Although improving on Q1 output, Equinox Minerals’ big Lumwana copper mine in Zambia – potentially Africa’s largest – has come up with disappointing second quarter operating results. The mine is in its ramp up stage to full production and should be doing better at this stage is the gist of the company’s Q2 preliminary production statement.
An obviously disappointed Craig Williams, the company’s CEO, commented “while the various issues that have impacted production at Lumwana during Q2-2009 on their own could have been managed with minor implications, the compounding effect of these, within a short space of time, has presented significant limitations to maintaining suitable ore supply to fully realize our large processing capacity. Importantly, considerable gains were achieved on a number of fronts during the second quarter, but the rate of improvement is likely to result in a more modest production and revenue estimate for 2009 which will be advised with our second quarter report.”
The specific factors affecting production included:
Below target availability, productivity and cycle times of the mine truck and shovel mobile equipment fleet. Although substantially improved from Q1 these all need to further improve and be maintained to meet production targets.
Transitional ore zones: Significant tonnages of transitional (mixed sulphide-oxide) ore are being encountered where primary sulphide ore was expected. Substantially lower metallurgical recoveries are achieved in transition ore compared to sulphide ores which during May achieved 94% recovery.
Uranium: The pits currently being developed on the Malundwe copper orebody include the uranium-rich zones at Valeria South and Valeria North. As these uranium zones are being selectively mined (applying a cutoff grade of 200ppm U, compared to the 700ppm U cutoff used in the original mine plan) and stockpiled, they are not yet being treated by the copper concentrator and are effectively currently classified as ‘waste’ to the copper project. This uranium-rich copper ore stockpile may be treated at a later date, if and when the Company builds a uranium plant, but is not contributing to current production cash flow.
The orebody-related issues are expected to improve in the coming months as the mine moves below the weathering profile and the uranium zones and into more consistent sulphide ore. Availability and productivity parameters continue to improve and management is developing, as a matter of urgency, strategies to further increase productivity and mine output. These strategies include engaging specialist consultants to advise on opportunities to improve productivity and the Company is intensifying its internal training programs to improve the workforce skills and expertise.
Management is also currently reviewing 2009 annual production and cost targets and anticipates including this updated target information with the Company’s Q2-2009 results expected to be released during August 2009.
None of the current problems facing the operation are insuperable, and the surge in the copper price during the second quarter will be helping overall figures for the unhedged output. Equinox originally hedged 30% of the first three years of production at $2.68/lb. The current copper price is about $2.24/lb, while the mine should be able to produce at well below this level, although the lower than expected results to date will mean current operating costs will be higher than expected. Some light will be thrown on this with the release of the 2Q financials. The development study envisaged operating costs of around $0.82/lb, but this included uranium credits.
As mining progresses through the mixed oxide/sulphide zone into the sulphides, mill recoveries will inevitably improve, while the stockpiled uranium-rich copper ore will, at some stage be treated effectively providing cheap feed to the concentrator. The company still seems to be looking at uranium as an eventual co-product, although there are several hurdles to go through before this can be achieved including the financing and building of a uranium plant.