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Canada’s Anvil digs deep to develop Kinsevere Stage II copper project

Anvil Mining is the latest in a growing list of companies coming face-to-face with the realities of developing projects in the DRC.
Author: Rodrick Mukumbira
Posted: Wednesday , 14 May 2008
Source:Mineweb

TSX and ASX-quoted Anvil Mining Ltd. is the latest in the growing list of companies that are being forced to dig deep into their pockets to develop their projects in the Democratic Republic of Congo (DRC).

The costs of developing the second stage of its flagship Kinsevere copper mine in the central African country overshadowed the company's first quarter financial results, announced this week, but were a good testimony to the challenges of doing business in the mineral-endorsed DRC, where ruined infrastructure and logistics problems defy the wisdom of developing any project.

Anvil now faces a bill of US$$380-million after the costs of developing the Kinsevere Stage II project rose by 48% over the US$257-million that had been estimated in the feasibility study. About 75% of the new costs would be incurred during 2008, with the balance in 2009 before the project is brought on stream in the second half of that year.

The stage I development of Kinsevere comprised an open pit mining operation, started during the first quarter of 2007 on the Tshifufia and Tshifufiamashi pits, a one-million-ton-a-year dense-media separation plant, and an electric arc furnace, with a capacity to produce 23,000 to 25,000 tons per year of "black copper" ingots grading 85% to 95% copper.

The Kinsevere mine stage II development includes the construction of a 60,000-ton per year solvent extraction electrowinning plant, designed to produce London Metal Exchange Grade A quality copper cathode directly at the mine site in the DRC's copper belt.

"The company faces challenging conditions in the DRC with regards to the logistics and transportation of parts and equipment to site," the company said in a statement accompanying the company's first quarter financial report this week.

"In addition," it added, "increases in the price of fuel, materials, and steel, as well as the increased global demand for construction and engineering labour have had an important impact on the revised cost estimate."

The revised construction cost estimates reflected the "benefit of detailed design and engineering as well as additional infrastructure at the mine site and general cost escalation currently affecting the construction of new projects in the mining sector worldwide", the company said.

Anvil is thus caught in the same dilemma Lundin Mining Corp. and Freeport McMoRan Copper and Gold Co. - joint venture partners in the DRC's mega Tenke Fungurume copper-cobalt project - currently find themselves in.

The estimated costs of progressing that project have swollen from US$1-billion last October, nearly doubling to US$1.9-billion currently. And since the inception of the construction phase of the project, US$475-million have so far been spent.

A civil war between 1998 and 2003 left four million people dead, copper and cobalt mines in ruins and transportation and power infrastructure destroyed. Electricity shortages in the region have caused some mines in the DRC's southern neighbour Zambia and in South Africa to close in recent months.

"Our efforts are currently focused on the construction and development of Kinsevere Stage II in order to be in position to deliver the first copper cathodes in the second half of 2009," Anvil's president and CEO, Bill Turner, however said.

His company's first quarter profit increased marginally from last year, despite a 79% growth in sales. Net income for the first quarter was US$21.4-million or US$0.30 per share, compared to US$21.1-million or US$0.36 per share in the prior year quarter.

Total comprehensive income rose to US$21.5-million from US$21-million in the year-ago quarter. The company's concentrate sales jumped 79% to US$75.3-million from US$42.03-million in the same quarter last year. During the latest quarter, Anvil Mining produced 12,027 tons of copper and 482,655 ounces of silver contained in concentrates.

The company has however revised its 2008 production forecasts to 47,000 tons of copper and 950,000 ounces of silver, due to lower than expected production at its Dikulushi and Kulu properties.

It said despite the Dikulushi operation achieving its copper and silver production targets in the first half, the rate of extraction of ore from underground stopes using the sub-level caving method and that of developing its underground operation were slower than expected.

At Kulu, Anvil is encountering finer grained and lower grade material with a poor metallurgical recovery through the HMS plant as mining progresses further downstream, and it is currently modifying the plant to enable it to process the material. These modifications are expected to be completed in the third quarter of 2008.

Anvil is also working on an engineering cost study for the construction of an expandable 15,000 tonnes per year Vat Leach / Solvent Extraction and Electrowinning processing facility at Kulu and expects to complete the study before mid-year.

It is also fast tracking the process to turn the Kulu HMS operation into a cathode copper production facility to increase metallurgical recovery and "realise the full value of this project", Turner said.