Freeport warns on Congo risk
Brendan Ryan
Posted: Tue, 02 Oct 2007
[miningmx.com] -- COPPER AND GOLD producer Freeport McMoRan views its Tenke Fungurume project in the Democratic Republic of Congo (DRC) as "the largest undeveloped, high grade copper/cobalt project in the world today."
Addressing the Denver Gold Forum, Freeport CEO, Richard Adkerson, highlighted the paucity of world-class copper projects saying it was one of the key reasons the group had accepted the risks inherent in operating in the DRC.
The group acquired Tenke Fungurume through the takeover of Phelps Dodge in March this year for $25.9bn in cash and shares.
That created the world’s largest, publicly traded copper company and diversified Freeport’s operations which previously consisted solely of the Grasberg copper/gold mine in Papua Indonesia.
Adkerson said the group would invest $650m to develop Tenke Fungurume aiming to start production in 2009 although he added: "That’s an aggressive target and there are lots of reasons why we may not make it."
Estimates are Tenke Fungurume has an economic life of 40 years and will produce at an annual rate of 115,000 tonnes of copper and 8,000 tonnes of cobalt.
Adkerson pointed out the Tenke Fungurume concession covered 1600 square kilometres of which less than half had been explored and that had revealed a "cumulative" strike length of more than 80km.
But he also highlighted the many challenges involved in developing such a large project in a country like the DRC.
"Never underestimate the challenges involved here. The country faces huge challenges in providing basic infrastructure such as ensuring there is enough power as well as on issues such as health facilities and, of course, security.
"But the potential for our company here is extraordinary," Adkerson said. He described Tenke Fungurume as: "A mega-development opportunity in a world that lacks those opportunities."
According to Adkerson, the shortage of large, high-quality copper projects world-wide is one of the main reasons underpinning the copper price.
That is back at near-record levels around $3.70/lb after falling to $2.50/lb in January this year from peak levels around $4/lb reached in mid-2006.
Adkerson said near-term copper production is "challenged" because the copper mining groups are developing projects of lower quality than the industry has previously been used to.
"New mines are taking longer to build and 60% of today’s mines will deplete or go underground by 2021. Supply is unlikely to increase meaningfully while China continues to lead strong demand growth." |
