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August 14, 2007

Anvil Mining May Have Started Small But It Is Now A Whole Lot Bigger

By Rob Davies

Many people recognise the Congo now as an attractive place to explore and develop mines. But that was not the case back in 1995 when Bill Turner first started looking around. Two years later he had identified the Dikulushi property but work did not really begin until 2001. That meant that his company, ASX and TSX listed Anvil Mining, had to negotiate with the old regime and then renegotiate with the new one. That is a difficult trick, but one that Anvil has executed successfully. Now Dikulushi is producing 20,000 tonnes of contained copper and two million ounces of silver a year and is about to go underground after mining from an open cut since 2002.
The mine has a very high grade of 6.0% copper that produces a high grade concentrate running 56% copper. Initially the concentration was done using a heavy media plant but a more conventional process using a ball mill and floatation has since replaced that. The decline has reached the same level as the pit bottom and Craig Munro, the Chief Financial Officer, says underground mining will start next year and will allow production to be maintained at the same rate and will continue for at least another six years. The orebody is open below the current 650 metre limit of drilling and Mr Munro thinks more ore could be discovered at depth.

Now that Dikulushi has matured production growth is coming from the Kulu tailings treatment operation that started at the end of 2005, although first quarter production was below budget. This too uses an HMS plant, in fact the same one that was used at Dikulushi, to process tailings that run 3-4% copper. An oxide concentrate with a grade of 26% copper is produced and sold locally to treat the 9,000 tonnes of copper it contains. Metallurgical recovery using this process is not high and examination of the feasibility of establishing an SX-EW facility is now underway as a high priority. There are enough tailings to support 6 – 7 years of operations but there is also plenty of exploration potential in the Kolwezi Klippe area it is located in. The mine that was the source of the tails could be re-examined as well, although Mr Munro says it needs de-watering first.

The newest project is Kinsevere only 30 kilometres from Lubumbashi and is a totally new discovery. With a measured and indicated resource of 20 million tonnes at 4.3% copper it is the largest resource of the three even before allowing for the 21 million tonnes at 3.4% copper in the inferred category. Ore treatment will again be by HMS plant but this time augmented by an electric arc furnace to produce “black” or blister copper at the rate of 23,000 tonnes a year. Stage two of the production process is due to start in 2009 when a 60,000 tonne SX-EW plant comes on stream for a capital cost of US$238million.

The success of the low key and cautious approach adopted by chief executive Bill Turner from the outset is evident from the market capitalisation of around the C$1 billion mark and the excellent results just announced for the June quarter. Consolidated net income of US$35.4 million compares with US$22.5 million for the second quarter of 2006. Concentrate sales also reached a quarterly record of US$65.7 million, compared to US$43.0 million for the corresponding quarter of 2006. Operating cash flow before working capital movements was a record US$43.3 million and consolidated production for the second quarter totalled 8,395 tonnes of copper and 583,269 ounces of silver contained in concentrates.

The company is well on the way to its target of producing 40,000 tonnes of copper and 2 million ounces of silver in 2007 and it raised C$201 million from a bought deal in the last quarter to fund its expansion plans. Over 100,000 tonnes per annum is the aim by 2010 and at the same time Anvil will be investing in downstream processing to add value to its products. As a cashed up, unhedged, expanding producer in a highly mineralised part of the world this company must be exactly what many resource investors are looking for. A dividend payment may not be too far off.