Goldcorp’s board of directors have approved the construction of the El Morro Project in northern Chile. Construction of the copper / gold project is expected to begin in September 2012 and will take five years to complete.

New Gold owns a 30% stake in the project while Goldcorp is the project developer and operator, holding the remaining 70%. Goldcorp is responsible for funding New Gold’s 30% share of capital costs, which amount to $1.2bn. Under the terms of agreement, New Gold will repay its share of capital plus accumulated interest out of 80% of its 30% share of the project’s cash flow, with New Gold retaining 20% of its 30% share of cash flow upon the start of production.

New Gold executive chairman Randall Oliphant said the company’s 30% interest in El Morro positions them to have a meaningful share in the project, with a proven mine developer and operator as a partner and a favourable finance arrangement that carries through production.

Initial production from the mine is expected in 2017 with full production anticipated in 2018. Development activities during 2012 will focus on access road construction, engineering, equipment procurement and exploration. Work will involve a combination of additional condemnation drilling for infrastructure locations and exploration drilling to test potential extensions of the La Fortuna deposit.

The deposit is one of two principal zones of gold-copper mineralisation that have been identified to date. Current open pit proven and probable mineral reserves total 537Mt at 0.52% copper and 0.49g/t of gold.