Delay at Tenke Fungurume (October 24, 2007)

The base metals market will have to wait a bit longer for some of the massive stores of minerals under the soil of the Democratic Republic of the Congos copper belt to hit the market.

Lundin Mining (LUN-T, LMC-T, LUMI-O), the second largest stakeholder in one of the belts biggest copper projects, Tenke Fungurume, announced that capital costs at the project are rising and a delay in start-up is looming.

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

While Lundin reports that construction of the initial phase of operations is well underway, it says production start-up is behind schedule because of delays in construction.

The companies had set the fourth quarter of 2008 as the production start-up date, but now say production wont happen until into 2009.

Lundin says the project is currently 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. The current mine plan has ore grades of 4.6% and 0.4% copper being processed for the first ten years with cash costs estimated to be 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 per day.

Freeport is on deck to fund 70% of project development costs and Lundin Mining the balance of 30%. Freeport has to arrange for funding overruns in excess of 25% over the initial budget.

All the building hasnt left exploration at the site in the dust. So far this year t 31,000 metres have been drilled and nine rigs are turning on the concessions the company reports.

In Toronto on Oct. 24 Lundin shares were off close to 2% or 19 to $12.25 on 3.8 million shares. In New York Freeport McMoRan shares were up 98 to US$112.13 on 10.4 million shares traded.