Blackthorn Resources (ASX: BTR) has delivered the Pre-Feasibility Study for its Kitumba Copper Project in Zambia that demonstrates positive potential for an economically and technically viable project.
Work will begin immediately on project optimisation focussing primarily on metallurgical recovery and mining sequence that could enhance economics.
This optimisation work will also be based on an updated Resource that incorporates recent high-grade drilling results, and is expected to lead to a PFS update in early 2014.
Key takeaways from the study include:
- Annual ore production of about 3 million tonnes Run of Mine to produce about 39,000 tonnes of copper using a combination of flotation and solvent extraction and electrowinning;
- Life of mine average C1 cash cost estimate of US$2.04 per pound of copper;
- Post-tax Internal Rate of Return of 12.7% using a US$3.50 per pound of copper price;
- NPV of US$108 million with an annual average EBITDA of about US$105 million once the project is at full production; and
- Project development cost estimated at US$358 million, including US$34.2 million contingency.
"The completion of the PFS for the Kitumba Project along with identification of optimisation and value enhancement potential is a very important milestone for the company and the latest in a series of positive developments since BHP Billiton exited the JV just two years ago," managing director Scott Lowe said.
"We have chosen a smaller scale underground operation rather than a much larger scale open pit as this allows us to target the higher grade zone much earlier, and to avoid expensive and time-consuming pre-strip.
"The economic comparison clearly showed that the internal rate of return is better for the underground scenario with a significantly lower pre-production capital cost."
Lowe added the copper market continues to be firm in what is a very volatile international business environment and that Kitumba would be well positioned to take advantage of what many analysts are forecasting to be higher copper prices in the medium term.
Kitumba is currently envisaged as an underground operation targeting the high-grade core of the deposit. This has a 11 year mine life based on 33 million tonnes of mineable ore with 572,000 tonnes of contained copper.
It is part of Blackthorn's wholly-owned Mumbwa Project in west central Zambia that covers 250 square kilometres and is being explored for Iron Oxide Copper Gold style mineralisation.
Work is underway to prepare Mining Licence application for submission to the Mining Ministry of Zambia.
The company is also formulating a 'Path to Production' strategy that will incorporate management of critical financing, project implementation and organisational development risks.
Following completion of the optimisation studies, submission of the mining licence application and strategic planning for the "Path to Production", the next phase of the project will be implementation of an investment-grade Feasibility Study expected to commence early 2014.
Independent advisors will be engaged to assist with identification and evaluation of strategic alternatives, principally for managing finance, project execution and organisation capability development risks.
There is considerable opportunity for the Project economic metrics to be improved.
Further metallurgical test work will be undertaken on additional ore samples collected during the recently completed Phase 7 exploration program that had returned high grade intercepts from infill drilling including 174 metres grading 5.04% copper from 240 metres and 243 metres at 5% copper from 208 metres.
An independent metallurgist will be commissioned to manage the test work program and examine opportunities for optimising the metallurgical process design, reducing costs and increasing recovery for each material type.
The same drilling is also expected to advance some Resources to the Measured category while work has started on defining a maiden Ore Reserve.
The company added its current production schedule indicates that the ore grade peaks mid-mine life.
A revised mining plan will assess opportunities to modify the production sequence to smooth out the mined grade over the production life and ensure consistent feed quality to the processing plant.
The optimisation will also encompass development schedule optimisation to provide the "best fit" with the chosen production strategy.
Under the PFS, underground sub-level caving was determined to be a cost effective and productive extraction methodology, allowing for maximum resource extraction and not requiring the use of back-fill.
Preliminary haulage modelling based on the use of "60 t class" trucks and a production rate of 3Mtpa indicated that a peak fleet size in the order of 9 trucks and 6 loaders will be required.
By opting for a dual decline arrangement, productivity reductions due to having a high number of trucks on a single access haul route have been negated, enabling production targets to be met without incurring the capital cost associated with establishing a hoisting shaft or a conveyor system.
Once the primary decline is advanced far enough, up to 4 production horizons may be developed concurrently from the decline.
Similarly, due to the large lateral footprint of the ore-body, each production horizon was considered capable of accommodating 2 development jumbos, with an additional unit included to undertake access development for each level as it was reached by the decline.
In total, this means that up to 6 development jumbos are provided for in the development schedule.
The ultimate result of this level of resourcing is that all development will be completed within 10 years of commencement. In doing so, a degree of production flexibility will be ensured by maintaining development well in advance of the production horizon.
The process plant design is based on two key parts:
- a concentrator producing about 24,000 tonnes per annum of 25% copper concentrate; and
- a solvent extraction electrowinning plant (SXEW) producing approximately 33,000tpa of copper cathode.
The concentrator will produce a copper concentrate which will then be acid leached to provide feed solution to the SXEW. Residue from the leached concentrate will then be processed to produce a copper concentrate.
The SXEW plant will treat the pregnant liquor (copper rich solution) resulting from the acid leaching of the bulk flotation concentrate to produce copper cathodes.
The site is accessed via 52 kilometres of dirt road from Mumbwa. The road is generally in poor condition and will require upgrading to allow for construction traffic and ultimately operations traffic.
The Zambian government has recently announced its intention to upgrade the public portion of this road, and the PFS assumes that this will be done at no cost to the Project and in time for construction traffic.
With Pre-Feasibility Study in place, Blackthorn can focus on optimising the Kitumba development and is expected to lead to a PFS update in early 2014.
Of particular interest is how the recent high grade intercepts from infill drilling would impact on its economics. These include 174 metres grading 5.04% copper from 240 metres and 243 metres at 5% copper from 208 metres.
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