First Quantum lends hand to Zambian recovery

Although the Nkana and Mufulira mines reverted back to private hands only six months ago, newly appointed operator First Quantum Minerals (FM-T) has wasted no time in effecting their repair. As a result, the company is well on its way to ensuring its place as a mid-tier copper producer for years to come.

“When we came in, we saw four major areas that needed to be addressed quickly: mining, buying, security and the cobalt plant,” said consulting engineer Matt Pascall, who addressed The Northern Miner and a group of visiting analysts during a recent tour of the operations. “For instance, we have commitments with Anglo American to provide them with 72% recoveries from the plant, but it was only running in the low 50s.”

In March, completing Zambia’s privatization program, First Quantum and Swiss-based Glencore International jointly acquired a 90% stake (on a 44/46 basis) in the two mines. The acquisition included a concentrator and cobalt plant at Nkana, and a smelter and refinery complex at Mufulira. All had been run by state-controlled Zambia Consolidated Copper Mines (ZCCM), which retains a 10% interest, half of which is carried freely, plus a nominal royalty.

The deal required that the pair pay US$20 million up-front. They must, in addition, pay US$23 million in five equal annual instalments, starting in 2003, and commit to US$159 million in capital expenditures over the next three years. Glencore has the right to market any production from the joint venture while First Quantum manages daily operations.

The acquisition proved convenient for First Quantum, which was already producing copper at its Bwana Mkubwa tailings recovery project in the nearby city of Ndola. The additions are expected to quadruple the company’s attributable output this year and increase it to 80,000 tonnes annually by 2004.

Since the 1930s, Nkana and Mufulira have yielded an astonishing 15 million tonnes combined copper, making Zambia one of the world’s most prolific producers of the red metal. By First Quantum’s estimates, remaining reserves are sufficient to keep production going for at least 12 more years.

But historical figures belie recent ones; since Zambia nationalized its mining industry in the 1970s, annual production has steadily declined from a peak of 700,000 tonnes to a mere 260,000 tonnes in 1999, of which Nkana and Mufulira accounted for one-third. The situation had become so precarious that some quarters estimated the industry was costing the government US$1 million a day just to sustain.

Pascall said most of the necessary upgrades and repairs can be funded from internal cash flow and standard commercial facilities. Moreover, Glencore has also provided a loan of US$40 million for working capital.

One of the first steps taken by First Quantum was to bring in a new mining fleet and begin developing underground stations to maintain the equipment. New contracts for materials and consumables quickly followed, slashing procurement costs by more than 30%.

Immediate attention was devoted to theft and morale, both of which were overcome by tighter security measures and an increase in wages. Next, a team of expatriate personnel was hired to oversee all levels of operation, from surface facilities to development headings.

“I’m a great believer in decentralization of management, but I’m an equally firm believer in the centralization of mine services, simply on the basis of cost-effectiveness and consistency,” noted Thomas Dale, chief executive officer of Mopani, the unit through which the joint venture operates in Zambia.

First Quantum expects operating costs to break even by year-end. By 2004, when combined production levels off at about 140,000 tonnes copper and 2,700 tonnes cobalt per year, operating costs are expected to fall to the US45-per-oz. range (net of tolling and byproduct credits).

Nkana was put into production in 1932 by Anglo American (AAUK-Q), which ran the operation until nationalization took root. Few could have foreseen that the mining complex’s smelter and refinery would once again end up in Anglo’s hands.

Today, Nkana comprises three mines spread across several kilometres of the northwest-plunging Nkana synclinorium, which is part of the Chambishi-Nkana basin that lies on the southwestern flank of the Kafue anticline. Grades generally increase northwards, in the form of chalcopyrite at the South Orebody, chalcopyrite-bornite at the Central zone and bornite-chalcopyrite at Mindola. Cobalt occurs mainly in the form of carrollite and cobaltiferous pyrite in equal proportions.

Varying dips and thickness necessitate different mining methods and degrees of mechanization. The predominant technique in use at Nkana is vertical crater retreat.

However, a particularly troublesome problem at both mines is dilution. ZCCM’s practice had been to aim for a complete recovery of stope blocks, even though this resulted in a third of the ore being left behind as wall rock failures, produced misleading muck grades.

“During our due diligence a year ago, we felt that the best way to overcome this was by sacrificing a skin of ore and aiming for a clean 70-80% instead,” said Pascall. “However, our ability to implement that quickly has been limited by our inheritance.”

