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2008 News

Cardero Receives Final Preliminary Economic Assessment Technical Report

Cardero Resource Corp. ("Cardero" or the "Company") -- (TSX: CDU, NYSE-A: CDY, Frankfurt: CR5) is pleased to announce that SRK Consulting (Canada) Inc. ("SRK") has updated the recent Preliminary Economic Assessment for the Pampa de Pongo iron deposit. The increased NPV and IRR result from the positive MIDREX Direct Reduction material evaluation (See NR 08-25), which demonstrated the suitability of Pampa de Pongo iron oxide pellets as Direct Reduction (DR) process feed.

DR-grade pellets typically attract a premium of at least 10%, which has increased the after-tax NPV8% by approximately US$700 Million to US$4.1 Billion, and increased the real after-tax IRR from 18% to 20%. The life of mine project revenue, net of all off-site costs and project royalties and including copper and gold credits, is now estimated at US$ 46 billion, equating to average annual net revenue of US$ 1.93 billion. Life of mine net pre-tax operating cash flow is estimated at US$38.9 billion or US$1.6 billion average annually.

Site estimated operating costs are approximately 15.8% of net revenue, providing a very high project operating margin and are indicative of the robust project fundamentals. On a per tonne basis, the net revenue (pre-tax) after all off-site costs and royalties and including copper and gold credits is approximately US$140 per tonne of pellets sold, with the corresponding total cost of production approximately US$22 per tonne of pellets sold, yielding net operating cash flow per tonne of pellets produced of US$118.

The Company cautions that the PEA is preliminary in nature, and is based on 100% 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. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Accordingly, there can be no certainty that the results estimated in the SRK PEA will be realized. The PEA results are only intended as a preliminary first-pass review of the potential project economics based on a minimal amount of information. In addition, the cavability assessment of the deposit is preliminary as it is based on a limited number of drillholes and, as such, substantial work is required to verify the current caving and output assumptions.


The effective date of the mineral resource estimate is September 30th, 2008. SRK is not aware of any environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant issues that may affect the mineral resource estimate. The classified inferred mineral resource estimates at a 15% iron cut-off grade are shown in Table 1. The economic cut-off used to generate mineral resources was assumed and is based on experience with similar projects. The final cut-off required to produce a saleable product will need to be confirmed by future metallurgical test work. This economic cut-off was applied to both the Central and South Zones. Although the South Zones contribute a relatively small tonnage, SRK is of the opinion that there are reasonable prospects for additional tonnage in this area which could then make these resources amenable to underground mining methods. At the East Zone, a large magnetic anomaly, with potential for 350-500 million tonnes of conceptual mineralization is ready for drill-testing. A single drillhole, which tested the southern edge of the anomaly, intersected 292 metres of semi-massive to massive magnetite mineralization.

SRK Classified Inferred Mineral Resources for the Pampa de Pongo Deposit at 15% Iron cut-off



































SRK has delivered the final Preliminary Economic Assessment Technical Report to Cardero and the report will be filed with SEDAR forthwith. 


The results of the preliminary economic assessment, based on the currently available data and the assumptions used, demonstrate that Pampa de Pongo is an economically robust project that warrants further development. The project is situated in a very favourable location, a short distance from critical infrastructure, including a deep-sea port facility, located 38 kilometres west of the deposit on the Pacific coast of Peru.

Drilling and magnetic surveys indicate the presence of a large, massive magnetite mineralized Central Zone that is conducive to underground bulk mining. The South Zone resource and other exploration targets have a good to excellent possibility to enhance the total material available for exploitation. Further exploration of the East Zone, if successful in outlining 350-500Mt of conceptual mineralization, could allow concurrent development with Central Zone, significantly increasing the overall mineral resources, pellet production tonnage and revenue.

The successful metallurgical test work completed for the Central Zone mineralization indicates that Pampa de Pongo iron oxide pellets will exceed the stringent requirements of blast furnace and direct reduction end-users. The Pampa de Pongo pellets contain exceptionally low levels of deleterious elements -- a factor which should significantly enhance their saleability.


The mine was designed for and will support a production rate of 75,000 tonnes per day or 27.4 million tonnes per year. The mine production life is 24 years and includes a 5-year straight-line production ramp-up. Alternatively, modifications to the current preliminarily mine production plan could result in revised production rates and a corresponding change in the predicted economic results. 

