CUPRIC Canyon Capital said its proposed Khoemacau underground copper mine in Botswana’s Kalahari Copper Belt could become twice as large as the 50,000 tonnes/year set down in its ‘starter project’ which it financed in February.
The US investment firm said last month that it had arranged a $50m term loan facility with Red Kite Mine Finance through its wholly-owned subsidiary, Khoemacau Copper Mining. The proceeds from the loan would be used to finance project development costs and front-end engineering ahead of full scale construction in the second half of this year.
Khoemacau has been scoped to produce 50,000 tonnes/year of copper and 1.4 million ounces/year of by-product silver at a capital cost of $350m which would be extended to 80,000 tonnes/year in time.
Dennis Bartlett, CEO and director of Cupric Canyon, said however there was scope to take the project further if concentrator capacity was added at Zone 5, the area identified for the starter project.
Currently, processing will be through the Boseto plant which Cupric Canyon bought out of liquidation after the local subsidiary of Australian firm Discovery Metals, which was operating on a property adjacent to Khoemacau, ran into financial hardship.
“The long-term plan is to build a larger concentrator near Zone 5 that will process 16,800 tonnes per day of ore and produce 80,000 tonnes/year of copper-in-concentrate,” said Bartlett in a telephonic interview.
“A prefeasibility study for this plant has been completed and shows very positive returns,” he said. “After the new plant is started up, the plan is to feed the Boseto concentrator with ore mined from other resources near that plant.
“These resources include Zeta, Zeta NE and Zone 5 North. The combined production from the Zone 5 and Boseto plants is expected to average 120,000 tonnes/year, or more,” he said.
In the meantime, John Munro, corporate finance and project development advisor, to Cupric Canyon is setting about financing the balance of the capital required for the starter project. “On fund raising we are still working with a number of mine finance groups on a combination of senior project debt, subordinated debt and either minority equity or a silver stream,” he said. “We have not selected any groups with which to work yet,” he added.
“There is however strong interest from specialist mine finance groups to participate in this financing, given the quality, scale and geography of the project.”
The Zone 5 resource contains 100 million tonnes of ore grading 2% copper and 20 grams per tonne of silver as reported in November 2015. The Zone 5 mine is expected to have a minimum life of 25 years and average C1 cash costs of about $1.00 per pound at a run-rate of 50,000 tonnes/year.
Bartlett is a bull in respect of the copper market. “Our view over the next few years is that we expect copper prices to be very strong. We don’t see supply meeting the average 2% per year growth in demand that we expect,” he said. First production from Khoemacau is expected in 2019.
On a shorter-term horizon, however, the noises from the market are generally bullishf or copper. “The eventual move in copper is likely to be decided by what Chinese copper demand does,” said Goldman Sachs in a note today.
“However, in the near term, the supply disruptions which look likely to exceed our commodities team forecasts could be a dark horse seeing the commodity in a bigger deficit this year,” it said.