Fully and partly developed reserves stand at 14 million tonnes grading 2.1% copper and 0.11% cobalt, while undeveloped reserves top 61 million tonnes grading 2.32% copper and 0.14% cobalt.

Pascall added that poor drilling practices have had to be corrected as well, and mine layouts redrawn. However, the improvements are showing up at the mill, with copper head grades at the Nkana mill topping 2% — a feat not accomplished since 1968. This, in turn, has helped direct mining costs to the mill dip below budget.

Meanwhile, improvements at the cobalt plant have pushed recovery rates to 70%, and the planned addition of new flotation cells to the concentrator should result in greater utilization of crushing capacity. A portion of the Nkana concentrates is railed to Mufulira for processing, as required by tolling agreements under the ZCCM privatization program.

Following Nkana a year later, Mufulira has gone on to produce some 9 million tonnes of copper, becoming the most mechanized mine in the region. Though the mine is but a shadow of its former self, new loaders and more efficient drilling are turning in respectable numbers once again.

“From a production point of view, there wasn’t much point in paying a lot of attention to the plants if we weren’t bringing in the material,” said Pascall.

By the time of The Miner’s visit, Mufulira was hoisting more than 160,000 tonnes of ore to surface each month. Moreover, a switch to updip shrinkage stoping methods was well in place, promising to curb dilution and allow stopes to be enlarged to a length of 400 metres and a height of 200 metres.

“We need to start looking at what to do once the existing reserves are depleted,” noted Pascall. “Everything at Mufulira is an integrated system, so one doesn’t want to make any decisions about hoisting capacity without considering depth extensions.”

The target is to treat 2.4 million tonnes annually in the two new crushers, though a third is scheduled to arrive in the coming months. “That [third crusher] will get my problems out of the way,” said metallurgical manager John Chongo.

Reserves stand at 27 million tonnes grading 3.04% copper within an overall resource of 68 million tonnes averaging 3.09% copper. Ore minerals are chalcocite, bornite and chalcopyrite.

All told, Mufulira is expected to contribute 55,000 tonnes copper to the joint venture’s yearly output, making it the smaller of the two mines. But what it lacks in production it makes up in purity: a tonne of Mufulira copper cathode fetches US$40 per tonne above the London Metal Exchange spot price.

The refinery can produce 275,000 tonnes of cathode annually but is currently operating below capacity. A portion of the US$84 million earmarked for Mufulira is destined for the tank houses, but a larger chunk will be used to help rejuvenate the aging smelting plant that feeds them.

As far as mining operations go, few are easier or cheaper than Bwana Mkubwa. In the first six months of this year, the operation cranked out 5,036 tonnes of copper cathode at a cash cost of US13 per lb., or US57 on a total cost basis (net of byproduct credits).

The flow sheet calls for tailings to be pumped in slurry form to the plant, where they will be combined with acid created on-site in a series of vats. The resulting pregnant copper solution is then purified and passed through a solvent extraction-electrowinning plant to produce up to 35 tonnes of cathode per day.

On an annual basis, Bwana Mkubwa treats 1.6 million tonnes of tailings and generates 110,000 tonnes of acid. Only 40,000 tonnes of acid are used internally; the rest is sold to other copper-belt operations.

Reserves stand at 5.7 million tonnes grading 0.73% copper.

Although mining is First Quantum’s top priority these days, exploration is not being overlooked. Resources at Nkana alone top 111 million tonnes grading 2.29% copper and 0.1% cobalt. “But the complexity of the deposits demands more infill drilling,” noted chief geologist Wellington Mkubwa.

Toward that end, 57 holes totalling 12,200 metres are to be drilled this year in a portion of the C and D Fold zones and between the 4,400 and 5,120 levels at Mindola. The latter area, known as the Mindola-at-Depth project, hosts reserves of 24 million tonnes grading 2.42% copper and 0.14% cobalt.

Whatever the outcome, Nkana has sufficient hoisting capacity to handle an increase in production rates. A proposed decline between the Mindola shaft and the Central area could spread the weight.

As for the future, the last word goes to Vice-President of Exploration Alan Stephens: “Geologically, the places to be for major copper deposits are Chile, Peru and Zambia. And considering exploration was only renewed in 1994, Zambia is essentially unexplored.”

First Quantum’s exploration portfolio consists of three wholly-prospecting licences and a fourth in which Casmyn (CMYN-O) retains a 15% participating interest after $3 million has been spent. Combined, the properties cover 15,228 sq. km.