Lisheen to reach design capacity

Based on an improved first-quarter performance at the Lisheen zinc-lead mine in southern Ireland, Ivernia West (IVW-T) says full production should be attained by mid-year.

The underground operation, which started up in September 1999, was hampered by water problems and low metallurgical recoveries last year. As a result, the ramp-up and commissioning phase were delayed.

Set in the rural heart of the country, Lisheen is a 50-50 joint venture between Anglo American (AAUK-Q) and Limerick-based Ivernia West (the latter also has a Toronto office). Anglo is the operator and also holds a 23.4% stake in Ivernia West.

Production in the fourth quarter of 2000 was off 19% from the previous 3-month period, partly because the intersection of a major water-bearing feature in the Main zone resulted in a 2-week loss of production in December.

Some 172,970 tonnes of ore grading 12.44% zinc and 3.27% lead were processed in the fourth quarter, compared with 203,555 tonnes of 12.07% zinc and 3.97% lead in the third.

For the year, Lisheen processed 762,722 tonnes of ore averaging 12.13% zinc and 3.93% lead — less than half of design capacity. Metal production totalled 64,166 tonnes zinc and 21,418 tonnes lead. At full production and on a yearly basis, the 4,500-tonne-per-day Lisheen mill is expected to process 1.5 million tonnes and produce about 160,000 tonnes of contained zinc in concentrates. These rates are expected to be sustained over the mine’s projected lifespan of 14 years.

Mill recoveries in 2000 averaged 69.77% for zinc and 71.53% for lead, compared with expectations of 92% and 78%, respectively.

In the second half of the year, Anglo began taking the following steps to improve mine output and mill recoveries:

– The company accelerated the development of underground infrastructure, including underground service bays.

– Higher-than-anticipated water levels prompted Lisheen to implement a water management program, while expanding the pump capacity by 70%.

– Conventional cleaning cells were added to the mill’s zinc circuit in order to improve recoveries and the quality of the concentrate. (The mill had been designed using only column cells, which have a longer retention time and poorer control characteristics.) Recoveries improved to 82.69% for zinc and 72.62% for lead.

– Lisheen hired 12 contract miners to assist in the ramp-up to full production and train local workers.

Mine production has steadily increased during the first quarter of 2001, climbing to 107,000 tonnes of mined ore, or 86% of design capacity, in March. Production in the quarter was 9% higher than expected.

“Overall, Lisheen is performing well and we remain confident the mine will achieve full production by mid-2001,” says Ivernia West President David Hough.

Nonetheless, Ivernia West took a US$25-million writedown on the carrying value of the mine in the fourth quarter, reflecting increased capital costs, as well as changes in the life-of-mine plan caused by a recalculation of reserves. Consequently, the company reported a net loss of US$30.7 million (or 28 per share) for the year ended Dec. 31, 2000. Before writedowns, the loss amounts to US$5.7 million, compared with a loss of US$1.3 million in 1999.

The company continued to capitalize costs associated with the commissioning of Lisheen during the year.

As of Nov. 1, 2000, Anglo agreed to fund Ivernia’s 50% share of certain cost overruns for Lisheen. By year-end, the Anglo-funded portion of these overrun contributions totalled US$4.5 million. Capital costs for Lisheen were originally budgeted at US$280.5 million.

Price-dependent

Given the current zinc price (about US44 per lb. at presstime), Hough does not expect the mine to turn a profit until full production levels are reached. At design capacity, a US1 increase in the zinc price will add about US$2 million to Lisheen’s earnings.

“Our financial performance is quite dependent on the zinc price,” Hough confirms.

Lisheen is a carbonate-hosted zinc-lead deposit near the village of Moyne in County Tipperary. It was discovered in 1990 by Ivernia West and then-partner Chevron Mineral Corp. of Ireland. In 1994, Chevron’s interest was acquired by Minorco, which went on to merge with Anglo American Corp. of South Africa to form Anglo American.

The deposit occurs along the Rathdowney trend, a structurally controlled belt that extends 40 km between the towns of Abbeyleix and Thurles. The region is a broad plain drained by the Rossestown and Drish Rivers, tributaries of the River Suir.

Sporadic occurrences of lead and zinc were identified in the late 1960s and early 1970 along the Rathdowney trend, but it was not until 1984 that the first significant mineralization was discovered, at Derrykearn. Following the 1986 discovery of the Galmoy zinc-lead deposit (6.2 million tonnes grading 11.31% zinc and 1.12% lead), Ivernia and Chevron were granted prospecting licences covering Lisheen and other areas. Following two years of soil sampling, geological modelling and geophysics, a target area was identified for drilling. The seventh hole of the program, drilled in April 1990, intersected 6.4 metres grading 14.7% zinc and 2.7% lead.

By the end of 1996, 550 holes had been drilled, outlining a resource of 22.5 million tonnes grading 13.02% zinc and 2.19% lead.

Two zones

The deposit comprises two distinct flat-lying zones, dubbed Main and Derryville. These lie at an average depth of 190 metres and range in thickness from half a metre to 30 metres. Mineralization occurs as massive stratiform lenses at the base of extensively dolomitized, Lower Carboniferous Waulsortian limestones in the hangingwall of the Killoran fault zone.

The underground mine is accessible by a 1.7-km-long decline. Conventional drift-and-fill mining is used because of the limited thickness and flat-lying nature of the deposit. Where the deposit is more than 14 metres thick and grades are relatively high, blasthole stoping will be used.

The mine is close to boglands, so water continues pose problems for operators.

The milling circuit consists of a semi-autogenous grinding (SAG) mill, ball mill and closed-circuit cyclones.

Last year, 97 infill drill holes were completed on the Main and Derryville zones, the objective being to close-in the drill centres to 30-metre spacings. the results were used to re-calculate reserves and resources. Proven and probable reserves now stand at 15.4 million tonnes grading 11.76% zinc and 2.02% lead, versus the 13.4 million tonnes of 13.34% zinc and 2.43% lead in the 1996-1997 feasibility study. Additional measured and indicated resources are pegged at 14.5 million tonnes grading 14.4% zinc and 2.55% lead.

At the end of 2000, Ivernia West had 117.5 million shares outstanding and US$10.1 million in cash, with a total debt of US$100.7 million. The company trades at 27 in a 52-week range of $1 to 27.