Tiger Resources ramps up operations in the DRC

VANCOUVER – The risk-reward tradeoff that permeates the Democratic Republic of Congo (DRC) is working out well for Tiger Resources (TGS-T, TGS-A): the Australian company has been producing copper from the first phase of its Kipoi project for 18 months, work has begun on the larger second phase of mine development, and drills are returning strong copper grades from resource expansion targets at Kipoi and beyond.

The Kipoi project sits 75 km northwest of Lubumbashi in the DRC’s Katanga province. Tiger owns 60% of Kipoi and is the project operator; the DRC’s state mining company, Gecamines, owns the other 40%.

A 12-km long sedimentary rock assembly that tracks a northwest-southeast fault through the project area is home to five known zones of copper mineralization: Kipoi Central, Kipoi North, Kileba, Judeira, and Kaminafitwe. Three of those zones carry defined resources.

The largest deposit is Kipoi Central, where resources currently stand at 25 million measured and indicated tonnes grading 2% copper plus 7.9 million inferred tonnes averaging 1% copper. Kipoi North contains 4 million indicated tonnes averaging 1.33% copper and 1 million inferred tonnes grading 1.1% copper, while Kileba is home to 8.6 million indicated tonnes grading 1.49% copper as well as 2.2 million inferred tonnes averaging 1.23% copper.

Each of those deposits has a high-grade core surrounded by a larger, lower grade resource. Tiger is currently mining all three and dividing the ore by types. The low-grade ore is being stockpiled, to be fed through the solvent-extraction electrowinning (SXEW) facility that is under construction. The high-grade ore, meanwhile, is being turned into copper concentrate by virtue of a Heavy Media Separation (HMS) plant, which is able to recover 60% of the copper from high-grade oxide mineralization.

Tiger built the HMS plant in 2011, commissioning it in June of that year. The facility is expected to operate for 39 months, during which time it will process 2.7 million tonnes of ore grading approximately 7% copper, to produce a total of 113,000 tonnes of copper in concentrate. Tiger sells the copper concentrate to the Chambishi Copper Smelter in Zambia.

The HMS plant has been performing beyond expectation. In fact, the young mine set a new production monthly record in March, churning out 4,007 tonnes of copper in concentrate. To achieve that feat the HMS plant operated at 37% above nameplate capacity.

In 2012 Kipoi produced 36,966 tonnes of copper in concentrate. Cash costs averaged just US76¢ per pound of copper in concentrate, which enabled Tiger to book $146.6 million in revenues for the year. In 2013 Tiger expects costs to fall to just US48¢ for each pound of copper in concentrate.

The end of 2013 will also bring Kipoi close to another milestone: the commissioning of the SXEW plant. Tiger broke ground on the plant in January and plans to spend 16 months building phase 1, which involves a 25,000-tonne-per-year (tpy) SWEX circuit. In phase 2 Tiger will add a second 25,000-tpy SXEW circuit and a crushing circuit, while phase 3 will see a leach tank added to the facility.

When phase 1 starts operating, feed coming into the facility will be crushed and washed. The 0.3-mm fraction will be sent to the heap leach pad, where copper recovery is expected to average 83%. The slimes and fines will be stockpiled until the tank leach system is available.

Tiger has planned out Kipoi’s development stages carefully and if all works according to plan the various phases and stages should support each other seamlessly. For example, when the SXEW plant comes online next year, Tiger will already have more than enough feed for it. The stockpiles of low-grade ore are a start, but the SXEW plant will also reprocess the material that went through the HMS plant. Since recoveries in the HMS plant average 60%, its processed material still bears 2.5 to 3% copper.

All that feed means Tiger will not have to spend money mining at Kipoi during the first two years of SXEW operations. In those first years the new facility is expected to produce 25,000 tonnes of copper at an average cost of US72¢ per lb. Low acid consumption and low electricity rates help in keeping Kipoi’s production costs down.

Once phase 2 is complete output will rise to 50,000 tonnes of copper per year. Mining will also recommence, which will increase production costs to a life-of-mine average of US$1.13 per lb.

That life of mine is currently pegged at nine years, based on the resources at Kipoi Central, Kipoi North, and Kileba. However, Tiger thinks its Kipoi mine will operate for much longer because the company is confident there is still lots of undiscovered copper in the rocks of Kipoi.

To start, the three deposits all remain open for expansion. Then there are Judeira and Kaminafitwe, which are both zones of known mineralization that do not yet bear defined resources. Tiger plans to change that, starting with Judeira. The Judeira zone is just 6 km northwest of the HMS plant and actually hosts two copper zones, known as Judeira North and South.

An 11-hole program in late 2012 expanded the width and downdip extent of the Judeira South deposit, where copper oxide mineralization exists within a breccia zone of dolomitic siltstones intercalated with shales. That drill program produced some nice results. Hole 5 returned 16.5 metres grading 5.12% copper from 46 metres below surface, followed directly by 30.2 metres averaging 2.41% copper. Hole 6 cut 44.5 metres of 2.28% copper from 37 metres depth, and hole 8 intercepted 76.2 metres grading 1.69% copper from 90 metres depth, including 6.5 metres of 5.8% copper.

With these drill results in hand, Tiger is now working to establish a maiden resource estimate for Judeira.

The potential to expand Kipoi’s resources doesn’t stop at the property’s boundaries. Tiger is also exploring its Lupoto project, the northern border of which is just 10 km south of Kipoi, and a 15-hole drill program that recently tested the Sase Central target at Lupoto hit into some high-grade copper.

The 2,225-metre program included some infill work and some holes to expand the deposit to the east.  Both efforts returned copper hits. The best results came from holes 43 and 44, which returned 36.6 metres grading 3.2% copper from 73 metres depth and 38.5 metres averaging 3.65% copper from 54 metres depth respectively.

Other notable results include 27 metres of 1.42% copper, 38.5 metres of 0.58% copper, 15.9 mtres of 1.51% copper, 55.1 metres of 0.65% copper, and 8.5 metres of 4.84% copper. All intercepts occurred within 150 metres of surface.

Sase Central is already home to 11.9 million inferred tonnes grading 1.3% copper. The deposit lies along a major east-west-trending fault system, where the fault intersects a regional northwest-southeast lineament. The deposit remains open along strike to the east and at depth.

As at Judeira, results from the recent Lupoto drill program will now be used to update the resource estimate. Tiger is hopeful that resources from Judeira and Lupoto can add four years to the Kipoi mine life.

For now, the mine is based on known reserves at Kipoi. According to the feasibility study for the Kipoi SXEW expansion, those reserves gives the mine an after-tax net present value of US$378 million, using an 8% discount rate and a copper price of US$3.40 per lb. from 2014 to 2017 and US$3 per lb. thereafter. Those same parameters predict that Kipoi will generate a 44% after-tax internal rate of return.

The first phase of the SXEW expansion is expected to cost US$160.9 million. All three phases of the expansion will cost US$385.2 million, including sustaining capital. Tiger plans to complete the entire expansion by the middle of 2016.

Tiger says that cash flow from operations will be more than sufficient to fund the entirety of the SXEW expansion. However, for added security the company hedged approximately 43,000 tonnes of copper production from the next three yea
rs of operation. That hedging agreement enabled the company to secure an US$80-million debt facility that Tiger can tap into if needed to fund the rest of the SXEW project.

Tiger’s share price added 6¢ in two days following news of the latest drill results from Lupoto to end the first week of April at 36¢. The company has a 52-week trading range of 25¢ to 39¢ and has 673 million shares outstanding, creating a market capitalization of $242.4 million. At the end of 2012 Tiger had $45.2 million in the bank.