An analysis of open pit and underground mining scenarios lead to the conclusion, based on the current data and assumptions, that an underground block cave mine would provide the most favourable economic results. 


Four cases were used in the cash flow analysis to demonstrate the variation of project economics with metal price. All other variables were kept constant for all cases including the life of mine mill feed tonnes and grade. The four cases all used the assumption that pellets would be the final product. Case 1 assumes sale of blast furnace pellets while the other cases assume sale of direct reduction pellets. Pellet prices were obtained from an independent market study, the 3-year average and reference public-domain reports. Direct reduction pellets were assumed to have a 10% premium over blast furnace pellets.

Economics Assessment Results by Case

Taxation Assumption



Net Present Value (US$ B) & Internal Rate of Return (%)

Case 1
BF Pellets
198 ¢/dmtu

Case 2
DR Pellets
169 ¢/dmtu

Case 3
DR Pellets
218 ¢/dmtu

Case 4
DR Pellets
253 ¢/dmtu

After Tax

0% discount rate






8% discount rate






10% discount rate












Pre Tax

0% discount rate






8% discount rate






10% discount rate












Pellet Price Assumptions


Pellet Type

Pellet Price 



BF Pellet


Independent market opinion for BF pellets [$128/tonne]


DR Pellet


3-year average (154 ¢/dmtu)+ 10% DR pellet premium [$109/tonne]


DR Pellet


Independent market opinion (198 ¢/dmtu) + 10% DR premium [$140/tonne]


DR Pellet


2008 public domain scoping (230 ¢/dmtu) + 10% DR premium [$163/tonne]


SRK recommends two stages of work to take Pampa de Pongo to the next level of development. These recommendations are described below. The Preliminary Economic Assessment will be contingent upon the success of the East Zone exploration drilling, while the Prefeasibility Study will be contingent on the success of the definition drill programs of the East Zone and/or the Central Zone. 

East Zone Preliminary Economic Assessment

Acceleration of exploration of East Zone, allowing concurrent development with Central Zone, assuming positive results. Critical work items include:

  • Exploration Drilling -- six drillholes, totalling 4,500 metres, to prove economic potential and determine Inferred Resources.
  • Preliminary Economic Assessment -- Scoping level assessment, similar to that just completed for Central Zone, including conceptual mine design, resource estimate, metallurgy and economic value. The critical aspect would be to determine if the potential resource could be developed concurrently with Central Zone, thereby significantly increasing the annual output of the operation and the project revenue.

Central and East Zone Prefeasibility Study

Assuming positive results from the East Zone drilling, the major components of the study should be as follows:


  • East Zone Definition Drilling -- Rapid definition drilling to dovetail prefeasibility-level work with that being undertaken for Central Zone. This drilling would comprise approximately six additional drillholes for a total of 4,500 metres.
  • Central Zone Definition Drilling - approximately 17 drillholes, totaling 14,500 m, to achieve a 200-metre drill spacing. This should be sufficient to upgrade existing resources from Inferred Resources to at least an Indicated Resource category. All permits are in place to complete drilling work.
  • Geotechnical Studies -- concurrent with definition drilling, detailed geotechnical analysis.
  • Environmental baseline -- environmental monitoring, including groundwater assessment and preparation of Environmental Impact Assessment.
  • Metallurgy -- Various bench-scale metallurgical tests to quantify metallurgical variation within the East and Central Zones. Further development of the furnace firing cycle to optimize and enhance blast furnace pellet quality with additional grinding to reduce silica even further and, conversely, increase total iron grade in the pellets.
  • Condemnation Drilling -- If not already defined through definition drilling, the outer edges of the Central Zone should be defined through 5 drillholes for a total of 4,250 metres of condemnation drilling.

A budget of approximately $7.0 million is estimated to complete the work program outlined above. Completion of this program would advance the project through to the completion of the pre-feasibility stage.




