In Spite of Delays to Feasibility Study, Baja Moves to Construction

Baja Mining Corporation [BAJ:TSX] announced early this month that the wait for the delayed Definitive Feasibility Study (DFS) report on its El Boleo project is soon to be over. Its completion brings Baja one big step closer to first production slated to begin in 2009. Baja owns a 100% interest in the El Boleo project, an advanced polymetallic (Cu-Co-Zn-Mn) property located on the east coast of Baja California Sur, Mexico near the town of Santa Rosalia. The Boleo property has a mining history that dates back 140 years. Baja’s company website puts production estimates on the property for the period 1868 to1972 at approximately 19 million tonnes of copper ore at an average grade of approximately 4.3% copper. It is Mexico’s largest copper-cobalt deposit and one of the largest copper deposits in development in North America. Baja Mining’s management is comprised of knowledgeable industry tradesmen, many of whom have at least thirty years of experience and have brought numerous projects into production. El Boleo was staked in 1992 by Mintec International Corporation of Barbados. At the time Mintec was owned and operated by current Baja president, John Greenslade, and fellow business partners. In April of 2004, Mintec became a subsidiary of Baja Mining (formerly First Goldwater, Inc.). Shortly after, Baja commenced the work for the DFS on the property. By July of 2006, the bulk of this work was completed and Baja expected to finalize the study with a follow-up mine test in September of last year. Until this site test was complete the final mine plan could not be drawn up. But Mother Nature’s wrath coupled with unforeseen setbacks delayed this work until the beginning of January. “We got hit with two category five hurricanes,” said Greenslade, “which slowed us down a little bit.” The torrential flooding damaged the roads leading to the test mine site. I asked Greenslade if severe weather like this is typical of the region and what preventative measures Baja takes in minimizing damage. He told me that the El Boleo property is located within the hurricane alley of the Pacific Coast, but the storms usually hit Cabo San Lucas and then divert back out to sea. “It typically gets hit once or twice every ten years,” he said. “Last year was a little unique in that it got hit by two hurricanes within three weeks.” To minimize damage, Baja uses diversionary tactics around the processing plant such as creating a berm up along the creek walls to keep the plant high enough above the flood plane. Flooding is diverted along a dry river bed through diversion ditches. Flood protection and diversion barriers are also used to protect mine openings. The other unforeseen setbacks contributing to the DSF hold-up were the delays in delivery of roof bolting equipment to the test site and in acquiring drill rigs for the approximate 38,800 meter in-fill drill program The roof bolting equipment was needed in order to finish the mine site test to determine the best procedure for roof bolt installation during mining development. The postponed work on the site test was finally completed in November 2006. The drill rig setback delayed completion of the in-fill drill program until January of this year. Baja reported the findings of this in-fill drill program in an April 4th news release. The data and updated resource model resulting from the final 20,000 meters of in-fill drilling increased measured and indicated resources by more than 20%. Measured resources of 74,600,000 tonnes were reported at 1.92% copper equivalent, 0.93% copper, 0.080% cobalt, 0.48% zinc, 2.72% manganese and indicated resources of 202,600,000 tons at 1.50% copper equivalent, 0.62% copper, 0.050% cobalt, 0.66% zinc, 3.10% manganese. Although Baja Mining’s April 4th news release reported the Definitive Feasibility Study is targeted for release in late April Greenslade told me today the actual 43-101 report will be filed on Sedar some time in May. He said the nine or ten volume series of reports that comprise the feasibility study won’t be available for review until June. In January of this year Baja published a Preliminary Economic Assessment (PEA) and Greenslade thinks the Definitive Feasibility Study will show improved results over those reported in the PEA. “But, the capital and operating costs,” he added, “I’m not expecting to change. The difference will be that we’ve updated the geological resource with more infill drilling and we’ve made some corrections to the geological model that we discovered.” He expects to see slightly improved economics on the project. To limit the effects of the DFS delay on the construction schedule Baja’s management has moved early on initializing construction financing set to be finalized later this year. The company has been involved in discussions with the primary bank for several months and operating documents will be delivered to the financial institution in May. Greenslade expects final signed contracts and securities will not be registered with the lenders until late August or September. Along with primary debt financing Baja is looking to make subordinate offtake agreements linked to the market price at time of delivery. Greenslade said the ultimate terms are not finalized yet and won’t be released until this summer at the earliest. While the delays of the Definitive Feasibility Study have no doubt caused a few headaches and frustrated grimaces amongst Baja Mining’s management and shareholders it certainly hasn’t dampened their resolve to bring the El Boleo project into production. “We’re targeting 2009 for first production,” said Greenslade. Baja has already started negotiations with the construction contractor and will probably break ground this July. “Right now we’re into base line engineering work leading to detailed engineering towards final construction.”

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