements with respect to: Lumina's plans and expectations for the Project; the results of the PEA, including, base case parameters, assumptions and analysis; forecasts of net present value, internal rate of return, initial and sustaining capital costs, operating costs and cash flows and sensitivity analysis, taxes, and royalties; plans related to mine and concentrator development and design, operations, equipment and infrastructure, including proposed throughput, production schedule and life-of-mine estimates for the Project; capital intensity on initial capital estimate and underlying capital cost and production forecasts; plans related to mineral processing and recovery methods; forecast metal recoveries; copper, gold and molybdenum price projections; mineral resource and cutoff grade estimates and underlying assumptions; estimates of power, transportation, water and labour requirements and costs; LOM stripping ratios; preproduction stripping requirements; potential to optimize the process water flow sheet; plans to meet World Bank Guidelines regarding social and environmental management practices; plans to address environmental protection and rehabilitation; and plans related to Lumina's strategic review process.
In certain cases, forward-looking statements can be identified by the use of words such as "plans", "estimates", "expects" or "does not expect", "is expected", "goal", "scheduled", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". These forward-looking statements are based, in part, on assumptions and factors that may change, thus causing actual results or achievements to differ materially from those expressed or implied by the forward-looking statements. Such factors and assumptions include, but are not limited to: assumptions concerning copper, gold and molybdenum prices; cutoff grades; power, transportation, water and labour requirements; processing recovery rates; mine plan and production scheduling; process and infrastructure design and implementation; accuracy of the estimation of operating and capital costs, applicable tax and royalty rates; accuracy of capital cost and production forecast used to estimate capital intensity on initial capital; open-pit design, accuracy of mineral resource estimates and resource modeling; reliability of sampling and assay data; representativeness of mineralization; accuracy of metallurgical test work and timely receipt of regulatory approvals.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Lumina to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks and other factors include, among others: risks related to fluctuation in the price of copper, gold and molybdenum; risks relating to estimates of mineral resources, production, operating costs, capital and sustaining costs, decommissioning or reclamation expenses proving to be inaccurate, the inherent operational risks associate with mining and mineral exploration activities, many of which are beyond Lumina's control; expropriation risks; risks related to fluctuation in foreign currency exchange rates, interest rates and tax rates; requirements for additional capital; capital and operating cost escalation; restrictions on the import of mining plant, equipment, supplies and reagents; inflation; government regulation of mining operations; environmental, safety and regulatory risks; unanticipated reclamation expenses; title disputes or claims; limitations on insurance coverage; changes in project parameters as plans continue to be refined; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; competition inherent in the mining exploration industry; delays in obtaining governmental approvals or financing or in the completion of exploration, development or construction activities, as well as those factors discussed in the sections entitled "Risks and Uncertainties" in Lumina's annual Management's Discussion and Analysis. Although Lumina has attempted to identify important factors that could affect Lumina and may cause actual actions, events or results to differ, perhaps materially, from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended.
There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements in this news release are based on beliefs, expectations and opinions as of the effective date of this news release. Lumina does not undertake any obligation to update any forward-looking statements included herein, except in accordance with applicable securities laws.
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 news release.
Contacts:
Lumina Copper Corp.
David Strang, President & CEO
+ 604 646 1880
+ 604 687 7041 (FAX)
dstrang@luminacopper.com
www.luminacopper.com