Study highlights cash flow potential for Congo copper project

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 01 Dec 2011   Posted by admin

A positive scoping study has been completed for a two-stage solvent extraction electrowinning facility (SXEW) at the Kipoi copper project in the Democratic Republic of the Congo. Majority-owned by Tiger
Resources (60 per cent), with the remaining interest held by state-owned La Générale des Carrière et des Mines (Gecamines), the Kipoi mine has been in production since April 2011.
Highlights from the study include: average annual production for the life of the mine of 42,350 tonnes of London Metal Exchange grade A copper metal; operating costs of US$0.63 per pound of copper during
an initial three-year operating period, with an average of US$0.92/lb for the life of the mine; after-tax Internal Rate of Return
(IRR) of 48 per cent (base case); after-tax Net Present Value (NPV) of US$272 million (using an 11 per cent discount rate and US$2.36/lb copper price); 15- month payback from the start of production of initial project capital cost of US$151.4 million (life of mine capital cost, including sustaining capital, o US$422.4 million); and Stage 2 development fully-funded from Stage 1 free cash flow. Tiger Resources managing director Brad Marwood said in a statement that the results would add further value for shareholders by underlining the robust economics of the project. “The results are very encouraging and demonstrate that Kipoi has the potential to generate significant cash flow based on its projected low cash operating costs,” he said. The base case economic analysis used analysts’ consensus forecasts of the long-term copper price of US$2.36/lb over the Stage 2 project life, generating an after-tax IRR of 48 per cent and NPV (11 per cent) of US$272 million. Using copper prices of US$3 and US$3.50, the NPVs increase to US$437 million and US$593 million respectively, and the IRRs increase significantly to 57 per cent and 69 per cent respectively.
Kapoi’s existing stage 1 Heavy Media Separation (HMS) infrastructure facility, which is expected to produce an average of 35,000 tonnes per annum of copper in a 25 per cent concentrate across a 39-month
mine life, would act as a capital springboard for the development of Stage 2. The Stage 2 plant would take over from Stage 1 facilities in mid-2014. Stage 2 would produce London Metal Exchange Grade A quality copper cathode directly at the mine site. Initially, Stage 2 would process residues from the HMS plant, providing immediate feedstock to Stage 2 operations. This would mean the mining schedule would not need to recommence until 2016.
“The company’s immediate aim is to further improve the Kipoi economics by expanding the resource, complete the feasibility study and move Stage 2 into development; thus further up the value curve,” said Mr Marwood. “It is important to note that the combined Kipoi Stage 1 and Stage 2 projects are fully funded on the basis of current average copper price projections.
“The biggest potential impact on the Kipoi project value is likely to be realised through increasing the mineral resource base available as feed to the Kipoi infrastructure. This will potentially increase the mine life
and/or annual plant throughput,” he said. According to a report from Tiger, a preliminary economic assessment plus a mineral resource and mine plan for Stage 2 were prepared based on the positive scoping
study results. The company said that the cobalt resources present at Kipoi were excluded from these assessments and would be addressed separately in the coming months.
Kipoi covers an area of 55 square kilometres and contains a 12km-long extensively copper-cobalt mineralised segment of Upper Roan sediments. The project’s known copper deposits include Kipoi Central, Kipoi North, Kileba, Judeira and Kaminafitwe. It is envisaged that ore from Kipoi Central, Kipoi North and Kileba South, plus other deposits within the Kipoi project and within the nearby Lupoto project, would be processed during Stage 2.
The Kipoi mining schedule, based on all of the project’s mineral resources, has mining set to begin in the fourth year of Stage 2 operations, with sequential mining of the Kileba and Kipoi Central phases 1 and 2 followed by Kipoi North, and the satellite pits at Kipoi Central. Mining operations are proposed to begin during 2016, with first ore feed to the project’s plant in 2017.


By Rachel Seeley

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