Kansanshi gets the nod

An independent feasibility study has given First Quantum Mines (FM-T) the green light to develop its Kansanshi copper deposit in Zambia.

The study, prepared by GRDMinproc of Australia, pegs Kansanshi’s leachable reserves at 46.9 million tonnes grading 1.75% soluble acid and 0.29 gram per tonne. Another 95.6 million tonnes at 1.03% copper and 0.19 gram gold must be floated and then concentrated.

Miners will extract 4 million tonnes of oxide/mixed ores and 2.1-6 million tonnes of sulphide ore annually over 16 years to produce 1.6 million tonnes copper and 395,479 ounces gold in all. About 44% of the ore will be processed into copper cathode and the rest into concentrate for shipment to nearby smelters.

Headgrades are expected to average 1.43% copper and 0.22 gram gold.

Copper recovery rates are pegged 80%.

Life-of-mine operating costs, net of gold credits, are projected at US$838 per tonne copper, or US$945 per if contract miners are employed.

Capital costs are pegged at US$163.4 million, though this shrinks by US$20.4 million with the use of contract miners. Another US$118.3 million is needed for sustaining and expansion capital.

Payback comes in 4.2 years, assuming an average copper price of US$1,587 per tonne and average gold price of US$330 per oz.

Using those metal prices and a 10% discount rate, the net present value rings in at US$228 million. This excludes taxes and assumes the project is financed on a 100% equity basis.

The internal rate of return is 32.6%, which increases to 36.8% if copper prices alone increases to US$1,653 per tonne. Again, this is based on a 100% equity basis and exclusive of taxes.

First Quantum has raised US$120 million via Standard Bank Group and WestLB AG. Half will be structured as commercial debt and the rest as an export credit facility.

First Quantum also is in advanced discussions with the European Investment Bank and other institutions, such as metal brokers. The bank itself may participate on a level playing field with Standard and WestLB; otherwise, it will be subordinate to them.

Construction may begin as early as the second quarter.

First Quantum has an 80% stake in Kansanshi, with Zambia Consolidated Copper Mines (ZCCM) holding the remainder. ZCCM is state-owned.

First Quantum also operates the Bwana Mkubwa copper mine, which lies in the Copper Belt proper, near the town of Ndola. There, the company produces about 30,000 tonnes copper cathode annually, plus appreciable volumes of sulphuric acid.

First Quantum shares slipped 8 on the day to close at $4.67.