Optimisation study expected this month on Cameroon cobalt project
Colorado-based Geovic Mining, which hopes to start construction in November on what may be the world’s biggest primary cobalt mine, expects to wrap up a key optimisation study on the project by mid-July, CEO Jack Sherborne said on Thursday.
In addition, financing activities are progressing and the company hopes to have the debt package for the mine in place before the end of March 2009.
Geovic holds 60% of Geovic Cameroon (GeoCam), which owns the Nkamouna cobalt/nickel/manganese project, in Cameroon. The balance is held by the National Investment Corporation of Cameroon and local investors.
GeoCam completed a feasibility study on the mine late last year, but was not completely happy with the numbers, and commissioned an optimisation review, with the aim of lowering capital and operating costs at the mine and improving overall economics.
For an openpit mine, ore concentration facilities and 2 000 t/d process plant, the feasibility study estimated preproduction capital requirements at $398-million, well up from a previous figure of $129-million.
After signing up top names in Bateman International, Roberts & Schaefer Australia and South Africa’s Group Five to conduct the optimisation study, the company set “aggressive” internal cost reduction targets from the outset, Sherborne told Mining Weekly Online.
“And frankly, the team has done an admirable job in that regard, particularly in light of the inexorable general mining industry cost increases that had to be factored into the optimisation analysis,” he commented.
Significant construction work at Nkamouna is scheduled to get under way in November this year, once the rainy season has ended in Cameroon.
The company has secured all but one of the permits needed to build the mine, and Sherborne speaks glowingly of government support for the project.
“The government of Cameroon is very keen to initiate a mining industry in the country and have pledged to do everything they can to expedite the start of the Nkamouna project.”
The project, which is scheduled to start output in 2010, contains proven and probable ore reserves of 54,7-million tons, grading 0,25% cobalt, 0,69% nickel, and 1,33% manganese.
GeoCam plans to produce 9,22-million pounds a year of cobalt, which would make it the second largest producer of the metal, after OM Group, according to 2007 output figures from the Cobalt Development Institute.
PROJECT FINANCE
GeoCam plans to fund about 60% of the Nkamouna project through debt, and the remainder in equity.
CitiBank has been advising the company since September 2007 and remains “optimistic” about completing the project financing, Sherborne said.
The company hopes to have completed the debt package before the end of the first quarter of next year.
“We continue to have significant interest from major commercial banks including Citi to participate in the financing group which likely will also include several multilateral agencies – development banks and possibly export credit agencies.”
Part of the financing will likely be linked to metal offtake agreements – national development finance institutions might be more likely to invest in the project if a firm from the country signs a metals-purchase agreement for production from the mine.
Discussions in this regard have already taken place, including with potential buyers in the Far East, Sherborne revealed.
MARKET OUTLOOK
Prices for cobalt, like copper, have surged over the last two years, spurring miners to speed up the development of new mines and expansions of existing ones.
In light of the expected increase in supply, some market watchers have suggested that the price may have peaked, although analysts are divided over whether new mines scheduled to come on stream, most notably in the Democratic Republic of Congo which contains extensive cobalt reserves, will start production on time.
“Clearly, global cobalt supply is going to be significantly affected by new production from the DRC and also from some new laterite nickel producers, but the timing and actual magnitude of these new supply sources is probably longer term and more modest than many forecasters are currently estimating,” Sherborne commented.
The metal, which is used in gas turbine aircraft engines, batteries and catalysts, is usually produced as a byproduct from copper and nickel mines. Prices touched all-time highs above $50/lb earlier this year and remain above $40/lb. Geovic is targeting a long-term cobalt price in the range of $15/lb to $20/lb, and, based on the feasibility study results, will produce the metal at $3,12/lb, net of nickel credits.
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