EXPLORATION 1997 — Taking a chance on Zaire — Tenke Mining set for feasibility at Tenke-Fungurume

The Lundin group’s Tenke Mining (TNK-T) has a monstrous copper-cobalt resource which it hopes to exploit by means of low-cost metallurgical techniques. The drawback is that it exists in Zaire, a country widely thought to be the home of political risk.

Occupying the best house on a bad street has proved profitable for the group in the past — witness its success with the Baja Alumbrera property in Argentina, now held by MIM, North and Rio Algom (ROM-T). When the world decided Argentina was no longer an unfriendly place to do business, offers were not long in coming. Tenke’s attitude in Zaire appears to be similar in that it believes the country’s political and economic climate will continue to improve.

In July 1996, Tenke (then known as Consolidated Eurocan Ventures) acquired a 55% interest in the Tenke and Fungurume concessions in a US$250-million deal with the Zairian state mining company Generale des Carrieres et des Mines (Gecamines). Tenke paid US$50 million up front and, under the terms of the agreement, was given 24 months to finish a feasibility study, after which time it must pay another US$40 million to proceed to production. Tenke then has another 48 months to bring the project on-stream, at which point it will owe Gecamines an additional US$160 million.

It’s a rich deal for a rich copper-cobalt deposit. Current estimates of the resource on the Tenke and Fungurume concessions indicate 222 million tonnes grading 4.52% copper and 0.33% cobalt in 21 mineralized zones — five at Tenke and 16 at Fungurume. Pit designs have been drawn around 92.6 million tonnes of that resource, with grades of 4.59% copper and 0.36% cobalt.

The Northern Miner recently visited the concessions, which lie 180 km northwest of Lubumbashi, capital of the southeastern province of Shaba. They straddle the Lufilian arc, Zaire’s legendary copper belt.

Copper mineralization had been known to exist in the concession area since the turn of the century, when Tanganyika Concessions, a British company, discovered several showings. In 1906, Tanganyika was folded into the Belgian company Union Miniere du Haut-Katanga, which first drilled the prospect 12 years later. Work continued up to the end of Belgian rule in the Congo in 1960 but ceased when the southern province of Katanga (later renamed Shaba) seceded, igniting a civil war that was ultimately suppressed by national and United Nations troops.

Between 1967 and 1969, the government expropriated Union Miniere’s assets for market value and formed Gecamines to operate them. Experienced and well-trained Congolese staff made Gecamines the wheelhorse of the Zairian economy during the 1970s, earning the bulk of the country’s foreign exchange.

But the twin plagues of high government debt and political instability led to severe unemployment and currency inflation in Zaire, and Gecamines was starved for capital. Equipment was not replaced, plants were not upgraded, and funds were unavailable for development work.

In 1970, a new company, Societe Miniere de Tenke-Fungurume (SMTF), was formed to develop the project. Charter Consolidated, a subsidiary of the South African mining house Anglo American, was the operator, in joint venture with Gecamines, Amoco Minerals, Mitsui Mining and several smaller holders. (Amoco and Mitsui left the consortium in the early 70s and were replaced by the French mining agency Bureau de Recherches Geologiques et Minieres.) SMTF spent US$280 million to bring the project to the feasibility stage. Then, in 1977-78, further violence in Shaba province led the foreign partners to abandon the project. By that time, more than 170,000 metres of drilling had been conducted, along with 17 km of trenches and 12 km of exploration declines and drifts. SMTF was dissolved in 1984 and the property reverted to Gecamines.

As Zaire’s economy worsened, Gecamines deliberately concentrated its resources on cobalt production — centred around refineries at Kolwezi and Likasi — to take advantage of that commodity’s higher price. Operations without significant cobalt production were allowed to fall away — the huge copper-zinc mine at Kipushi was shut down in 1990, and exploration and development work at Tenke-Fungurume was discontinued in the absence of a foreign partner.

With its assets continuing to deteriorate, Gecamines began to look for outside capital, and as the grip of Zairian President Mobutu Sese Seko began to loosen, the time was right to shop projects around. Gecamines examined expressions of interest on the Tenke-Fungurume concession from a host of companies, including the large South African mining houses Gencor and Iscor, and by July 1996 Gecamines had struck a deal with the Lundin group to form a joint-venture company to be called Tenke Fungurume Mining.

