Equinox Studies Lumwana’s Uranium Potential

With mine construction well under way at its large, wholly owned Lumwana copper project in northwestern Zambia, Equinox Minerals (EQN-T, EQN-A) now has the time to revise a bankable feasibility study of the project’s associated uranium resources.

The last bankable feasibility study of Lumwana was completed in 2003, when U3O8 prices were US$11 per lb. The study tallied a substantial uranium resource within and adjacent to the primary copper reserve, compiled metallurgical data, and sketched out designs and costs for a separate plant that would process Lumwana’s uranium ore and produce yellowcake on-site.

Equinox has hired Australian consulting firm Ausenco (AAX-A) to manage the revised uranium study, which is due early next year. Ausenco is already involved in Lumwana as the co-lead engineering, procurement and construction management contractor, along with Bateman Engineering.

Apart from reviewing the 2003 work, Ausenco will carry out infill drilling to move material into the reserve category and conduct more metallurgical test work on the uranium mineralization.

There will be an updated design for a processing plant and infrastructure to produce yellowcake on-site, and new capital and operating cost estimates. (There was a capital estimate of US$77 million for an acid-agitated leach plant in 2003, but that’s now out-of-date.)

The Lumwana open-pit mine will soon be exploiting two large, adjacent copper deposits, named Malundwe and Chimiwungo, that are very homogenous, flat, tabular structures.

A secondary geological event has allowed hot fluids to penetrate these tabular orebodies and then crystallize out perpendicular pods of uraninite veinlets.

It’s these enriched zones that can be mined separately during the copper mining.

“That’s the key,” says Kevin van Niekerk, Equinox Minerals’ vice-president of investor relations and corporate development. “This is not an Olympic Dam-style single orebody that has copper mixed up with uranium — it’s quite the opposite, actually.”

In the 2003 feasibility study, Lumwana’s uranium resources stood at 9.5 million tonnes grading 0.093% U3O8 in the indicated category, plus 2.6 million inferred tonnes of 0.042% U3O8, for a combined 21.4 million lbs. of contained U3O8. The figure uses a 0.01% uranium cutoff grade and is National Instrument 43-101-compliant.

“We’ll have a look at the best way to process this material all over again,” van Niekerk says. “It may be the case that we throw everything in the copper concentrator and then treat the copper concentrate as it’s produced to remove uranium.”

He says there is a “very tangible potential” to bring down Lumwana’s total operating cost to produce copper by way of a uranium credit.

Furthermore, he says, when the “clock stops for uranium going up,” the companies that will be left standing will be the tier-one producers and very few of the rest.

“What is certain is, we will be one that will be left, because we are extracting that uranium ore as part of our copper mining process,” van Niekerk says. “It will be stockpiled on clay-protected pads. . . (and) whether it’s being processed or not, and how it will be processed, that is the subject of this feasibility study.

On the corporate side, Van Niekerk says Equinox has many options for how to handle this potential uranium side business, such as spinning off a new uranium company or doing a Silver Wheaton (SLW-T, SLW-N)-style monetization and selling off of the uranium.

“My conversations with the analysts have been to temper their expectations somewhat, because they all get away with themselves a little bit at the moment when it comes to uranium,” he says. “Tempering them simply because we are a copper company. We needed to fully fund and finance Lumwana, and we needed to get Lumwana into construction to, frankly, guarantee our future.”

There are only three significant uranium players in Zambia: Equinox, Australia’s OmegaCorp (OMGCF-O, OMC-A) with its Kariba uranium project, and U.K-based African Eagle Resources (AFE-L) with calcrete-hosted uranium on its Lunga licence, which has been partly optioned to South Africa’s MinEx Projects.

OmegaCorp’s Kariba comprises a 2,521-sq.-km prospecting licence in Zambia’s Southern province, just north of Lake Kariba, and hosts 11 million contained pounds U3O8. The company is carrying out a scoping study with preliminary metallurgical test work returning results of 80% recoveries using an alkali leach.

Back at Lumwana, Equinox strongly emphasizes that its revised uranium feasibility study will not delay the commissioning of the Lumwana copper mine in the second quarter of 2008.

“We’re greenfield,” van Niekerk says. “We’re carving this thing out of the bush, and the progress is very measurable.”

Lumwana will become Africa’s largest new copper mine and Zambia’s biggest-ever investment. The mine is slated to produce an average of 169,000 tonnes copper contained in concentrates for the first six of its 37-year mine life.

Lumwana’s semi-autogenous grind (SAG) mill shells arrived in Zambia in mid-March. Once installed, the mill will rank as the largest one in Africa, with a milling capacity of 20 million tonnes per year and an installed cost of around US$30 million. An adaption of the operating mill at Escondida in Chile, the SAG mill is contracted to FFE Minerals, a U.S. company, and manufactured by Gandara Censa (Spain) and Siempelkamp (Germany).

Equinox hit another milestone a month earlier, with the closing of a $211-million equity offering comprised of 105.6 million units priced at $2.00 apiece. Each unit consists of a share and one-quarter of a warrant, with a full warrant exercisable at $2.30 into one share for 14 months.

The underwriting syndicate was co-led by Sprott Securities and CIBC World Markets, and included Dundee Securities, GMP Securities, Paradigm Capital, Raymond James, RBC Capital Markets, TD Securities and Laurentian Bank Securities.

In December, Equinox signed a debt facility with a group of financial institutions to provide a total of US$584 million in senior and subordinated project finance to complete construction of the Lumwana mine.

In the boardroom, the high-profile Sam Jonah has recently resigned as chairman and director to pursue his many other business interests. Equinox non-executive director Brian Penny has assumed the role of “acting chairman” until a new chairman is found.