Kamoto copper can resume production: study (April 13, 2006)

A feasibility study on the dormant Kamoto copper mine in Katanga province, Democratic Republic of Congo, says a capital infusion of US$427 million can put the mine back into production.

Katanga Mining (KAT-V), which holds a 17.5% interest in the project and an option to increase that to 75%, commissioned the study, which was led by consulting firm Hatch. Katanga’s interest is held through Kinross Forrest, a company formed by Kinross Gold (K-T, KGC-N) and Congolese industrialist George Forrest. Congolese state mining agency Gnrale des Carrires et des Mines (Gcamines) holds the other 25%.

Hatch concluded the project — which encompasses an underground mine, open pits, a mill and a metallurgical plant — could resume production with a new mining fleet, upgrades to the underground pumping and ventilation systems, and refurbisment of the existing mill and plant. The operation could resume production at 122,000 tonnes copper and 6,400 tonnes cobalt annually.

There would be a four-phase capital program, with the first phase to cost US$176 million and the whole program US$427 million. About US$150 million would go into refurbishment and later expansion of the metallurgical plant, and about US$80 million into the Kamoto underground mine. Another US$231 million, beyond the capital cost, would go into sustaining capital over a 20-year period.

Mining could resume from underground as soon as an equipment fleet was delivered. The underground reserve at Kamoto is 45.6 million tonnes grading 3.09% copper and 0.39% cobalt, with another 26.1 million tonnes grading 3.96% copper and 0.47% cobalt in resources, including some in pillars that would only be mined as remnants near the end of the mine’s life.

The mine used room-and-pillar stoping, but some of the deposit would be mined by longhole stoping under the current scenario.

Four open pits — Musonoie-T17 West, Mashamba East and West, and Dikuluwe — would be contract-mined to provide oxide ore. The four pits have reserves of 47.6 million tonnes grading 3.2% copper and 0.26% cobalt. Another 46.5 million tonnes, grading 3.13% copper and 0.37% cobalt, are classed as measured and indicated resources.

Hatch estimated operating costs at US$469 per tonne copper, after credits for cobalt. At assumed prices of US$2,425 per tonne for copper and US$10 per lb. for cobalt, the prject has a net present value of US$649 million at a discount rate of 6%. Its internal rate of return is 25.5%.