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ADB loan approved for Lumwana copper mining project
By: Charles Carlisle
Posted: '01-OCT-06 18:00' GMT © Mineweb 1997-2006

LONDON (Mineweb.com) --The Board of Directors of the African Development Bank (AfDB) Group has approved a loan of US $ 43 million to the Lumwana Mining Company Limited. Lumwana is the operating company for the Lumwana copper project and is wholly owned by Equinox Minerals of Australia, which is quoted on both the Australian and Toronto stock exchanges.

Equinox has also just completed its own capital raising exercise for the project too with the successful completion of a Canadian offering of 75 million shares at Cdn$ 1.40 a share to raise Cdn $105 million. A previous equity offering in January raised another Cdn $ 144.7 million.

The Lumwana project is situated in the North Western region of Zambia some 300 km west of the Zambian Copperbelt and 95 km south west from the provincial capital of Solwezi.

The deposit outlined to date is low grade, but large. Measured and Indicated Resources presently total 269 million tonnes averaging 0.8% copper (4.9 billion pounds of contained copper) with additional Inferred Resources totalling 632 million tonnes averaging 0.6% copper (over 8.9 billion pounds of contained copper).

Equinox ’s plan for developing Lumwana envisages that the Malundwe and Chimiwungo deposits, which are 7km apart, will be mined sequentially by open-pit mining methods. The ore bodies are 95% sulphide (with only 5% oxide) and very consistent, so large-scale bulk-mining methods will be employed. The open pit mine design forecasts the extraction of 348 million tonnes of ore at an average 3.6:1 strip ratio over a mine life of 17 years, although some reports put the anticipated life as more than double this. Production is planned to start up towards the end of 2007.

Sulphide ore will be processed on-site by conventional flotation to produce copper concentrates for shipment to off-site smelters. Metallurgical test work indicates recoveries of greater than 95% copper, producing concentrate grades of 43.3% Cu for Malundwe and 29.5% Cu for Chimiwungo. The flotation plant has a design capacity to treat 20 million tonnes per year of ore and will, in the initial first 5 year period, produce copper, in concentrate, equivalent to 188,000 tonnes of copper metal per year (415 million lbs per year). Life of mine copper metal production will average 150,000 tonnes per year (330 million lbs year).

The Definitive Feasibility Study ('DFS') indicates that the Lumwana life of mine total operating cash costs will be just under US$0.70 per pound of copper produced. During the initial 5 year period, when higher grade material is being mined, total operating cash costs are likely to be just over US$0.63 per pound.

Lumwana’s copper concentrates also contain small amounts of cobalt and gold. Letters of intent have been signed with three South African smelters to take this concentrate output. There is also uranium in the orebody. Equinox originally stated that this would be uneconomic to extract and the uranium fraction would be stockpiled and then returned into the pit as waste when mining was completed. However the huge increase in uranium price has made the company look again at options for uranium production and a heap leach process is under consideration for the uranium bearing stockpile. However no income has been assumed for uranium production, nor for the contained cobalt and gold, in the concentrates in the economic assessment of the operation.

The total development activity will probably include the construction of a fully self contained town for approximately 5,000 people as well as associated supporting infrastructure. The mine will operate a fleet consisting of twenty-six 240 ton trucks under trolley assist infrastructure, four 50 ton Electric Shovels and associated ancillary equipment which will all be owned and operated by Lumwana Mining.

According to the ADB, the project has a huge development impact. The infrastructure in the North Western province, where the project is located is poor and Government –supported facilities are limited and need significant upgrades. The development of the Lumwana project is likely to engender positive socio-cultural and economic impacts in an area, which has so far received little investment. The project represents substantial foreign direct investment in the country and thus will have a positive impact both in terms of employment creation and in terms of contribution to Gross Domestic Product
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The project will generate significant employment of over 1,500 jobs during the construction phase and 1,055 direct jobs during the operating phase. The project will also yield substantial fiscal benefits that will accrue to the Government of the Republic of Zambia through: (i) corporate transaction over the life-of-mine; (ii) taxes on wages and salaries paid to Zambian employees and related industries; (iii) copper production royalties; (iv) power tariffs and other charges and (v) foreign exchange benefits relating to the export of copper.

This is the first mining project financed by the Bank in Zambia under the Private Sector Window.



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