Mine Life

Mean Annual**





Ore Production

million tonnes



Mine Life

production years







Iron Pellet Production

million tonnes



Payable Copper production

million lbs



Payable Gold Production

000 oz







Iron Pellet price

US¢/dmtu / US$/t

218¢ / $140

Copper price



Gold price







Gross Revenue

US$ Million



Net Smelter Return*

US$ Million




US$ Million



Site Operating Costs

US$ Million



Pre-Tax Operating Cash Flow

US$ Million







Initial Capital

US$ Million


Sustaining Capital

US$ Million


Total Capital

US$ Million


Income and other taxes

US$ Million







Post-Tax NPV8%

US$ Million


Internal Rate of Return %







Undiscounted Total Post-Tax Cash Flow

US$ Million



* The NSR here reflects revenue from iron, copper and gold, net of all off-site costs. For iron the net revenue is the FOB sales price.
** Mean Annual figures are averaged over 24 production years, including ramp-up in the early years of production. These figures are lower than those achieved during full production. 


Grade Factor -- Grade factor is estimated at 90% (10% dilution). Block caving should yield lower levels of dilution in the early years of production.
Processing - Iron recovery is 93.4% with a final pellet grade of 64.5% iron, while copper and gold recovery from concentrate is conservatively estimated at 50% each.
Payable Metal - Pampa de Pongo would produce, on a LOM basis, 330Mt of blast furnace pellets grading 64.5% iron, 535 million pounds of copper and 493,000 ounces of gold. MIDREX Technologies is currently evaluating the suitability of the Pampa de Pongo pellets as Direct Reduction pellets, which would attract a 10% premium on price.
Operating Cost -- Operating cost is estimated at approximately US$13 per tonne of ore milled or US$22 per tonne of pellets produced.
Capital Cost -- Pre-production capital is US$3.3 billion. Expansion and sustaining capital is US$4.2 billion. All capital costs include 20% contingency.


The effective date of the Pampa de Pongo Iron Project, Preliminary Economic Assessment Technical Report Resource Estimate for Central Zone & South Zone is September 30th, 2008. Inferred mineral resources were estimated at a cut-off of 15% Fe and were classified in accordance with Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards on Mineral Resources and Mineral Reserves. 

The database used to estimate mineral resources for the Central Zone comprised of 5 drill holes with 1,011 Fe, Cu and Au assays assigned to grade shells. The South Zone comprised also of 5 drill holes with 266 Fe, Cu and Au assays assigned to grade shells. Separate zone-specific Au and Cu caps were generated for the various Central and South Zones. For resource estimation all capped assays were composited to 2 metre intervals. 

In the Central Zone to constrain grade interpolation two grade shells were generated. The high grade shell generally comprised of >40% Fe grade which represents roughly 2/3rds of the inferred mineral resource, and a second >15% Fe grade shell represents a hanging wall zone of lower grade and lower intensity of magnetite replacement. In the South Zone two grade shells were generated to represent two distinct zones. Shells were defined by a >20% Fe boundary.

A total of 210 density determinations were used to generate a regression with iron grades which were subsequently used to assign density to the block model. The block model comprised of 25 metre x 25 metre x10 metre blocks, and grade was interpolated using inverse distance squared. The assay and drillhole database and resource estimate was validated by SRK and found to be appropriate for the estimation of inferred mineral resources. SRK is not aware of any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant issues that would materially affect the mineral resources.


Mr. Gordon Doerksen, P.Eng., Mr. Marek Nowak, P.Eng. and Mr. George Wahl, P.Eng. (all of SRK Consulting (Canada) Inc.), each of whom is a qualified person as defined by National Instrument 43-101, are each responsible for portions of the PEA Technical Report and have reviewed the scientific and technical information that forms the basis for this news release. All of these qualified persons are independent of Cardero.

Gordon Doerksen, P.Eng. is a Principal Consultant -- Mining with SRK in Vancouver. Mr. Doerksen has 23 years of experience in the mining industry, mainly at operating mines in North America and Africa. He has conducted and managed engineering studies for a variety of commodities in Asia, South America, North America and Africa.

Marek Nowak, P. Eng, has over 25 years of experience in the mining industry. Mr. Nowak specializes in natural resource evaluation and risk assessment using a variety of geostatistical techniques. He has worked on a variety of studies for operating mines and on advanced exploration projects, which included validation of large databases, studies of sample biases, resource estimates, reconciliation, and simulation of grade control models.

George H Wahl, P. Geo has over 20 years of experience. Mr. Wahl is a resource geologist who has worked with clients to advance their projects from exploration through to basic engineering. He has worked on several iron ore projects in Carajas, Corumba, and the Iron Quadrilateral in Brazil, as well as on several iron ore projects in the Labrador Trough and another on Baffin Island.


