The high-grade, open-pit mine is in the southeastern province of Katanga, 400 km by road from the regional centre of Lubumbashi and just inland from the western shore of Lake Moero, which straddles the DRC-Zambian border.
Anvil holds a 90% interest in the mine, with the remaining 10% held in trust by the company for the economic, social and infrastructure development of the Dikulushi region.
Anvil put Dikulushi into production in October 2002 at a capital cost of US$6.2 million. Another US$7.5 million was spent on this latest expansion, which replaces a relatively crude but inexpensive heavy-medium-separation (HMS) plant with an annual capacity of 250,000 tonnes.
Floats and tailings from the HMS plant, which grade more than 3.2% copper and 71 grams silver per tonne, have been stockpiled and will eventually be run through the ball mill and flotation circuit.
Even with the inferior HMS processing, for the financial year ended June 30, 2004, Anvil produced 29.3 million lbs. (13,587 tonnes) copper and 1.14 million oz. silver in concentrate at a total cash cost of just US49 per lb., after silver credits and including all transportation and treatment charges.
During this period, Anvil mined 276,088 tonnes of ore grading 7.21% copper and 198 grams silver per tonne, and delivered almost 34,000 tonnes of concentrate.
Anvil is an unhedged copper producer, and so it realized a copper price of US97 per lb. during the last financial year, resulting in net earnings of US$6 million (US31 per share) on revenues of US$30.5 million. In the previous financial year, Anvil lost US$800,000 on US$10.6 million in revenue.
“From an economic point of view, it’s quite a robust project,” says Anvil President and CEO William Turner. And he says that with today’s substantially higher copper prices, the company will do even better in the current financial year.
Using the new ball mill and flotation circuit instead of the HMS plant will result in some dramatic improvements: plant recoveries will rise to about 92% from 71%; the concentrate grade will increase to around 55-58% copper from 40-41%; and the silver credit in the concentrate will jump to about 1,700 grams per tonne from 1,000 grams.
“The grade of the concentrate has been exceptional, considering the coarse-gravel size of the grind,” says Turner. “Normally, you have to crush things a lot finer than this, but it’s because of the mineralization: it’s chalcocite, not chalcopyrite.”
From Dikulushi, truckers take the concentrate about 50 km to the Congolese town of Kilwa on Lake Moero, where they drive on to an Anvil-built, 48-metre-long barge. The barge crosses over to the town of Nchelenge, on the Zambian side of the lake, where the roads are sealed and infrastructure is better overall. From there, the concentrate is transported some 2,500 km either to the Palabora or O’okiep smelters in South Africa or the Ongopolo smelter in Namibia.
“It’s the kind of concentrate that you can ship anywhere around the world,” says Turner. “It doesn’t have mercury or chlorine or any of the other contaminants, so we’ve never had a penalty on any of the concentrate we’ve produced so far.”
Overall, Anvil’s expansion of Dikulushi means copper and silver output will rise by roughly 50% to a rate of about 20,000 tonnes copper and 1.8 million oz. silver annually, in concentrates. At the same time, the higher concentrate grade will mean lower transportation costs per tonne of contained metal.
Dikulushi is a low-temperature, hydrothermal deposit. The main footwall orebody is hosted in a fault zone, which strikes northeast and dips 65 to the southeast. The fault zone strikes 240 metres, is up to 25 metres wide, and has been defined to a depth of 300 metres below surface and remains open at depth.
Mineralization is dominantly massive chalcocite nearest the footwall and then less massive-to-disseminated chalcocite farther into the hangingwall. The thickest parts of the orebody measure 25 metres in width, with 1-metre assays grading up to 20% copper and 600 grams silver per tonne.
The footwall fault transects a sandstone-carbonate contact, and within the carbonates, bornite has precipitated in preference to chalcocite.
Currently, the pit at Dikulushi is 60 metres deep, and miners are beginning to exploit a richer zone that has returned eye-popping drill intercepts such as 33 metres of massive chalcocite grading 17.4% copper.
(Anvil’s South African mining contractor slipped into receivership earlier this year, forcing Anvil to take over mine management in August.)
The open pit could easily be extended to 150 metres or more, but exploration drilling a few months ago (to a depth of 300 metres) returned values such as 5 metres grading 18.36% copper and 591 grams silver in the main footwall orebody at a vertical depth of 225 metres.
“That has indicated that the underground resource potential is quite good,” says Turner. “So instead of going down to 150 metres, we’ll go down 110-120 metres and then head underground, probably in mid-2006 rather than 2008.”
Much of the decision will rest on a new, upcoming resource estimate that will include results from recent drilling.
At June 30, 2003, total resources were 1.7 million tonnes grading 7.18% copper and 201 grams silver, or 123,600 contained tonnes copper and 347 contained tonnes silver. This figure is based on a 1.5% copper cutoff and a 200-metre depth, and did not include any HMS floats or tailings.
