Engineering & Mining Journal

SEP 2018

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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NEWS-LEADING DEVELOPMENTS 4 E&MJ • SEPTEMBER 2018 Quellaveco Project Gets Go-ahead Anglo American announced in late July it will proceed with development of its 60% owned Quellaveco copper project in the Moquegua region of southern Peru. The project has an expected capital cost of $5 billion to $5.3 billion and will be funded 60% by Anglo American and 40% by its partner, Mitsubishi, with Mitsubishi pre-funding the first $500 million of Anglo American's share of capital expenditures. First production of copper from the project is planned for 2022, ramping up to full production in 2023. During the first 10 years of full production, the mine is expected to produce about 300,000 metric tons per year (mt/y) of copper at a cash cost of $1.05/lb. Quellaveco will be an open-pit mine, with processing by flotation to produce cop- per concentrate along with molybdenum and silver byproducts. Nameplate plant throughput capacity will be 127,500 mt/d. "Quellaveco is one of the world's largest and most attractive undeveloped copper orebodies," Anglo American Chief Execu- tive Mark Cutifani said. "We expect Quel- laveco to generate a real, post-tax IRR of greater than 15%, with a four-year payback and an EBITDA margin of more than 50% due to its first-quartile cash cost position. "We see significant potential to expand Quellaveco beyond its current 30-year re- serve life as well as to increase throughput above the initial capacity of 127,500 mt/d." Fluor has been awarded the engineer- ing, procurement, and construction man- agement contract for Quellaveco. Fluor completed the feasibility study for the proj- ect and has been responsible for early site infrastructure development since 2014. Anglo American has developed sup- port from local communities through an innovative 18-month consultation with local authorities and community repre- sentatives from the Moquegua region. As a result of this process, the company has agreed to 26 detailed and specific long- term commitments relating to water man- agement, environmental protection, and social investment. As an example, by ensuring that water required by the operation is drawn mainly from a river whose water is not fit for hu- man or agricultural use due to its volcanic origins and, additionally, by collecting ex- cess rainfall and sharing it with the com- munities, Anglo American is delivering on its promise of a positive water impact for local people and their livelihoods. Quellaveco ore reserves total 1.3 bil- lion mt, containing approximately 7.5 million mt of copper. Current reserve life is 30 years, with potential for further ex- tension based on estimated additional mineral resources of 1.6 billion mt con- taining 6 million mt of copper. The Quellaveco project has all of the major permits required for construction. It will be operated by Anglo American and will create more than 9,000 jobs during the construction phase and approximately 2,500 jobs in normal operation. Through the end of 2017, Anglo Ameri- can had invested approximately $450 mil- lion in early groundworks and engineering, including a tunnel and barrier for the di- version of the Asana river, an access road, construction camps, and water infrastruc- ture for construction and operations. Lundin Mining Initiates Takeover Bid of Nevsun On July 26, Canadian base metals min- er, Lundin Mining Corp. made an offer to acquire all of the issued and outstanding common shares of Nevsun Resources Ltd. for approximately C$1.4 billion (US$1.1 billion). Under the terms of the offer, Nevsun shareholders will receive C$4.75 in cash for each Nevsun share. Lundin Mining has made numerous pro- posals to Nevsun, beginning in February. "Our offer will represent the clearest path for Lundin Mining to acquire the Timok project and for Nevsun shareholders to real- ize on the value of their investment without dilution and financing risk," Paul Conibear, president and CEO of Lundin Mining, said. "We believe that the proposed Nevsun ac- quisition consideration is full and fair value and represents a significant premium to Nevsun's unaffected share price prior to the announcement of our first proposal." However, Nevsun released a statement saying it felt the offer ignored the "funda- mental value" of Nevsun. "Despite the progress we have made in enhancing Nevsun's value, Lundin's notional takeover offer represents only a 13% premium to Nevsun's closing trading price of C$4.21 per share on the TSX on July 16, 2018, and only a 9.1% premium to the volume weighted average trading price of Nevsun's shares over the 30 days ended July 16, 2018," said Peter Kukiel- ski, Nevsun's president and CEO. He added that Lundin has ignored the recent improvements at Bisha mine, the new Timok Lower Zone and progress at the Timok Upper Zone project. "The work we have been doing has also been noticed by several strategic parties that have expressed an interest Fluor has been awarded the EPC contract for the next large Chilean copper project.

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