Cardero's focus through 2008 and into 2009 is to realise the considerable value it believes is locked in the Company's significant iron ore assets in the Marcona District of southern Peru, the Baja district of Mexico and in Minnesota, USA while continuing to progress its base and precious metal exploration projects in Argentina and Mexico. The common shares of the Company are currently listed on the Toronto Stock Exchange (symbol CDU), the NYSE Alternext US (symbol CDY) and the Frankfurt Stock Exchange (symbol CR5). For further details on the Company readers are referred to the Company's web site (www.cardero.com), Canadian regulatory filings on SEDAR at www.sedar.com and United States regulatory filings on EDGAR at www.sec.gov.

On Behalf of the Board of Directors of

"Hendrik van Alphen" (signed)
Hendrik van Alphen, President

Contact Information:

Quentin Mai, Manager -- Corporate Communications & Investor Relations
Email: qmai@cardero.com 
Phone: 1-888-770-7488 (604) 408-7488 / Fax: (604) 408-7499

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the content of this news release, which has been prepared by management.

Cautionary Note Regarding Forward-Looking Statements 
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 27E of the Exchange Act. All statements, other than statements of historical fact, included herein including, without limitation, statements regarding the anticipated content, commencement and cost of exploration programs, anticipated exploration program results, the discovery and delineation of mineral deposits/resources/reserves, the preliminary economic assessment of proposed operations at Pampa de Pongo (including the assumptions upon which such assessment is based), business and financing plans and business trends, are forward-looking statements. Information concerning mineral resource estimates also may be deemed to be forward-looking statements in that it reflects a prediction of the mineralization that would be encountered if a mineral deposit were developed and mined. Although the Company believes that such statements are reasonable, it can give no assurance that such expectations will prove to be correct. Forward-looking statements are typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions, or are those, which, by their nature, refer to future events. The Company cautions investors that any forward-looking statements by the Company are not guarantees of future results or performance, and that actual results may differ materially from those in forward looking statements as a result of various factors, including, but not limited to, variations in the nature, quality and quantity of any mineral deposits that may be located, variations in the market for, and pricing of, any mineral products the Company may produce or plan to produce, the Company's inability to obtain any necessary permits, consents or authorizations required for its activities, the Company's inability to produce minerals from its properties successfully or profitably, to continue its projected growth, to raise the necessary capital or to be fully able to implement its business strategies, and other risks and uncertainties disclosed in the Company's annual report on Form 40-F filed with the United States Securities and Exchange Commission (the "SEC"), and other information released by the Company and filed with the appropriate regulatory agencies. All of the Company's Canadian public disclosure filings may be accessed via www.sedar.com and its United States public disclosure filings may be accessed via www.sec.gov, and readers are urged to review these materials, including the technical reports filed with respect to the Company's mineral properties.

Cautionary Note Concerning Reserve and Resource Estimates 
This press release and other information released by Cardero uses the terms "resources", and "inferred resources". United States investors are advised that, while such terms are recognized and required by Canadian securities laws, the SEC does not recognize them. Under United States standards, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Mineral resources that are not mineral reserves do not have demonstrated economic viability. United States investors are cautioned not to assume that all or any part of inferred resources will ever be converted into reserves. Inferred 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 the inferred resources will ever be upgraded to a higher category. Therefore, United States investors are also cautioned not to assume that all or any part of the inferred resources exist, or that they can be mined legally or economically.

National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101") is a rule developed by the Canadian Securities Administrators, which established standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Unless otherwise indicated, all reserve and resource estimates contained in this press release or released by Cardero in the future, have been or will be prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") Standards on Mineral Resource and Mineral Reserves, adopted by the CIM Council on November 14, 2004 (the "CIM Standards") as they may be amended from time to time by the CIM. United States shareholders are cautioned that the requirements and terminology of NI 43-101 and the CIM Standards differ significantly from the requirements and terminology of the SEC set forth Industry Guide 7. Accordingly, the Company's disclosures regarding mineralization may not be comparable to similar information disclosed by companies subject to the SEC's Industry Guide 7.

This press release is not, and is not to be construed in any way as, an offer to buy or sell securities in the United States.

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