first quantum

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    Low costs flagged for First Quantum's Kansanshi
    By: Nicole Mordant

    Posted: 2003/02/20 Thu 17:33 ZE2 | © Mineweb 1997-2003

    CAPE TOWN – The results of a feasibility study on First Quantum Minerals’ Kansanshi copper-gold project reveal that the Canadian junior’s 80%-owned deposit in Zambia could be one of the world’s lowest cost producers, while the investment returns also look attractive.
    The study, conducted by Perth-based GRDMinproc, shows cash operating costs after gold credits of just $0.38 a pound over the 16 year life of the first phase of development. At a copper price of between $0.75 and $0.80 a pound, the internal rate of return from Kansanshi waxes between 36.8% and 50% with a payback period of between two and 2.8 years. IRRs from copper projects are usually closer to the 16% or 17% mark.

    Pre-production capital costs are estimated at $163 million, the bulk of which comprises the process plant. Construction of the mine is expected to begin in the second quarter of this year and be completed by the end of October 2004.

    “The main thing about development at Kansanshi is that the infrastructure is largely there,” said Philip Pascall, chairman and CEO of First Quantum.

    One of the extra costs of mining in large parts of Africa is the absence of infrastructure, which often has to be paid for by the mine operator.

    Kansanshi, acquired by First Quantum from Phelps Dodge after a competitive bidding process, is projected to produce at start-up 85,000 tonnes of copper a year, rising to 125,000 tonnes. Life-of-mine is pegged at 28 years, with a second phase expansion envisaged during years 17-28 of the project.

    The remaining 20% of the Kansanshi operation is owned by Zambian Consolidated Copper Mines. Zambia is a key resource area for copper and cobalt but was hit hard last year by Anglo American’s announcement that it was pulling out of its Konkola copper project there.

    Zambia’s Minister of Mines and Minerals Development, Kaunda Lembalamba, told Mineweb at the Mining Indaba in Cape Town that the government had worried that the mining industry was in a decline, but that things were looking better following investments from the likes of First Quantum and Equinox. In particular, the western region of the country offered promise with its untapped copper deposits, he said.

    “Two-thirds of the west still needs to be explored. Once these areas are tapped, we are sure that Zambia will regain its status as one of the great copper countries,” Lembalamba said.

    Separately, Clive Newall, First Quantum’s president told Mineweb that another interesting deposit very similar to that at Kansanshi had been discovered which would fit nicely into First Quantum’s pipeline when the Kansanshi construction was complete. So far, six holes had been drilled before the rainy season set in. Newall declined to give further details, saying an announcement would be made in a few months time.

    In addition to Kansanshi, First Quantum also operates the wholly-owned Bwana Mkuba copper mine in Zambia and the Lonshi deposit in the neighbouring Democratic Republic of Congo (DRC), where it is in fact the biggest copper producer. Gecamines, the government mining company which was at one time the biggest copper producer in the world before it was devastated by war and corruption, is expected to produce only around 10,000 tonnes of copper this year.

    Ore mined at the high-grade Lonshi deposit is sent across the border to be processed 36km away at Bwana Mkuba. Such a cross-border processing arrangement is unusual but, according to Newall, runs smoothly and is an elegant solution to the difficulties of securing finance for the setting up of a processing plant in the DRC.

    First Quantum is also keen to diversify geographically its portfolio of deposits and is eyeing South America as a serious exploration target.

    According to Newall, First Quantum’s ambition is to graduate to a mid-sized copper producer alongside the likes of Western Mining, Falconbridge and Noranda. First Quantum is listed in both Toronto and London’s AIM market. Its 45% institutional shareholder base is split 55%/45% between investors in the United Kingdom and North America respectively.

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