First Quantum refinances Bwana Mkubwa (July 12, 2001)

First Quantum Minerals (FM-T) has borrowed US$14.2 million from KBC Bank to refinance and possibly expand its Bwana Mkubwa copper tailings recovery project in Zambia.

The debt facility, which is secured against the mine itself, carries interest at the London Interbank Offer Rate plus 2.5%, considerably less than the facility it replaced. The loan is to be repaid in 18 monthly installments, starting this month.

A portion of the proceeds are earmarked for a possible expansion of the solvent extraction-electrowinning plant to accommodate feed from the Lonshi copper oxide deposit, about 35 km away in the Democratic Republic of Congo.

A scoping study is under way to determine the compatibility of the two deposits.

“The restructuring of Bwana Mkubwa’s debt will result in considerable interest savings for First Quantum and provide the initial capital necessary to transform the mine from a tailings re-treatment facility to a direct feed oxide operation,” states Philip Pascall, First Quantum’s chairman.

Pascall also says Lonshi adds several years to Bwana Mkubwa while possibly tripling its production to 30,000 tonnes of Grade A copper cathode per year. Bwana Mkubwa currently generates about 70,000 tonnes of excess acid yearly, meaning it would most likely remain self-sufficient.

At last report, Bwana Mkubwa hosted 4 million tonnes in reserves grading 0.73% copper. Resources at Lonshi stand at 1 million tonnes grading 6% copper, though it may contain additional tonnage.

First Quantum also operates the Nkana and Mufulira mines, just northwest of Bwana Mkubwa. Ownership is split between First Quantum, with 44%, Swiss-based Glencore International, with 46% and the government of Zambia, with 10%.

Combined, the two mines produced 18,634 tonnes copper and 368 tonnes cobalt in the quarter ended Feb. 28. Cash costs averaged US71 per lb. at Nkana and US58 per lb. at Mufulira.

In early June, First Quantum raised $35.38 million on the market for working capital and debt reduction. The proceeds are also earmarked for capital projects at Nkana and Mufulira and to partly fund the expansion study at Bwana Mkubwa. Accordingly, production and costs are expected to improve at Nkana and Mufulira.