Tiger moving on high grade DRC deposit

Tiger Resources (TGS-T, TGS-A) has a firmer grip on the economics of its copper rich deposit in the Democratic Republic of Congo (DRC). Now it must wait to see how firm its grip is on the rights to the project.

In accordance with the government’s stated wish to have feasibility studies on projects completed promptly, with production following soon afterwards, Tiger finished a definitive feasibility study on the first stage of the Kipoi copper project.

Tiger is in the processing of acquiring a 60% interest in the project by acquiring a 60% stake in SEK. It is getting that stake by acquiring Congo Minerals. SEK is 60% held by Congo Minerals and 40% held by Gecamines.

The recent DRC government review of mining contracts which was launched last year — put the projects contract in the category of contracts that needed to be reviewed.

Tiger says negotiations associated with that review are at an advanced stage, and expects things to be formalized soon without any significant changes to existing contractual terms.

A condition of the review was that Gcamines be given an active role in the development of the mine.

The feasibility study focused on Kipoi Central, which is one of five deposits within a 12-km long fragmented sequence of mineralized roan sediments.

A resource update there put total measured and indicated resources at 2.9 million tonnes grading 8.1% copper for 232,000 tonnes of contained copper metal.

Financials in the study were based on a throughput capacity of 900,000 tonnes per year with a head grade of 7% copper over a three year period to produce 95,000 tonnes of copper metal. A copper price of US$2.50 per lb was used.

Capital expenditures are estimated at US$59 million, cash costs per lb of copper came in at US$1.20, and projected cash flow is estimated at US$138 million.

Costs are mitigated, Tiger says, by existing infrastructure already in place at Kipoi. Such infastructure includes covers sealed roads to Lubumbashi — the capital of the Katanga province — as well as railway and high voltage power lines running through the project and the ready availability of water.

The project’s net present value with a 10% discount rate is US$58 million with an internal rate of return (IRR) of 51% after taxes and royalties and the payback period for investment is estimated at just 1.5 years.

“The exceptional high grade resource at Kipoi Central should ensure the Company can develop a robust project, with an internal rate of return of more than 50%, capable of generating positive cash flow under varying economic scenarios and will provide a strong platform for the growth of Tiger into a 100,000 tonne per year copper producer,” said Tiger’s managing director David Young in a statement.

To get to that robust figure Tiger plans to develop Kipoi in two stages.

First it would build a short duration pyrometallurgical plant to recover 25,000 to 30,000 tonnes per year of black copper from high grade oxide ores.

Then, for its second stage it would move the operation into a leach solvent extraction and electrowinning (SXEW) plant with similar capacity to treat the bulk of the oxide ores.

The company already completed a feasibility study on the two stages last year, but this most recent study, which is labeled a “definitive” feasibility study, looked at stage one more closely.

And while Kipoi has copper resources grading 3%, they were ignored in the study, which instead focused only on ore in the central area grading above 3.25% copper.

The crushing circuit would have a feed rate of 900,000 tonnes per year to produce roughly 120,000 tonnes per year of 25% copper concentrate.

Tiger plans to build two shaft furnaces alongside a HMS plant to turn out such numbers. It says construction would take one year and is aiming to be in production by the end of 2009.

The company is looking at debt and convertible debt to fund development and wants to have finances in place by the end of 2008.

Perth-based Tiger has 251 million shares outstanding and its share price has moved between 45 and 32 over the last 52-week period.