Delay at Tenke Fungurume (November 05, 2007)

Base metal markets will have to wait a bit longer to see some of the massive stores of minerals from the Democratic Republic of the Congo’s copper belt.

Lundin Mining (LUN-T, LMC-N), the second-largest stakeholder in one of the belt’s biggest copper projects, Tenke Fungurume, announced that capital costs at the project are rising and a delay in startup is looming.

Lundin has a 24.75% interest in Tenke Fungurume, while operator Freeport-McMoRan Copper & Gold (FCX-N) has a 57.75% interest. State mining company Gnrale des Carrires et des Mines (Gcamines) holds the remaining 17.5%.

While Lundin reports that construction of the first phase of operations is well under way, it says production startup is behind schedule because of delays in construction.

The company says production will start in 2009, instead of the fourth quarter of 2008, as originally planned.

Lundin says the project is about 40% complete.

Once the first phase of construction is finished, the mine will be set to produce 115,000 tonnes of copper cathode and 8,000 tonnes of cobalt annually. The current mine plan sees ore grading 4.6% copper and 0.4% cobalt being processed for the first 10 years with cash costs estimated at some of the lowest in the industry.

The first phase of construction has an estimated capital cost of US$900 million — a 38% increase from the previous estimate of $650 million.

Lundin says the spike was mainly due to a decision to bump up throughput to 8,000 tonnes per day from 7,000 tonnes.

Freeport is on deck to fund 70% of project development costs and Lundin Mining, the balance. Freeport has to arrange to fund overruns of more than 25% over the initial budget.

All the construction hasn’t left exploration at the site in the dust. So far this year, 31,000 metres have been drilled and nine rigs are turning on the concessions.

In Toronto on the news, Lundin shares were off about 2% or 19 at $12.25 on trading volume of 3.8 million shares. In New York, Freeport shares were up 98 to US$112.13 on 10.4 million shares traded.