Tax-free period

The agreement includes a 10-year tax-free period for the joint-venture company and for Tenke Mining, and also sets up a system of customs clearance at the site to allow uninterrupted shipment of copper and cobalt out of Zaire. Gecamines’ 45% interest is carried. Tenke Mining’s advances to carry Gecamines are paid back out of profits, and Tenke also receives a management fee (1.25% of gross revenues) for the first seven years of the project.

Tenke has budgeted US$22 million for the feasibility study, to be managed by Kilborn SNC Lavalin. Development drilling is to start in early April and the report should be complete in April 1998.

Earlier work by SMTF and Gecamines, which blocked out the 222-million-tonne resource, included pit designs with a waste-to-ore stripping ratio of 9-to-1 — the mineralized zones tend to be stratiform, relatively continuous and surrounded by waste. The grade makes the difference: oxide mineralization runs more than 5% copper and 0.5% cobalt; sulphide material, about 4% copper and 0.3% cobalt.

The deposits occur in strongly deformed but virtually unmetamorphosed sedimentary rocks — largely shales and dolomites. Termed the Roan or Shaban supergroup, the sediments are late Proterozoic in age and occur as tectonic blocks in younger sediments. The copper and cobalt mineralization occupies narrow stratiform zones, generally in shaley parts of the sequence.

Since the mineralized zones are already well-defined, much of the feasibility work will centre on metallurgical testing. Traditionally, the copper ores of Shaba either had a grade high enough to justify direct smelting, or were sulphides that could be floated. A large part of the mineralization at Tenke and Fungurume occurs in oxidized material — largely malachite (hydrous copper carbonate). Solvent extraction-electrowinning (SX-EW) may offer the best means of extracting the metal. In the early 1970s, SMTF built a pilot plant to experiment with early SX-EW technology. It is likely that the new feasibility study will also include a pilot SX-EW plant.

Sulphide ores from the two areas are mainly chalcocite and appear to be amenable to pressure leaching or biometallurgy after flotation. Tenke estimates that 90% of the copper and 70% of the cobalt can be recovered in the proposed circuits. “We could probably operate for up to 15 years on oxides only,” Tenke Vice-president Brian Spratley told The Northern Miner.

However, current plans call for the sulphide zones to be brought into production after about three years.

Two phases

Tenke’s preliminary plan includes a first phase of development, with yearly production of 100,000 tonnes of copper and 8,000 tonnes of cobalt, at a capital cost of US$350 million. A second phase, to cost US$300 million, is expected to double production.

Initial estimates place cash operating costs at US$65 per tonne. Total costs, including depreciation and amortization, are believed to be around US$1,235 per tonne of copper.

The feasibility study will also determine how much of SMTF’s construction can be put to work in the new project. The consortium left behind crushing and conveyor structures, footings for a large mill, and a large camp and 2-km-long airstrip. “The interesting part will be to see how much of the civil works we can use,” said Ted Webb, Tenke’s president.

Electrical power, generated at the Inga dam site on the Zaire River, feeds the Gecamines plants at Kolwezi. An alternating current (AC) line from Kolwezi to the site will have to be upgraded, at a cost of around US$5 million, to provide reliable power, but actual capacity should present no problem as Zaire is a net exporter of electrical power.

The concession is crossed by the main railway through Shaba province, and Tenke is considering shipping the copper out via the southern route to Zambia, where rail connections to Dar es Salaam, Tanzania, are available.

However, rail routes are also available to Durban, South Africa, or Beira, Mozambique. Should the Angolan railway system reopen, rail transport westward to Lobito could become an option as well.

Tenke’s enthusiasm extends to the exploration potential of the Dipeta syncline, a block of folded Roan sediments joining the Tenke and Fungurume mining areas. There has been scant drilling in the area, returning grades comparable to the known mineral deposits, and the repeating stratigraphy in the syncline represents a 70-km strike length of the favorable sequence.

About 10 km farther west, Roan sediments have been mapped in the Pumpi region, where the joint venture also has an exploration concession.

The first exploration targets are areas with known copper enrichment in soil samples and on “copper clearings” — areas where vegetation growth is retarded by the phytotoxic effect of copper in the soil.

Balanced against the project’s technical promise is the economic and political risk of working in Zaire. Tenke is counting on growing political openness in Zaire, and on a smooth transfer of power from Mobutu to his successors. The importance of the project may, in itself, protect the operation from external threats, and the company is actively courting the support of the community. But Webb points out that there is a benefit to taking

a chance: “If you’re first in, and take the risks on, you can get good deals.

It gets harder after that.”