Resolution of Two Potential “Show Stoppers”:

Successful Community Relocation and Sourcing

of Water - Frontera Copper Corporation’s
Experience at the Piedras Verdes Copper
Project, Sonora, Mexico
Matthew D. Gray
Resource Geosciences
de Mexico SA de CV
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 The Project
-Piedras Verdes leachable copper deposit
-100% owned by Frontera Copper Corporation
-Conventional open pit mining, SX-EW process
-Production of cathode copper in 2nd half 2006
-Proven and probable minable reserve:
Ore Tonnes Total Cu Grade Contained Cu
(000s) (%) (lbs. Millions)

Proven 168,265 0.36 1,327

Probable 22,686 0.36 181
P+P 190,951 0.36 1,508

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 General Location

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 The Project – Frontera’s Opportunity
-AZCO and Phelps Dodge spent > $18M USD evaluating
the deposit.
-With copper prices at historic lows, Frontera Copper
Corporation purchased a fully drilled and defined
copper resource.
-The copper resource was not in doubt, but significant
social, technical, and legal issues would need to be
resolved in order to develop the deposit

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 The Community Problem
-Agrarian common use lands, community of >300
persons residing on top of copper deposit

Photo courtesy of Alejandra Platt

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 The Water Problem
-No water rights available for purchase in the project
region and development of new water rights prohibited

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 The Community Solution – Relocation
-Work with affected community and Municipal
government to develop a new townsite at location
chosen by residents

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 The Water Solution – Legal & Technical
-Create legal opportunity to develop water via technical
and administrative collaboration with National Water
Commission
- Develop water supply via focused exploration drilling
and development program

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Community Relocation

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 Project Site Location - Community

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 Project Site Location - Community

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 Community Relocation
Project development required relocation of Piedras Verdes
village:
• Agreement with agrarian community (ejido) to develop
new townsite
• State, municipal, and federal permits
• Agreements with 84 individual homeowners
Frontera Copper resolved relocation issues and avoided
project delays by respecting the following key points:

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 Community Relocation
1. Slow process, and cost of agreement is inversely
proportional to the amount of time available to reach
agreement
– FCC started early, accepted risk of initiating relocation prior
to financing of project
– Negotiations began in April 2002
– Final community relocation agreement reached in June
2004
– All 84 homes purchased and relocation completed in
September 2005.

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 Community Relocation
2. Must understand needs and motivations of affected
community
– Consistent and permanent presence on site (individuals
negotiate with and build trust with people, not corporations)
– Part time negotiators are not effective, momentum is lost
– Empowerment of front line negotiators; ability to advance
when opportunity presents itself
– Community must be lead participant in finding solutions,
company cannot dictate solution.

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 Community Relocation
3. Company must demonstrate that it is credible and
trustworthy
– Proposal must be fair and beneficial to community (common
sense, but sometimes overlooked)
– When dealing with multiple parties, same terms to all, no
sweetheart deals
– Always be true to your word - yes and no
– Never over-promise – a fatal error

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 Community Relocation
4. Financial compensation is not necessarily the most
important component of relocation agreement
– Lifestyle issues are of paramount importance
• Maintain community
• Provide employment opportunities to residents

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 Community Relocation
5. Keystone principal – most community members mimic
decisions of a few key peers
– The first supporters of a proposal are the hardest to
convince, but once on board, most others quickly follow
– Do not negotiate with unreasonable persons nor set
extreme precedents

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 Community Relocation - Agreement

1. FCC will construct townsite with electric, potable

water, and sewer services
2. FCC will construct schools, health clinic, community
buildings, recreational facilities, sanitary landfill, etc
3. Each resident will receive a lot with all services,
ready for construction

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 Community Relocation - Agreement

4. Each resident will be compensated for old home at

rate of double the assessed value
• Assessment by Federal agency
• 50% on signing
• 50% when resident has relocated to new village
• Residents free to salvage material from old
home

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 Community Relocation - Agreement
5. New village is not a “company town”
• Company does not build homes
• Infrastructure and homesites ceded to
Municipality and residents, who assume
responsibility for community
• Company provides logistical support
• Warehouse on site
• Material below cost

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• Moving assistance
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 Community Relocation – Jan 2005

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 Community Relocation – Feb 2005

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 Community Relocation – Mar 2005

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 Community Relocation – Apr 2005

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 Community Relocation – home salvage

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 Community Relocation – May 2005

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 Community Relocation – June 2005

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 Community Relocation – Aug 2005

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 Community Relocation – Oct 2005

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 Community Relocation – Oct 2005

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Water Supply : Legal and
Technical

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 Water Needs
• Closed circuit SX-EW system, water recycled,
zero discharge
• Wetting and evaporative losses
– 2,000 gpm peak need for plant and mine
– 4M cubic meters per year

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 Water Supply – known sources
Mocuzarit Reservoir
1,019M cubic meters water per year

San Bernardo Aquifer

Piedras Verdes
Project


Rio Mayo Aquifer
200M cubic meters per year

15km
Cuchujaqui Aquifer

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 Water Supply – so close and yet so far
• 200M cubic meters/yr subsurface water available from aquifer west
of mine
– Fully subscribed basin
– Controlled by agricultural union
• 1,016M cubic meters/yr surface water in reservoir north of mine
– Oversubscribed
– Controlled by agricultural union
• Obtaining water from known sources was theoretically possible,
but cost and time prohibitive due to political, social, and legal
issues – agricultural union has right of first refusal on sale of water
water rights

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 Water Supply – new sources

San Bernardo Aquifer

Piedras Verdes
Project potential well
field area


15km

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 Water Supply – new sources

- unstudied basin

- water availability unknown

- NWC prohibited from granting

new water rights in basin

potential well
field area


15km

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 Water Supply – new sources
• Technical studies indicated subsurface water might be
developed from unproven aquifer east of mine
– Presidential Decree prohibited the National Water
Commission from granting new water rights
– National Water Commission must issue technical
opinion of water availability in order to lift prohibition
– National Water Commission without resources to
complete required basin evaluation

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 Water Supply – solution
• FCC completed basin analysis in compliance with
National Water Commission standards
– Legal opening of basin for development: creation of
“paper water”
• FCC conducted technical study to locate and define well
field
– Development of “wet water”

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 Water Supply – legal framework
• “Paper water”
– Experts accredited by National Water Commission contracted
to conduct regional basin analysis
– Study conducted with constant feedback from NWC
– 12 months from inception to acceptance
– Study indicated 37M cubic meters/yr water availability in
basin, results allowed NWC to lift ban, but did not directly
provide technical information regarding mine aquifer location
and characteristics

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 Water Supply - technical
• “Wet water”
– 37 exploration boreholes in 2004 and 2005 to define
aquifer
– 3 test production wells constructed in 2004 to
measure aquifer characteristics
– 14 mine supply wells developed in 2005 and 2006

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 Water Supply – pump tests

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 Water Supply - conclusion

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 Water Supply – conclusion

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Acknowledgements

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 Community Relocation

Ing. Adelaido Gutierrez

Lic. Ricardo de la Cruz
Ing. Rodolfo Sauceda
Lic. Eduardo Ramirez

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