Equinox Will Soon Have The Largest Producing Copper Mine in Africa, Not To Mention A $1.5bn Uranium Stockpile
By Our Man in Oz
minesite.com
Try as he might Minesite’s Man in Oz cannot see Craig Williams, chief executive of Equinox Minerals, sitting for long on top of the world’s most valuable waste dump. That’s why the dual-listed Australian and Canadian company, with its flagship asset in Zambia, will press the “go” button later this year on the uranium phase of its Lumwana project. All that’s needed is a clear set of laws from the Zambian government and Equinox will not only be ranked as one of the world’s biggest copper producers, but also as one of the biggest uranium producers, a combination which should be of immense appeal to investors, and predators alike. Little wonder that since the start of 2007 the Equinox share price has been marching north, starting at A$2, rushing up to A$7, and now nestling at around A$5. That’s roughly the same price paid by the first raider on the Equinox share register, First Quantum, late last year.
It’s First Quantum’s 17.27 per cent stake in Equinox, as much as the uranium phase of Lumwana, which ought to have everyone interested in mining dusting off their Equinox file, as the company gets down to the business end of a 10 year odyssey in Africa. From being a company regarded as something of a curiosity when it moved early to secure an asset position before the resources boom took hold, Equinox today is in a near-priceless position, poised to play a starring role in the minerals world. Or as a perfect addition to the base metals and uranium division of a major miner. Xstrata or Anglo American rank among the natural marriage partners for Equinox, if First Quantum lacks the firepower to complete what it seems to have started last year.
Williams disagrees, however. He’s determined to see Equinox achieve its potential as a free-standing and independent minerals producer with an outstanding growth profile. “We can see a range of growth opportunities,” he says after Minesite tracked him down to his office in Perth. “First there is a de-bottlenecking project which will lift us from 20 million tonnes [of ore] a year to 24 million tonnes,” he says. “Then there is the potential for building our own [copper] smelter, and then there is the uranium.” If awarding prizes for confidence Minesite’s Man in Oz would give Williams a gold. But he’s probably deserved that since the 1990s when he and his late partner in exploration, Bruce Nisbet, embarked on the Lumwana project, a mission which followed their joint discovery of the Ernest Henry copper-gold project in Queensland, and their joint 1994 award for prospectors of the year in Australia.
Lumwana is a step up from Ernest Henry. It is a project with an “initial” 37 year mine life, and an orebody which contains discrete uranium zones, as well as copper. Mining, which started last year, is focussed on getting to the copper, and stockpiling the uranium–rich material, which isn’t allowed to pass through the concentrator. So Equinox’s government-approved design for Lumwana is to mine both types of ore, recover 169,000 tonnes of copper in each of the first six years, followed by a subsequent 122,000 tonnes a year, stockpiling uranium ore all the while.
That plan looked good when uranium was US$11 a pound. It looks completely daft with uranium at US$71/lb. In dollars that means the value of the eventual 21.8 million pounds of uranium destined for Equinox’s waste dump has risen from US$240 million to US$1.5 billion – a number which is deliciously close to double the total capital cost of bringing Lumwana’s copper phase on-line.
Williams laughs when Minesite’s Man in Oz asks whether he really wants to be the man in charge of the world’s most valuable rubbish tip. “We’re working on it,” he says. “Over the last six months we’ve been running a full feasibility study on uranium, and that’s being written up right now.” Perhaps, asks Minesite somewhat cheekily, Williams would care to share the results with our readers. “Not yet,” he says. “Given that the uranium ore is going to be in a stockpile it’s a fairly straight forward exercise, with simple metallurgy, and we’re going to be, essentially, treating a stockpile.”
So, why doesn’t Equinox just get on with it and shift the 3,000 strong workforce on site at Lumwana across from copper duties to uranium duties, especially since Williams confirms that the results of the feasibility study should be released “within a month”. That, however, is when government enters the conversation. “What the process is from here is hard to say,” he says. “There are still permitting issues, and environmental impact studies.” But isn’t Zambia a uranium-friendly government, asks Minesite. “Yes, but as of right now the government doesn’t have uranium export legislation. They’ve been working on that for some time and it’s expected to be released soon. I would hope that our environmental permitting and the export legislation will be all ticked off by mid-year.”
Those comments about the process through which the uranium stage of Lumwana is passing should catch the eye of investors. What it means is that mid-2008 becomes a red-letter phase in the life of Equinox. First copper concentrate is due by then, and if all goes to plan the resulting proof that the project works as promised ought to trigger one stage of a re-rating of the company. A government green light on uranium exports would be a second trigger. Then comes the expansion plans Williams has in mind, something which he is obviously thinking about, but which might be eluding the wider market.
“This isn’t just a case of switch it on and watch it all happen,” he says. “There are a range of things happening after commissioning. We’re going to be looking at expansion, which starts with de-bottlenecking to push throughput up from 20 million to 24 million tonnes a year. In the medium term, perhaps over five years, we could crank it up another notch, perhaps to 35 million tonnes, something in that order. That’s one of the luxuries of having a 37 year mine life.”
He’s right, obviously. Lumwana is not a small mine, nor is it a short-life mine. It will be, when full-scale production starts, Africa’s biggest producing copper mine, and while other projects in the planning and construction stage, such as Tenke Fungurume, might eventually surpass Lumwana’s first stage, Williams has no desire to stand still. After expansion comes early-stage thinking about a dedicated copper smelter, and the potential development of additional orebodies that Equinox has identified close to Lumwana.
All good, so far. Now comes the tricky question: “What’s you relationship like with First Quantum,” asks Minesite, a question which draws an interesting - as in extremely interesting - reply. “Basically, we don’t have one,” Williams says with a throaty laugh. “Well, you know, they’re a shareholder, and that’s it. We’ve had no communication with them.” How interesting, thinks Minesite’s Man in Oz. Someone buys 17.27 per cent of your stock and there’s no communication – perhaps a case of silence speaking louder than words. That developing situation could well add further excitement to the already propitious mid-year that Equinox is expecting. |
