Friday April 3, 10:51 am Eastern Time
INTERVIEW-Quantum ups pace of African exploration
By Camila Reed
LONDON, April 3 (Reuters) - First Quantum Minerals Ltd (FM.V - news; FQM) is forging ahead
with the development of its projects in Zambia, Zimbabwe and the Democratic Republic of Congo
(DRC), Clive Newall, British-based president of the Canadian company, told Reuters in an
interview.
It would turn the company into a medium-sized producer of copper, cobalt, gold and silver.
Delivery of first copper production from the 10,000 tonnes a year Bwana Mkubwa Copper Mine,
in Zambia began on Friday.
Newall said production would be over 8,000 tonnes in 1998 and rise to 10,000 tonnes in 1999. All
output was being marketed by brokers Gerald Metals.
Despite losing the bid for the Luanshya division of state-owned Zambia Consolidated Copper
Mines Ltd (ZCC.PA) to India's Binani Group (BINZ.BO) last year, the company was still
enthusiastic about its Zambian investments.
At first it decided to sue ZCCM as it believed it was the front runner in the sale.
But Newall said: ''We have dropped the case. There was no point in continuing. We have many
more things to do and we did not want anything to stand in the way of our relationship with the
government or ZCCM.''
''It has gone better in Zambia than it would have done in Canada...Only 20 months from start of
feasibility to production,'' he added.
On Thursday talks collapsed between ZCCM and the Kafue consortium over the privatisation of
Zambia's largest copper assets, the Nchanga and Nkana divisions.
Newall said his company was approached by the Zambians. ''It is tempting, but it is such a massive
infrastructure with so many potential problems. We are humming and haaing, but we have a lot do
to in the DRC.''
FQM signed a preliminary agreement in March with DRC's state-owned miner Gecamines. It gave
it 51 percent in a joint venture to explore the potential of four tailings projects.
The Luilu tailings dump has approximately 275,000 tonnes of copper and 35,000 tonnes of cobalt;
Kingamiambo some 200,000 tonnes of copper and 30,000 tonnes of cobalt, while Shituru and
Panda combined have approximately 400,000 tonnes of copper and 40,000 tonnes of cobalt.
Drilling was underway and a feasibility study would begin in a couple of months, said Newall. He
expected production to begin in the first quarter of 2000.
No upfront payment has been made to Gecamines. ''The payment schedule is not triggered until
feasibility,'' he said, refusing to be drawn on the amount other than to say it was modest.
While Newall recognised that investment in the Congo was a risky business, he believed that ''big
companies have to ignore the political risk. They are 'must have' orebodies.''
As with its Zambian operations, copper production costs are expected to be around the 30 cents a
lb level, but once cobalt credits are added production costs could be zero.
''There is a window for the next three years because all the big cobalt-producing projects continue
to be delayed.''
Although cobalt prices were around $17 a lb now, he thought it unlikely they would remain at this
level, and could foresee a $2/3 scenario.
At Bwana Mkubwa, where the company has built a sulphuric acid plant, it has benefited from the
dearth of acid available in the region. Sales will reduce cash costs to zero.
The plant can produce up to 130,000 tonnes annually, said Newall. This year it would make
90,0000 tonnes with at least 60,000 tonnes being sold to ZCCM, Gecamines, or others.
Eventually, the acid would also be used for the DRC projects, but Newall noted that they would
probably need to build a plant in the Congo too.
Newall is not turned off by investing in Congo and FQM is also part of the Kolwezi Group West
consortium, made up of South African, Canadian, Chinese and European firms.
Group West's capital cost is estimated at over $1.2 billion with annual production of over 400,000
tonnes of copper, as well as thousands of tonnes of cobalt.
''The consortium is meeting every week and we have a detailed timetable. We are moving down a
well-defined track,'' he said.
Newall hinted it was unlikely that the different operations at Group West would be split up, since it
did not make any sense.
Although he said that mining consortiums did not have good precedents, citing Kafue, he suggested
that Group West model itself on the oil industry, where such groupings seem to work.
Keen to show the company is not resting on its laurels, Newall said it is also conducting exploration
work at Bwana Mkubwa to find a new orebody or develop the existing open pit mine.
This would be financed from the company's cashflow, along with its plants in the DRC.
The company's share price has rallied from its low of C$1.75. It plummeted there from C$5 in July
when the company lost the Luanshya bid and was now trading at C$3, said Newall.
FQM is also close to completing the expansion of its Connemara heap-leach gold mine in
Zimbabwe to produce 26,000 ounces annually of gold.
Newall hinted the company may also look to increase its 15 percent stake in Anvil Mining. Anvil
owns the Dikulushi copper/gold project in the DRC.
''The feasibility study is complete and we are looking at starting construction shortly.''
Production was set at 25,000 tonnes a year of copper and 2 million ounces of silver. The
high-grade concentrate would be sold to smelters, he said.
One of these days....
Joe |
