Mawson West releases Kapulo feasibility study

Newly listed on the TSX in March, Mawson West (MWE-T) has already released a feasibility study on the Kapulo copper target at its Dikulushi concessions in the Democratic Republic of the  Congo, thanks to its previous work as an Australian-listed and unlisted company.

Mawson West began working on part of the Dikulushi property in 2006, as an earn-in agreement with Anvil Mining (AVM-T). Mawson bought the entire 7,500-sq.-km Dikulushi Mining Convention in April 2010.

In-between, the company delisted from the Australian Stock Exchange in mid-2009, and advanced the project, with Anvil as its single biggest shareholder. Mawson West then debuted on the TSX with a $60-million initial public offering at $2 per share, though it remains Australia-based, with Anvil still its largest shareholder.

The feasibility study deals specifically with the Kapulo project on the northeast corner of the company’s tenure, which sits in the country’s southeast corner. The Dikulushi Convention that hosts Kapulo, founded in 1998, set out a regulatory and
fiscal regime for the area, and established that a community foundation would have a 10% stake in the project.

Based on US$2.50-per-lb. copper, the feasibility study establishes proven and probable reserves of 3.6 million tonnes grading 3.6% copper and 8.3 grams silver per tonne, with potential annual production from an open pit of 15,800 tonnes copper and 78,000 oz. silver over a 7.5-year mine life. Overall measured and indicated resources at Kapulo, which include the reserves, stand at 6 million tonnes grading 3.5% copper and 10 grams silver.

Capital costs for the project are estimated at US$69.5 million, with the US$40.6-million cost of the processing plant by far the biggest expense. The company plans to fund development from current cash reserves, with commissioning scheduled for November 2012. Life-of-mine operation costs are estimated at US$1.97 per lb. copper, or US$1.79 per lb., excluding duties and taxes.

Using US$3.62 per lb. copper for the base case financial model, the study estimates the project could generate revenue of US$735 million, and a pre-tax operating cash flow of US$305 million. The net present value, using a 10% discount rate, then comes in at US$157 million, with an internal rate of return of 61% and a payback of under two years.

Mawson West is working on converting its exploration permit on Kapulo into an exploitation permit that would allow mining. Environmental and social studies have been submitted to the government, and await approval.

Along with Kapulo, Mawson West owns the Dikulushi mine where it is processing a dwindling stockpile of 1.2% copper. The operation, 135 km southwest of Kapulo and previously operated by Anvil, recovers 400 tonnes copper and 35,000 oz. silver per month, from a stockpile that is expected to run-out in October.

The company recently completed an internal feasibility study on exploiting the remaining known resource at Dikulushi, and a similar independent study is underway. The company is also looking at the possibility of developing a deposit 15 km from the mine.

Along with its initial public offering, the company raised an additional $60 million by satisfying the conditions of 120 million subscription receipts issued in December and January at 50¢ each. The receipts were converted into 30 million shares, thanks to a 1-to-4 share consolidation. Mawson West now has 142.6 million shares outstanding.

Mawson West’s share price rose 8¢, or 6.7%, to $1.28 on the latest news, though it also hit a trading low of $1.09 during the day.