Board Approves Construction of a $238 million 60,000 tonnes per year SX-EW Project at Kinsevere
Monday April 23, 5:23 am ET
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TSX, ASX: AVM Common shares outstanding 57.7 million(x) All amounts are expressed in US dollars, unless otherwise stated.
MONTREAL, April 23 /CNW/ - Anvil Mining Limited (TSX, ASX: AVM - News News), ("Anvil" or "the Company") is pleased to announce that the Board of Directors has approved the construction of a Stage II 60,000 tonnes per year Solvent Extraction and Electrowinning copper facility ("SX-EW") at the Kinsevere project (95%) located 27 km north of Lubumbashi, the provincial capital of the Katanga Province of the Democratic Republic of the Congo ("DRC").
The feasibility study for the project was carried out by the Anvil development group using Lycopodium Engineering Pty Ltd of Perth, Australia for the process plant portion of the study, and other specialist consultants for environmental and social impact assessments, metallurgical test-work, geology, mining and resource evaluation. The capital cost including contingency is estimated at $238 million, with a construction period of 24 months. Using a 10% discount rate for an initial 15 year-mine life and a copper price of $1.20 per pound, the feasibility study demonstrates a Net Present Value ("NPV") of $89 million and a robust Internal Rate of Return ("IRR") of 17%, with a payback period of 6.6 years. Using copper prices of $2.00/lb and $3.00/lb, the NPVs increase to $527 million and $1,075 million respectively and the IRRs increase significantly to 46% and 76% respectively.
The Stage I development of Kinsevere, which comprises an open pit mining operation, the construction of a Heavy Media Separation ("HMS") plant and an Electric-Arc Furnace ("EAF") is approximately 86% complete, with the HMS plant expected to be finished in May 2007. It is expected that the HMS plant and the EAF will be superseded, in mid-2009, by the new 60,000 tonnes per year Stage II SXEW plant, with the production of LME Grade A quality copper cathode directly at the minesite.
Bill Turner, President and CEO of the Company said: "We are very pleased to be in a position to immediately start the process of calling for tenders for detailed design and construction from several experienced, reputable engineering companies and to quickly move the Stage II development forward. We hope to commence construction work during the third quarter of 2007. The Kinsevere feasibility study indicates a low cash cost, open pit, copper mining and processing operation which is expected to generate robust returns using a conservative long-term copper price. Kinsevere will become our most important asset and cash flow generator for the foreseeable future, based on the current Measured and Indicated Resources. As the Phase 2 drilling program continues on the neighbouring Tshifufiamashi and Kinsevere Hill deposits, we are confident that our exploration team will be able to define significant additional resources."
The feasibility study
Underlying assumptions and key economic results
The underlying assumptions applied in the feasibility study to key aspects of the project and its economic results were as follows:
Capital cost - including
contingency $238 million
Construction period 24 months
Copper price used $1.20 per pound
Project life 15 years
Ore mined (tonnes) 24,038,000
Ore to waste ratio 0.96
Ore processed (tonnes) 24,039,000
Average copper head grade 4.16%
Average copper recovery 92.3%
Tonnes of copper produced 890,400
Mine operating cost (at mine gate) $0.53 per pound of Cu produced
Total cash cost - incl. transport
& royalties $0.76 per pound of Cu produced
Total cost - incl. amortization
& finance $0.88 per pound of Cu produced
Corporate tax 30%
Royalty payment to Gécamines 2% (copper equiv. delivered to mill)
Royalty payment to DRC government 2% (NSR)
Based on these assumptions and applying a discount rate of 10%, the key
results arising from the feasibility study were:
Net Present Value at 10%
discount rate $89 million
Internal Rate of Return 17%
Payback period 6.6 years
Cash cost per Cu pound produced
(mine gate) 53 cents lb
Cash cost per Cu pound after
transport & royalties 76 cents lb
Sensitivity to movements in the copper price
The feasibility study used a copper price of $1.20 per pound, a price that is consistent with market forecasts of the long-term copper price. The financial outcomes associated with Stage II are highly sensitive to variation in the copper price, with every ten cent move in the price per pound generating an impact of $55 million on the NPV and approximately 4% on the IRR.
Economic evaluation
An economic model was developed, for analysis of Kinsevere Stage II, on the basis of a 15 year mine life, however based on current Measured and Indicated resources and an extensive drilling program at Kinsevere planned for 2007, it is likely that the life of mine will be increased.
A summary of NPV, IRR and Payback period outcomes under different copper price scenarios is shown below:
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Copper Price NPV(10) Payback Period
($ per pound) ($ million) IRR (%) (years)
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1.20 89 17 6.6
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1.40 198 25 5.3
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1.60 308 33 4.4
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1.80 417 40 3.9
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2.00 527 46 3.6
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3.00 1,075 76 2.7
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Capital costs
Development of capital cost estimates has assumed that the majority of the infrastructure required for Stage II will have been constructed during Stage I. It has also been assumed that the Company will appoint a single Engineering, Procurement, Construction and Management ("EPCM") engineer to coordinate development of the project. The breakdown of the major components of the capital expenditures, including contingency, is as follows:
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Cost item $m
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Site establishment costs 37.0
SX-EW treatment plant 120.0
Infrastructure and plant services 31.7
Tailings storage facility 4.6
HT power supply upgrade & assoc. infrastructure 20.1
Administration and pre-production costs 24.4
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Total 237.8
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Operating costs
Operating cost estimates for Stage II have been developed from the Company's in-country experience, using historical data from the Company's operations at Dikulushi and Kulu and recent and ongoing construction works on Kinsevere Stage I. Labour costs include all applicable allowances for both national and expatriate staff, while overheads such as travel, light vehicle operating costs, general consumables, etc. were based on a doubling of the same costs for the operating budget for Stage I.
