Kalukundi looks good on paper

Another Congolese copper project has received a positive feasibility study, this time the Kalukundi deposit in the Kolwezi area of Katanga province.

The study, piloted by South African consulting firm MDM Engineering, proposes development of multiple open pits and a solvent extraction and electrowinning plant.

Project operator Africo Resources, a private company in which Rubicon Minerals (RMX-T, RBY-X) holds a 39.6% interest, is providing the $6-million study as part of its option obligations on Kalukundi. Africo can earn a 75% interest in the project, with the rest held by state mining agency Gnrale des Carrires et des Mines (Gcamines).

The pits would hold a reserve of 7.8 million tonnes grading 2.37% copper and 0.69% cobalt, part of a resource of 12 million tonnes grading 2.42% copper and 0.61% cobalt. There is a further inferred resource of 15 million tonnes at average grades of 2.63% copper and 0.58% cobalt. The stripping ratio of the pits is near 4.

The mine would produce 16,400 tonnes copper and 3,400 tonnes cobalt annually, out of about 800,000 tonnes of ore. Cash production costs, estimated for copper and cobalt as co-products, rather than crediting cobalt revenues against copper costs, rang in at US$1,410 per tonne copper or US64 per lb. (Treating cobalt as a by-product brings the production costs below zero.)

The study used prices of US$2,750 per tonne (US$1.25 per lb.) for copper and US$12 per lb. for cobalt. It assumed the pits would be contract-mined.

Capital costs totalled US$167 million, plus another US$7 million in pre-stripping.

Based on a financing structure of 70% bank debt, the project has a net present value of US$163 million at a 10% discount rate. The economic analysis used an income tax rate of 30%, a withholding tax rate of 10% and duties of 2% to 5%. The project is also subject to a 2.5% royalty held by Gcamines and a 2% royalty reserved to the state.

After taxes, the project’s internal rate of return is 28.5%. If it were entirely financed from equity, the net present value falls to US$44 million and the rate of return to 14.7%.

At the end of January, Africo had paid US$775,000 under the option deal. A further US$250,000 was due on May 22 and the remaining US$1.2 million was to become due once the feasibility study was complete.