Aljustrel feasibility sees higher costs (April 14, 2004)

An update of the feasibility study on the Aljustrel zinc project in Portugal shows increased capital costs, partly offset by higher revenues.

Owner EuroZinc Mining (EZM-V) revisited a 2000 study by consulting firm Steffen, Robertson and Kirsten, using revised bids from the project contractors and updated metal prices. The study had previously been updated in February 2001.

The rising Euro has pushed U.S.-dollar costs higher, particularly for capital expenditures, which are now estimated at US$86 million. The February 2001 revision showed a capital cost of US$69.2 million. Opearting costs per tonne have risen to US$19.24 from US$16.69, but with improved metal prices, particularly for silver, the cash cost of production has fallen to US35 per lb. (US$770 per tonne) of payable zinc, from US39 per lb. (US$860 per tonne) in 2001.

The project has a net present value of US$47.5 million at a 7% discount rate, and a 25.9% internal rate of return. The February 2001 valuation was US$44 million at an 8% discount rate, or an internal rate of return of 30.9%.

The feasibility study did not vary any of the mining and milling scenarios for Aljustrel. The update assumed a lower zinc price of US50 per lb. (US$1,100 per tonne), against US51 per lb. in the 2001 study; higher lead and silver prices (US$770 per tonne and US$6 per oz.) increased the byproduct credit, bringing cash costs down.

The updated study also assumed lower smelter charges for zinc and lead concentrates. Zinc smelting charges were forecast at US$162 per tonne, down from US$173.61, and lead smelting charges were forecast at US$90. Recent surveys of smelting and refining charges suggest the zinc forecast is fairly conservative, though lead smelter charges have averaged US$120 per tonne in recent months.