A fresh attempt at unlocking the value of the Kalahari Copperbelt kicked off this week, with developers announcing a US$565 million funding deal. Over the decades, the 1,000-kilometre vein of untapped wealth has tempted and ruined some, but the latest ‘challengers’ are oozing confidence. Staff Writer, MBONGENI MGUNI writes.
The enduring memory of Boseto’s three year presence in north-western Botswana will be that of the 422 workers who were summarily dismissed and loaded onto buses under riot police guard at 0230hrs, as the long-suffering mine finally breathed its last.
Boseto ground to a halt on poor copper prices, high operating costs and weak operating capital.
For many explorers eyeing the Kalahari Copperbelt, February 27, 2015 was a Black Friday and a reminder that building a copper operation under the heavy Kalahari sands, far from critical infrastructure, would be one of two types of dreams: “short-lived or pipe”.
Discovery Metals Limited was the last developer to taste the ‘Cuprum Curse,’ that has largely prevented the unlocking of the Kalahari Copperbelt. Cupric Canyon Capital this week finalised a US$565 million funding for the development of Khoemacau Copper Mine on the Kalahari Belt. The company took over Boseto in July 2015 and will use the failed mine’s processor for the new, high-tech Khoemacau. Boseto and Khoemacau have neighbouring orebodies.
Well-greased, Khoemacau has a two-year timeline to production in the first half of 2021, where it will target output of 62,000 tonnes of copper and 1.9 million ounces of silver annually. Production thereafter will be expanded using nearby orebodies, to extract a further 100,000 tonnes of copper annually. Khoemacau executives are oozing confidence over the fundamentals underpinning their bid to extract value from the Kalahari Copperbelt.
The most obvious reason is the funding, which will enable Khoemacau to clear its previous debt, guide mine development and support operating capital. Mine development alone will require US$397 million, a figure that rises to US$455 million after working capital and overheads. All the numbers are safely beneath the US$565 million Khoemacau has access to. By comparison, Boseto required and managed to raise US$170 million (P1.8 billion at current rates) to build.
The mine ended its first full year of production (2013) with P288 million in cash holdings, but high operating costs set against low copper prices burnt this down to P24 million just before the closure in February 2015. Prices are ultimately the major factor for success for any operation as they allow cash reserves to build up and buffer tough periods.
A study released in July 2007 by mining consultants Snowden, showed that Boseto Copper Project had the potential to be economically viable at copper prices of $1.50/lb and above. Prices were about US$2.50/lb when Boseto closed in 2015, indicating that the hole that had been burnt in cash reserves due to operating costs was ultimately fatal. Khoemacau’s experts believe a copper price of US$1.47/lb would cover average cash costs over the mine’s 21-year lifespan. Copper prices have been rising since late 2016 and, at about US$2.70/lb, are again reaching for highs last seen in 2014. Most forecasts suggest global demand will keep rising in line with generally tightening production and the rise of electric vehicles and their components.
Aside from the funding and market fundamentals, Khoemacau directors say their mining method is a major difference with Boseto.
“Boseto was an open pit mine, a steep dipping ore body and to be able to mine such, you actually need to do many cuts that cost a lot to get down to the ore,” explains Khoemacau CEO, Johan Ferreira. “We have a specially designed methodology in terms of an innovative decline design to actually access the ore body with the least metres and the least cost.” Khoemacau executives say while Boseto’s open mine design meant that mining would first encounter oxides then transition material before reaching the sulphides that contain copper, Khoemacau as an underground operation will cut straight to the good stuff.
They estimate that Boseto’s mining design led to recoveries of 40%, while the method planned for Khoemacau promises recoveries of up to 88%. “We have clearly defined the oxide/sulphide boundary through our drilling.
“We are not touching the oxides. We are only mining sulphides and that’s critical for everyone to understand. “Our whole process, plant and design is based on extracting copper from the sulphide flotation,” explains Ferreira. Khoemacau executive director and former Minerals Ministry permanent secretary, Boikobo Paya chips in. “We are going straight to processing sulphites to get that 88% recovery. The idea is that don’t spending money to bring out ore only to recover 40% of your copper. You spend money to bring out ore and recover 88%.”
Besides the mining method and design, one of the major drivers of Boseto’s high operating costs was the diesel power generation required for the mine.
As the first commercially run mine on the Kalahari Copperbelt, Boseto was not connected to the national grid and at some point was incurring cost of up to P4.50 per kilowatt/hour to keep the mine going.
The costs of diesel generation accounted for about 35% of Boseto’s costs, being measured at P26 million monthly.
The high costs meant any dip in copper prices would tip over a precarious operating position.
Khoemacau, meanwhile will be the first mine to benefit from the Botswana Power Corporation’s (BPC) P4.8 billion extension of the national grid to the north west.
Connecting to the national grid means far lower electricity costs for Khoemacau. “We are looking at BPC completing their project in December this year in terms of the NWTG and us connecting to it early, perhaps the first quarter of next year. Everything is timed such that we take advantage of the BPC project,” Paya says.
After the launch
Besides the power and mine design, Khoemacau’s operating costs are expected to be kept much lower than Boseto due to the mechanised mining approach the facility plans to pioneer. As opposed to the more labour intensive conventional mining, the automated processes are expected to help the mine’s safety, productivity and overall sustainability.
Studies suggest operating costs associated with mechanised mining results can be as much as 40% lower than conventional mining.
“In the past the focus has been on creating as many jobs as possible in a mine, instead of looking at the sustainability of the operation.
The focus should be to look at the sustainability of the operation, then the jobs will come,” Paya argues.
Ferreira adds that having a sustainable mine supports the development of ancillary industries and suppliers, particularly in the surrounding region, who can be supported to the point where their viability outlives the mine itself.
Boseto was built at US$170 million and eventually sold for US$35 million. Khoemacau is being developed at more than twice that. Its developers say the future is bright.