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Equinox optimistic govt will honour development deal over Lumwana

Equinox optimistic govt will honour development deal over Lumwana
Written by Kabanda Chulu
Monday, January 12, 2009 6:23:47 AM

EQUINOX Minerals has expressed optimism that the Zambian government will honour the material components of its development agreement for Lumwana Mining Company which is expected to produce 170,000 tonnes of copper concentrates this year.

And Williams has disclosed that the implementation of the Lumwana uranium project has been suspended to a later date due to difficulties in international project financing as well as low market prices for uranium oxide.

Giving an update on the Lumwana mining project whose final capital expenditure is US $ 814 million and is located in North Western Zambia, Equinox Minerals president Craig Williams yesterday stated that the company had remained confident that the material components of its Development Agreement with the Zambian government would be honoured.

He stated that Equinox would continue working closely with the Zambian government to secure the relevant incentives to ensure that the fundamental economics of Lumwana mines remained intact.

“To that extent, Equinox has recently secured a statutory instrument for exemption of the concentrate export tax recently legislated by government on Lumwana concentrate production that may be exported and Equinox has previously been granted statutory instruments for exemptions from import duty and for excise applicable to fuel and electricity consistent with the Lumwana Development Agreement,” Williams stated. “And Equinox shall continue to work with relevant Ministries in realising the remaining incentives as they may be required and the recent international financial crisis has reinforced the company’s consultative approach with the government as being in the best interests of its shareholders as well as the people of Zambia.”

Williams stated that during construction, the Lumwana project achieved an excellent health and safety record, achieving over five million hours without a lost time injury and resulting in a lost time injury frequency rate of 0.3.

He stated that final preparatory works for processing facilities were completed prior to the commencement of plant wet commissioning on December 3, 2008.

“With production ramp up progressing smoothly, the company estimates production for 2009 to total 170,000 tonnes of copper metal in concentrates at a cash operating cost of US $1.15 per pound. As can be expected, unit production costs are anticipated to be higher in the early part of 2009 until steady state production activities are reached, which is expected by mid-2009 and the final project capital expenditure is estimated at US $814 million that is consistent with previous company guidance,” Williams stated.

He stated that Equinox had hedging in place, comprising forwards and deferred premium puts, for about 30 per cent of its first three years of production.

“The company’s hedging book covering the period from January 2009 to March 2011 currently totals 124,585 tonnes of copper at an average price of US $2.65 per pound of copper (US $2.39 net of put option premiums) and that the hedging contracts between October-December 2008 have matured to realise a net benefit of US $22.4 million for Equinox,” Williams stated. “As an indication of the current value of the remaining hedge book as of January 5, 2009, the mark-to-market value, net of costs, at a copper price of US $1.45 per pound is US$243 million.”

He stated that since commencement of production in early December 2008, Lumwana had processed 1,070,000 dry metric tonnes of ore, producing 20,046 dry metric tonnes of concentrate at an average grade of approximately 40 per cent copper.

“Concentrate deliveries have commenced, with 12,156 tonnes of concentrate dispatched to various smelter destinations on the Copperbelt and concentrate grade and specifications are both in accordance with design expectations, test work and all off take agreements. Throughput rates are now being progressively increased to test processing plant capacity. Concentrate production continues to ramp up towards steady state commercial production,” Williams stated.

The Lumwana Mines have no smelter but Equinox has signed off-take agreements with Chambishi Copper Smelter and Mufulira smelter whose facilities would be used for refining its copper ores and concentrate production.

On the Lumwana uranium project, Williams stated that Equinox believed it to be prudent to defer the implementation of the uranium project until conditions improve sufficiently to deliver appropriate shareholder value.

And on the development of the Lumwana town, Williams stated that the housing development had continued to grow with over 450 houses completed to date, of which 120 houses had already been allocated to local staff under a home ownership mortgage programme.

Labels: DEVELOPMENT AGREEMENTS, EQUINOX, WINDFALL TAX

posted by MrK @ 6:22 AM