First Quantum tables Kansanshi report

An independent feasibility study has given First Quantum Minerals (FM-T) the green light to develop the Kansanshi copper deposit in Zambia.

The study, prepared by GRDMinproc of Australia, concludes that Kansanshi hosts some 46.9 million tonnes of leachable reserves grading 1.75% copper and 0.29 gram gold per tonne. Another 95.6 million tonnes at 1.03% copper and 0.19 gram gold can be floated and concentrated for shipment to nearby smelters.

The reserve, which is divided between two deposits, can support 16 years of production to churn out 1.6 million tonnes copper and 395,479 oz. gold in all. About 44% of the copper output will be in the form of cathode, and some of the gold will be captured in a gravity circuit.

Production will be somewhat staged, with miners extracting an average 4 million tonnes of mixed oxide and transitional mineralization in each of the first 11 years and gradually less so over the remainder of the mine life. By the third year, milling and flotation capacity will have been expanded to accomodate upwards of 6 million tonnes of sulphide feed annually, or 3.9 million tonnes more than initial rates.

Head grades are expected to average 1.43% copper and 0.22 gram gold. Copper recovery rates are pegged at 80%.

Life-of-mine operating costs are projected at US$838 per tonne copper (US38 per lb.), net of gold credits, or US$945 per tonne if contract miners are employed.

According to the report, capital costs ring in at US$163 million, or US$143 million with the use of contract miners. Another US$118 million is needed for sustaining and expansion capital.

Payback comes in roughly four years, assuming copper prices average US$1,587 per tonne and gold averages US$330 per oz. This is reduced by just over a year when copper alone is increased by US$66 per tonne. (At presstime, the official London Metal Exchange settlement price was US$1,641, and the 3-month price, US$1,660).

Using a 10% discount rate, the base-case scenario generates a net present value (NPV) of US$228 million. The internal rate of return (IRR) is 32.6%. Both projections exclude taxes and assume the project will be funded on a 100% equity basis.

First Quantum has secured US$120 million in financing from Standard Bank Group and WestLB AG. Discussions with other institutions, including metal traders, continue.

“We are in the final stages of completing a financing package for Kansanshi, with the goal of drawdown and initiation of construction in the second quarter,” says Chief Financial Officer Martin Rowley. “We expect to deliver a project financing package that is structured to further enhance the already exceptional economics of the Kansanshi deposit.”

The deposit is in the Lufilian Arc, a major fold-thrust tectonic belt that hosts all the deposits in the famous copper belt, which passes through both Zambia and neighbouring Democratic Republic of Congo (DRC).

Locally, the property is dominated by the northwesterly trending Kansanshi antiform, which exposed rocks of the Late Proterozoic Kansanshi Mine formation in the core of a major re-folded fold. Copper mineralization occurs in steeply dipping, north-trending quartz-carbonate veins and in flat-lying stratabound layers within altered phyllitic rocks of the Mine formation.

First Quantum has an 80% stake in the project, with the remainder held by state-owned Zambia Consolidated Copper Mines.

Should First Quantum advance the deposit to production, it must pay Phelps Dodge (PD-N) US$25 million within 30 days of the event. The payment will be reduced by an amount equal to 1.4 million of the shares of First Quantum that were issued to Phelps Dodge as partial payment for the deposit in 2001.

First Quantum also operates the Bwana Mkubwa copper mine, in the copper belt proper, near the town of Ndola. There, the company produces about 30,000 tonnes copper cathode annually, plus appreciable volumes of sulphuric acid.