Kibali – already one of Africa’s largest gold mines – going strong

The ongoing search for additional reserve ounces at Kibali will secure its future as a long-life mine and one of Africa’s largest gold producers, Randgold Resources chief executive Mark Bristow said in a speech in Kinshasa, DRC.  Randgold develops and operates the mine and has a 45% stake, which it owns in partnership with AngloGold Ashanti (also 45% owners)  and the Congolese parastatal SOKIMO which holds the 10% balance.

In 2014, its first full year of operation, Kibali produced 526,627 ounces of gold at a total cash cost of $573/oz and Bristow told a media briefing here that production and cost for the first quarter of 2015 were likely to be within guidance.

“When you’re producing gold at the rate of around 600,000 ounces per year, the need to replace the reserves that are consumed is of critical importance,” he said.  “We believe Kibali’s KZ structure hosts significant additional resources, and our continuing exploration is confirming this potential.  A number of targets have been identified and the Kalimva-Ikamva and Kanga sud targets have been prioritised for in-depth investigation.”  One suspects that the promising geology around the mine should host sufficient gold resources to keep it in operation well beyond its initial 18 year mine life.

Kibali is still a work in progress, with its third open pit now operational and the development of its underground mine ahead of schedule.  Ore from its stopes is already being delivered to the plant but the underground mine is only expected to be in full production by 2018.  The first of the mine’s three hydropower plants was commissioned last year and work on the second is well underway.  The metallurgical plant is operating at its design capacity and construction of the paste plant is nearing completion.  Despite the high level of production and development activity  –  some 5,000 people are currently employed on site  –  Kibali is maintaining a good safety record, with the lost-time injury rate reduced by 16% last year.

Kibali represents an initial investment of more than US$2 billion and at a gold price of $1,200/oz and its current mine plan is only expected to repay its funding after 2024.  Thanks to its strong cash flow, however, it has already been able to repay the first tranche of its debt in March.  The whole project has been a remarkable success to date, particularly given its location – almost right in the geographical centre of the African continent, close to the South Sudan and Ugnadan borders which necessitated the bulk of the supplies and equipment having to be delivered from the African east coast rather than through the DRC itself.

Bristow said Kibali was continuing to invest in the development of the regional economy by using local contractors and suppliers wherever possible.  A prefeasibility study on a palm oil project, designed to provide a sustainable source of post-mining economic activity for the region, has been completed and work on a bankable feasibility study has started.

On the issue of the DRC’s proposed new mining code, Bristow said he welcomed Prime Minister Augustin Matata Ponyo’s recent statement that the government was ready to re-engage with the mining industry with the intention to review the draft submitted to parliament and was open to further discussions with the sector.

“We were surprised and disappointed when the ministry of mines presented a draft code to parliament without taking the industry’s comments on board and which departed radically from the common ground we thought had been established.  As the DRC Chamber of Mines warned at the time, enactment of the code in this investment-hostile form will have a catastrophic effect not only on the mining sector but on the Congolese economy generally.  It was therefore very heartening to learn from the prime minister that the government has recommitted itself to negotiation,” he said.

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Did Ethiopia bomb Nevsun’s Bisha copper/gold mine?

Ethiopia-leaning media reports from Northeast Africa say that Ethiopian fighter jets bombed Nevsun’s  Bisha copper/gold mine in Eritrea on Friday.  Nevsun has dismissed damage to the Bisha plant as not serious and written it off so far as just an act of vandalism.

Lawrie Williams

African media reports stated that Canada’s Nevsun’s highly profitable Bisha copper and gold/silver mine had been bombed by Ethiopian Air Force fighter jets – supposedly in retaliation for an Ethiopian helicopter being held by Eritrea.  Nevsun itself has only commented so far that there was  an ‘act of vandalism’ at the mine which caused no significant damage affecting only the base of a tailings thickener.  this apparently took place during the night shift on Friday and released water into the plant area and that no-one was injured as a result.  This leak is being repaired and plant operations, which had been shut down anyway for 10 days for a ball mill gearbox repair, would be back at full swing by the end of this week.

Nevsun’s 60% owned Bisha mine has been developed on a complex Volcanogenic massive sulphide (VMS) ore deposit carrying high grade  gold/silver, copper and zinc.   It is configured in three distinct layered zones – a 35 m thick surface high grade gold-silver oxide zone (mostly mined out by mid-2013) immediately overlying a copper enriched supergene zone (which is the current main source of plant feed) which itself overlies a primary sulphide zone containing both zinc and copper, and which remains open at depth.  The sulphide zones contain lower grades of gold and silver too.

The operating plan started off with mining the gold/silver oxide cap and as mining became deeper it has now moved into the supergene enriched copper zone.  Nevsun reckons this enriched copper zone makes it currently one of the world’s highest grade open pit copper mines.  But as it mines through this copper zone it will eventually become primarily a high grade zinc and copper producer.  Nevsun owns 60% of Bisha with the balance owned by the Eritrean state mining company (ENAMCO) which bought 30% from Nevsun and has fully participated financially in the mine’s development programme.  The remaining 10% is a free carried government interest, also held by ENAMCO, in the project.

Initially processing the oxide ore cap, the mine produced low-cost gold-silver doré until mid-2013. Mill throughput has been expanded via a $110 million copper expansion project and is currently at 2.4 million tonne/year treating the supergene copper-rich ore and the main mine product has been switched to the production of copper concentrate.  The next production phase will see flotation capacity expanded again in 2016 to produce zinc concentrates in addition to the copper concentrates from primary ore. The budget for this project is ca. $89 million, and will be fully funded from operating cash flow.

Eritrea gained its independence from Ethiopia in 1993, but there has ever since been a very tense relationship between the two countries which at one time spilled over into a border war and there have been numerous other border incidents.  The Eritrean government is considered autocratic, even by African standards, but unlike most other African nations corruption is reported to be virtually nonexistent.  Other mine developers and explorers operating in the country describe mining sector and government relationships as extremely positive, with a very supportive mine development policy and the country  is considered a pretty safe environment in  which to operate, as well as being seen as having great mineral potential for both precious and base metals.

The Bisha mine is a very significant (probably the biggest by far) contributor to the country’s GDP and could thus become a target for Ethiopian military action to destabilise the Eritrean economy of the type suggested, although is reasonably distant from the border.  But it does appear that if there was indeed an attack by the Ethiopian Air force it was relatively minor, caused little damage and led to no casualties contrary to the media reports which suggested otherwise and reported smoke and flames visible from many miles away.

It does seem the media reports may well have been heavily exaggerated given Nevsun’s initial comments which are seen as more likely to be accurate as far as damage reporting is concerned.  Whether this damage (or vandalism) was indeed caused by the Ethiopian Air Force will no doubt surface in due course as the mine and Eritrean security forces investigate the incident.