Good intercepts, delayed start-up for Equinox

Vancouver – It’s been an up-and-down summer for Equinox Minerals (EQN-T) as it tries to get its Lumwana copper project into production.

Things were looking good in June as the company boosted its reserve estimate and started rotational tests at the newly-installed, 38-ft-diameter SAG mill. Then a fire ripped through the power facility, delaying the start of commissioning from July until December. Now, exploration drilling less than a kilometre south of the first pit to be mined at Lumwana is returning good copper intersections in an indication of the potential to expand this already massive project.

The Lumwana project consists of two pits: Malundwe and Chimiwungo. Combined, the two pits hosts proven and probable reserves of 319.4 million tonnes grading 0.73% copper. The project, which is largely constructed, is designed to process 20 million tonnes of ore per year, producing 340 million lbs. copper.

While the mine life already stands at 37 years Equinox is still exploring for expansion. The current expansion focus is Kanga, a series of induced polarization anomalies roughly 1 km south of Malundwe. In probing these anomalies Equinox has now drilled 20,000 metres in 112 holes along a 1-km strike and 1.2-km width.

The drills have hit significant copper mineralization along every cross section. The best intercept of late came form hole 260, drilled near the centre of the zone, which returned 24 metres grading 1.12% copper starting 238 metres downhole. Nearby, hole 261 cut 23 metres of 0.99% copper at a similar depth and hole 294 hit 18 metres of 1.47% copper from 256 metres downhole.

One cross section or 200 metres south, three holes returned better than 1% copper. Hole 270 cored 18 metres of 1.07% copper from 225 metres depth, hole 272 returned 1.21% copper over 12 metres from 167 metres downhole, and hole 275 hit 14 metres of 1.18% copper at 232 metres depth.

In the announcement Equinox president and CEO Craig Williams said a Kanga extension to the Malundwe pit could “materially impact the economics of Lumwana with higher-grade Kanga ore possibly displacing lower-grade Chimiwungo ore from the current mine schedule.”

The good news didn’t help Equinox’s falling share price, though. On July 25 Equinox shares closed down 8c at $3.54. The company has a 52-week trading range of $2.61 to $6.20 and has 593 million shares issued.

The company’s poor performance in the markets is likely attributable to the recent news that the project will not be handed over to Equinox from the equipment procurement construction (EPC) contractor to start commissioning until December. Until the late-June fire at the electrical station, handover was scheduled for late July.

The fire cause damage to a 20-MVA (megavolt-ampere) transformer and the adjacent 11-kV substation. Both of integral to the process plant. Work has begun to repair damage and requisite replacement items have been ordered but it seems the fire has necessitated a 5-month start-up delay.

Equinox says it has “vigorously pursued” claims under its insurance policies that provide cover for material damage and delay in start-up. The company has already received liquidated damages under the EPC contract and it seems likely the company will end up getting the maximum compensation fee, which is $28 million.