Maun Copper Project Costs Rise To P1 Billion

MBONGENI MGUNI
Staff Writer | Monday February 1, 2010 00:00

With resources of 60.4 million tonnes of copper, DML plans to open Botswana's largest copper mine in 2012, producing 25 000 tonnes of the base metal annually. The Maun-based project will also pump out 700 000 ounces of silver annually.

Last week preliminary findings from the ongoing Bankable Feasibility Study (BFS), showed that capital costs for Boseto have increased from the US$131 million (P895 million) estimated last year, on the need for additional contingency for price changes related to capital components.

The rise in capital costs largely reflects the impact of the recession on mining projects under development. By April last year, capital costs at Boseto had dropped by 25 percent to P895 million, on the back of lower quotes from suppliers of capital equipment and engineering. Prices of equipment and engineering necessary for structures such as the concentrator and other infrastructure generally remained flat during the year.

However, with the gradual recovery in the world economy and the resumption of mine development activities globally, prices of equipment and engineering are similarly recovering. Thus, DML's consultants have increased the contingency for capital component price changes.

Another component of the anticipated capital costs is the alternative power generation mooted for the Project. While the Botswana Power Corporation has indicated that Boseto will likely link up to the national grid by 2012, DML also has plans for self generation, which could include diesel generators or a small coal-fired power station. DML officials however explained that the increased capital cost projections had not affected the overall project economics.'Overall project economics have improved by ten percent, with the break even copper price at which the Project provides a ten percent discounted cash flow rate of return now being less than US$1.53 per pound,' DML officials said.

Presently copper - which was recently on a 17 month high - is trading at above US$3 per pound, with some analysts predicting the price will stay at least above US$2.50 per pound the whole year.

Besides the financials, work on the copper concentrator design has also been completed and is expected to culminate in a detailed capital expenditure estimated to be included in the BFS in February. Work has also begun on the Engineering, Procurement and Construction (EPC) contractor.

'The selection process for the EPC contractor for the next phase of the Project has commenced with the short-listing of suitably qualified internationally accredited consultancy companies in the areas of engineering and construction and a site visit of these companies to the Boseto Project area.'The development of the EPC contract documentation based on recognised international standards has been completed. The award of the EPC contract is expected as soon as the BFS results are finalised,' DML officials said.

Alan Smyth, an experienced civil engineer with extensive international experience, has been recruited to lead the DML team in the selection and monitoring of the EPC contractor. He will also form a team to oversee many of the smaller design and construct contracts required for the Project.

Other completed components of the BFS include resource geology and mine planning, ground water supply, metallurgy and process plant design. In addition, the grade control, geotechnical assessment and processing studies have been completed.

Other works include final resource estimate from an infill drilling programme on the Zeta, Plutus and Petra resources within DML's licence area. While an updated Zeta mineral resource estimation was completed last October, final Plutus and Petra resource estimates are planned for completion by February.

Besides the BFS, due to be completed in March, DML is also continuing with its exploration of other resources around the Boseto Project area and the Dikoloti Nickel Project in the north east.