By curtailing the open-pit mining earlier, Turner reckons that the savings in the waste stripping that Anvil will not have to do will probably pay for a large part of the underground development costs.
“It should be quite a long-life, underground operation,” he says.
Phased approach
Turner believes that developing Dikulushi in three phases — first an HMS plant, then milling and flotation, and thirdly underground development — is a big reason for the company’s success in the DRC.
“We haven’t built the ultimate project right from the beginning,” he says. “It’s a staged-development approach with low cap-ex up front, where we sort of step into it rather than jump into it.”
This strategy, he says, is simply a function of the political risk of the country: “When we started looking at developing this project in early 2001, we realized that US$5 million was about the most you could expect to get from a bank to work on a project in the Congo.
“The Congo is a place where there are incredible resources, but we looked at the financial constraints, and said ‘let’s build the project within those constraints.’ That has enabled us to move forward rather quickly where other groups have been struggling for several years.”
Beyond the mine’s gates, Anvil has a large exploration concession that encompasses almost 15,000 sq. km on both sides of Lake Moero.
Turner is particularly keen on the Kapulo copper project, which is 125 km northeast of Dikulushi, north of Lake Moero in the DRC and close to the Zambian border.
Stratiform
Anvil believes that, in addition to Dikulushi-type, fault-controlled copper mineralization, there are possibilities for large-tonnage, stratiform occurrences near Kapulo and elsewhere in the region.
“There are pretty fancy widths and grades of [copper] mineralization at Kapulo,” says Turner. “It’s the next project we’ll push into production around Dikulushi.”
Several hundred kilometres farther north in the DRC, Anvil has 4,500 sq. km. of exploration ground near Lake Tanganyika, south of the multi-million-ounce Twangiza gold deposits held by Toronto-based explorer
“We think thes
e things have tremendous gold potential, but we just haven’t had a chance to get in there yet,” comments Turner. “We’re in a country that has pretty amazing resource potential — a lot of stuff poking out the ground, (but) all held up for political reasons.”
While there may be significant barriers-to-entry in the area for new players, Anvil has been there since the end of 1995, and so, says Turner, “we have a bit of an understanding of the place, and have demonstrated that we’re capable of getting a project into production and looking after ourselves in a difficult environment.”
Turner says Anvil is looking at acquiring other copper projects down in the main part of the Copperbelt. Any acquisition likely wouldn’t be a producing asset, but one with a well-defined resource that could be put into production within 18 months.
Like Dikulushi, Anvil would begin with a smaller, starter project, producing 15,000-20,000 tonnes of copper in a concentrate per year, then bring in a solvent-extraction electrowinning circuit (because the ore in the main part of the belt is oxide copper, whereas Dikulushi is sulphide copper).
“We’d leach it and produce cathode copper,” says Turner, “then go through an expansion process to build that project into a bigger one.”
While Anvil now has the financial muscle both to expand Dikulushi and explore the surrounding area using cash flow from the mine, Turner says the company would still need to tap into the capital markets to fund any significant acquisition in the main part of the Copperbelt.
“Before the end of the year, we expect to crystallize some new deals that would lift us to the next level,” says Turner.
Anvil’s total assets were last pegged at US$32 million, including US$7.6 million in cash and liquid assets, whichs include about a half million dollars’ worth of
Anvil’s total debt stands at US$6.1 million, owed to Rand Merchant Bank. Rand also holds a hefty net smelter return royalty at Dikulushi of 6.25% on the first 65,000 tonnes of copper sold.
Based in Perth, Australia, Anvil has been listed on the Australian and Berlin stock exchanges since 1993 and 1997, respectively. Anvil effectively redomiciled to Canada this year and acquired its TSX listing in June 2004 via a C$7-million initial public offering of 1.6 million shares at $4.25 apiece.
There are now 23.6 million shares outstanding (24.9 million fully diluted), and shares last traded on the TSX at $5.60 within a trading range of $4-6 since the IPO.
The company will hold its first annual meeting in Canada on Oct. 29, 2004, in Toronto.
Turner and Bradford are both significant Anvil shareholders, owning 1.1 million and 958,000 shares, respectively. In the past year, Anvil lent Turner and Bradford A$541,000 and A$480,000, respectively, with most of the money being used to buy Anvil shares.
Mid-tier copper producer First Quantum has been a supportive Anvil shareholder since 1997 and has consistently maintained its stake at the 16-20% level. (Between the three of them, Turner, Bradford and First Quantum own 8.9 million Anvil shares, or 38% of the company.)
Comments Turner: “First Quantum started off as a ten-million- dollar company in 1997, and they have gone on and done some pretty impressive stuff. We expect to follow them.”
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