Northern Peru Copper Corp. announced Tuesday the results of a Preliminary Economic Assessment ("PA") on its 100% owned Galeno copper/gold/silver/molybdenum Project located in the Yanacocha District of Northern Peru. The results of the PA demonstrate that an open pit mining operation at Galeno is economically viable. Highlights of the study are as follows (all dollar figures in US dollars):
Highlights

- Robust project economics driven by high grade starter pit, exceptionally low strip ratio, simple processing technology, lower power requirements for milling soft ore, good existing infrastructure and large mineral resource.

- Base Case Net Present Value ("NPV") of $548 million and an Internal Rate of Return ("IRR") of 21.7% (using $1.20/lb copper, 8% real discount rate, $100/tonne treatment charge and $0.07/lb refining charge).

- Capital payback in 3.1 years.

- Average copper-in-concentrate production of 144,000 tonnes per year for 20.7 years with the first five years producing over 200,000 tonnes of copper-in-concentrate. Annual by-product production averages 43,000 ounces of gold, 2 million ounces of silver and 1,900 tonnes of molybdenum.

- C-1 life of mine ("LOM") cash costs (net of by-product credits) are estimated to average $0.486 per pound of copper mined.

- The Project will generate approximately 665 permanent jobs and 2,290 jobs during the two year construction period and $1.2 billion in taxes, government royalties and employee profit sharing payments.
Project economics

SRK Consulting developed a cash flow valuation model on the Project based upon the geological and engineering work completed to date. The base case was developed using long term forecast metal prices of $1.20/lb for copper, $425/oz for gold, $6.50/oz for silver and $10/lb for molybdenum oxide. These price forecasts are considerably lower than current prices which, as of June 30, were $3.35/lb for copper, $600/oz for gold, $10.70/oz for silver and $26.25/lb for molybdenum oxide.
Resources

WLR Consulting used the existing 43-101 resource estimate previously filed on SEDAR for Galeno and the corresponding block model to develop a mine plan and production schedule for the Project. That resource estimate determined Indicated Resources of 504 million tonnes grading 0.54% copper, 0.12g/t gold and 0.015% molybdenum and additional Inferred Resources of 554 million tonnes grading 0.39% copper, 0.09g/t gold and 0.010% molybdenum at a 0.4% copper equivalent cutoff grade was also delineated. (Cu Equivalent prices: Cu $1.00/lb, Au: $400/oz, Mo: $6.00/lb).

Using floating cone evaluations of potential economic pit limits on the Indicated Resource and including Inferred Resources when the pit shells moved out of the Indicated Resource, WLR Consulting used Indicated Resources of 481 million tonnes, Inferred Resources of 190 million tonnes and total waste of 87 million tonnes in determining the mine plan and production schedule. This analysis resulted in a LOM stripping ratio of 0.13:1 including the prestripping of 5.8 million tonnes of overburden.

Note: The PA is preliminary in nature and includes the use of inferred resources which are considered too speculative geologically to apply economic considerations that would enable them to be categorized as mineral reserves. Thus, there is no certainty that the production profile concluded in the preliminary assessment will be realized. Actual results may vary, perhaps materially.
Mining & milling

The Project will utilize conventional mining and milling processes and will benefit significantly from the exceptionally low waste to ore stripping ratio of 0.13:1. This would be one of the lowest stripping ratios of any major open pit mine in the world should the Project be developed.

Production is scheduled to deliver 90,000 tonnes per day (32.4 million tonnes per year) of sulphide ore to the primary crushers for 20.7 years. The milling and concentrator plant are forecast to produce, on average, 144,000 tonnes per year of copper in concentrate, 43,000 ounces per year of gold, 2 million ounces per year of silver and 1,900 tonnes per year of molybdenum in concentrate. Average LOM metallurgical recoveries have been estimated to be 90.2% for copper, 51% for gold, 80% for silver and 54.9% for molybdenum, producing a copper concentrate grading on average 33% copper, 3.1g/t gold and 145g/t silver and molybdenum concentrate grading 54% molybdenum. Milling will benefit significantly from the softness of the ore as preliminary test work indicates a Bond Work Index of less than 10 Kwh/tonne.

The Project will also benefit from a higher grade starter pit that will deliver, on average, more than 200,000 tonnes of copper in concentrate in the first 5 years of the mine's operation
Capital costs

Direct Capital Costs – $647.3 million
Indirect Capital Costs – $ 89.2 million
Owner Direct and Indirect Capital Costs – $116.1 million

Total (Base Case) – $852.6 million
Upfront Working Capital – $ 16 million
LOM Sustaining Capital Costs – $340.4 million

The capital cost estimates have been compiled with an accuracy level of -13% to +26%.
Operating costs

The results of the PA show that a mine at Galeno will be a low cost operation. The Project benefits significantly from the low strip ratio, easy terrain, close proximity to major infrastructure and soft ore. The PA estimates that the C-1 cash costs (net of by-products) over the life of the mine will average $0.486 per pound of copper mined. C-1 cash costs include at-mine cash operating costs, concentrate transportation and freight costs and all treatment and refining charges.
Infrastructure

Galeno is in an established mining district due to the presence of the world-class Yanacocha open pit gold mine 16 kilometres to the west and the in-construction Cerro Corona mine approximately 34 kilometres to the north. Substantial regional infrastructure is in place with water, power and skilled labour available in the vicinity of the project.
Environmental

The Project will utilize World Bank Guidelines for environmental management practice development and design. Preliminary baseline studies completed to date have included initial surface water quality sampling, archaeological studies, socio-economic reviews and biological and re-vegetation studies. Waste rock will be minimal due to the deposit's low stripping ratio. Preliminary test work has shown mill tailings as non-acid generating.
Next steps

The infill drilling program was completed in May and an updated 43-101 mineral resource estimate will be completed later this month. This new mineral resource estimate will form the basis of the prefeasibility study that is currently underway and is expected to be completed during the 4th quarter. Additional metallurgical testing is also being completed and will be incorporated into the prefeasibility study. In addition, the Company continues to drill the adjacent Hilorico gold target with two drilling rigs and anticipates that the exploration program will continue through the end of the 3rd quarter.