Metallurgy
The Kinsevere resource is comprised of three deposits: Tshifufia, Tshifufiamashi and Kinsevere Hill. A comprehensive metallurgical test-work program was performed on drill core samples from the oxide zones of the Tshifufia, Tshifufiamashi and Kinsevere Hill deposits, with particular emphasis on the results from the Tshifufia samples, as this is the largest deposit and is expected to supply ore feed to the plant during the early years of the project. The test-work concluded that the mineralization has favourable characteristics for treatment using an SX-EW process.
Environment and Social Impact Assessments
As part of the Kinsevere feasibility study, an Environment Impact Assessment ("EIA") and Social Impact Assessment ("SIA") have been undertaken with the aim of determining the baseline conditions for Stage II, the potential impacts associated with the project and developing an Environment Management Plan, Monitoring Programs and Emergency Response and Contingency Plans. These reports will be submitted to the DRC Government during the third quarter.
A flora survey at Kinsevere identified the presence of various plants of conservation importance and to mitigate the project impact, it is recommended that a floral reserve be established to protect the local flora population. For the SIA, a survey of 216 households in local villages (71% of the households) surrounding the Kinsevere project indicated that the community overwhelmingly (98%) considered that the project would be beneficial for the area.
During the development and construction of Stage II over a two year period, the Company will have a peak workforce of 1,500. When the SX-EW plant is operational in mid-2009, it will employ approximately 750 permanent employees, mainly from the surrounding villages and from the city of Lubumbashi, the capital city of the Katanga Province.
Kinsevere mineral resources
In January 2007, the Company released the results of the Kinsevere Phase 2 drilling program carried out during 2006. The previous Kinsevere Mineral Resource estimate announced in November 2005 was based on a Phase 1 drilling program of approximately 8,000 metres carried out on the Tshifufia, Tshifufiamashi and Kinsevere Hill deposits. The 17,220 metre 2006 Phase 2 drilling program, which focused entirely on the Tshifufia deposit, resulted in a substantial increase in the Measured, Indicated and Inferred resources. Kinsevere mineral resource estimates at December 31, 2006 are shown below.
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Total Total
Tonnes Copper Copper Cobalt Cobalt
Grade (%) (tonnes) Grade (%) (tonnes)
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Measured 6,010,000 4.4 266,700 0.29 17,200
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Indicated 14,070,000 4.3 598,000 0.19 26,600
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Total Measured
& Indicated 20,080,000 4.3 864,700 0.22 43,800
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Inferred 20,918,000 3.4 716,400 0.06 13,000
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Note: A NI 43-101 Technical Report on Kinsevere was filed on SEDAR at
www.sedar.com on February 23, 2007
Phase 2 drilling on the neighboring Tshifufiamashi and Kinsevere Hill deposits is now being undertaken. It is expected that this exploration work will improve the Company's confidence in the Kinsevere Mineral Resources, particularly at Kinsevere Hill and Tshifufiamashi, which will result in a re-estimation of the Mineral Resources during the second half of 2007.
Anvil Mining Limited is an unhedged copper and silver producer whose shares are listed for trading on the Toronto Stock Exchange (as common shares) and the Australian Stock Exchange (as CDIs) under the symbol AVM. It has majority interests in, and operates the Dikulushi copper-silver mine and the Kulu copper tailings operation in the Katanga Province of the DRC. In addition, the Company is currently developing the Kinsevere project as the Company's third mine in the DRC.
Additional Notes: The information in this news release that relates to in-situ Mineral Resources is based on information compiled by Gerry Fahey of FinOre Pty Ltd. Gerry Fahey is a Chartered Professional and a member of the Australasian Institute of Mining and Metallurgy, and a member of the Australian Institute of Geoscientists, and has sufficient experience, which is relevant to the style of mineralization and type of deposit under consideration, and to the activity he is undertaking, to qualify as a Qualified Person in terms of the Canadian National Instrument 43-101. Gerry Fahey consents to the inclusion of such information in this news release in the form and context in which it appears.
Caution Regarding Forward Looking Statements: The forward-looking statements made in this news release are based on assumptions and judgments of management regarding future events and results. Such forward-looking statements, including but not limited to those with respect to the operations of the construction and development of a 60,000 tonnes per year SX-EW plant and Electric-Arc Furnace and power grid at Kinsevere and its capital expenditures and estimated future production and operating cash costs involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the actual market prices of copper and silver, the actual results of current exploration, the actual results of future mining, processing and development activities, changes in project parameters as plans continue to be evaluated, as well as those factors disclosed in the Company's filed documents.
For further information
Craig Munro, Vice President Corporate & Finance and CFO, Tel: +61 (8) 9481 4700, Email: craigm@anvilmining.com (Perth)
Robert La Vallière, Vice President Investor Relations, Tel: (Office) (514) 448-6664, (Cell) (514) 944-9036, Email: robertl@anvilmining.com (Montréal), Website: www.anvilmining.com
Source: Anvil Mining Limited |
