Peru Copper Inc. ("Peru Copper" or the "Company") is involved in the acquisition and exploration of potentially mineable deposits of copper in Peru. On June 11, 2003, Peru Copper entered into the Toromocho Option Agreement ("Toromocho Option") with a Peruvian state-owned mining company, Empresa Minera del Centro del Peru S.A. ("Centromin"), whereby Centromin granted the Company the option to acquire its interest in the mining concessions and related assets of the Toromocho Project. Centromin later transferred the rights and obligations of the Toromocho Option to Activos Mineros, a Peruvian state-owned mining entity.
On January 3, 2007, the Company announced that a second copper-zinc zone is being drill tested immediately north of the Toromocho orebody. This skarn mineralization is peripheral to the large collapsed breccia pipe which hosts most of the two billion tonne Toromocho copper orebody.
On January 4, 2007, the Company announced the appointment of Gerald Wolfe to the position of President, Chief Executive Officer and Director of the Company effective January 15, 2007.
On February 5, 2007, the Company announced results from its recent column leach testing at the Toromocho copper deposit. These preliminary test results suggest that the geology of the Toromocho orebody maybe suited to an initial heap leach operation followed several years later by flotation concentration, which could result in a smaller upfront investment from the Company, as well as a shorter timeframe to copper production.
On February 23, 2007, the Company announced the retirement of Mr. Charles Preble from the Board of Directors effective February 28, 2007. Mr. Preble will continue to serve the Company as a consultant.
The Company prepares its financial statements in U.S. dollars and in accordance with accounting policies and practices generally accepted in Canada ("Canadian GAAP"). Peru Copper expenses all costs not directly related to its exploration and drilling efforts of the Toromocho Project and capitalizes all exploration expenses.
For the three months ended March 31, 2007, the Company recorded a loss of $1.3 million as compared to a loss of $1.0 million for the same period in 2006. Contributing to the Company’s loss was an increase of $0.4 million in management fees and salaries from $0.1 million in the first quarter of 2006 to $0.5 million in the first quarter of 2007. The increase in management fees was primarily due to a severance payment made to a retired management member and management bonuses.
Other items that contributed to the Company’s loss in the first quarter of 2007 included stock-based compensation and travel expenses, which together increased by $0.1 million. The increase in stock-based compensation was due to the vesting of outstanding stock options issued to directors, officers, employees and consultants. The Company capitalizes all stock-based compensation related to the vesting of stock options granted to employees and consultants who work directly on the Toromocho Project and expenses all other stock-based compensation. Travel expenses increased due to the continued development of the Feasibility Study, which is being conducted on the 47 concessions that make up the Toromocho Project. The Feasibility Study is on schedule for completion by the end of the fourth quarter of the current year.
Expenses were partially offset by $0.4 million of interest earned on cash balances and a small foreign exchange gain.
All of the Company’s $12.8 million of exploration expenses during the first quarter of 2007 have been capitalized under Canadian GAAP to exploration properties and all administration expenses of the Company have been expensed.
The bulk of the capitalized expenses for the first quarter 2007 were related to $8.1 million in acquisition and lease costs associated with the acquisition of Minera Centenario and payments made to Austria Duvaz. These payments were made in accordance with the agreements signed with Austria Duvaz in 2006.
Contributing to the capitalized expenses in the first quarter of 2007 were salaries and consulting fees and expenses of $2.1 million that were related to costs associated with an increasing number of consultants working on the Feasibility Study as well as the approximately 55 employees who normally work on the Toromocho Project. Supplies and general expenses totaled $0.7 million for the three months ended March 31, 2007 due to the accelerated development of the Feasibility Study.
Additional capitalized costs in the first quarter of 2007 include drilling and expenses of $0.5 million, valued added taxes of $0.4 million due to the purchase of supplies and $0.3 million in stock-based compensation for workers and consultants working directly on the Toromocho Project.
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