Rio Tinto acquired the La Granja project through a public bidding process in late January 2006 carried out by the Peruvian government. The company is currently completing a feasibility study on the viability of mining in the central portion of the concession defined by previous drilling. The company is also exploring peripheral zones in an attempt to increase the projects resource base.
The terms of the agreement state that Rio Tinto pay the Peruvian government US$22 million, nearly US$11 million of which will go towards the La Granja Social Trust Fund, created by the Peruvian Government to undertake sustainable development projects in the district of Querocoto.
The company must also invest US$60 million in exploration and feasibility studies between 2006 and 2009. They have the option to extend this term to 2011. At the end of this period, if the project is economically viable, the company will file a feasibility study that contains a minimum investment of US$700 million or the construction of a 35,000 tonnes per day treatment plant. If after the exploration phase the company decides not to proceed with the project, it would implement a proper social and environmental closure program.
The project is currently undergoing a US$95 million prefeasibility study. Instead of looking at La Granja as a conventional milling operation producing concentrates for export, the prefeasibility study is seeking to demonstrate recovery of copper metal using sulphide bioleaching with the aid of bacteria, followed by electrowinning. First production is at least seven years away.
The La Granja project is technically challenging and has modest copper grades. However, the deposit contains significant mineralisation of more than two billion tonnes.