Engineering & Mining Journal

MAY 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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REGIONAL NEWS - ASIA 20 E&MJ; • MAY 2018 www.e-mj.com Polymetal and Russian Copper Swapping Development Assets Polymetal International and Russian Copper Company have agreed to swap development assets on opposite sides of the Russia-Kazakhstan border. The transaction is viewed as synergistic for both companies due to the improved lo- gistical fit of the properties with existing processing facilities. Involved in the swap are Polymetal's Tarutin property in Russia and Russian Copper's East Tarutin property in Kazakh- stan. Polymetal will receive 85% of LLP Tarutinskoye, the license holder for the East Tarutin copper-gold deposit. In re- turn, Russian Copper will receive 100% of Vostochny Basis LLC, the license hold- er for the Tarutin copper-gold deposit. The transaction is an asset swap only and does not entail any additional pay- ments or deferred considerations. It is expected to close in the second quarter of 2018 and is subject to statutory approv- als and other customary conditions. The East Tarutin license area being acquired by Polymetal is situated on the Kazakh side of the border, as is the com- pany's Varvara processing plant. Ore haul- age distance to Varvara from East Tarutin is 110 km, as compared to 150 km from Tarutin on the other side of the border. "East Tarutin represents a much better fit for Polymetal in terms of logistics and potential size of reserve," Polymetal Group CEO Vitaly Nesis said. "This asset swap simplifies operational management of the Varvara hub and avoids the complications of cross-border ore shipment while pre- serving significant exploration optionality." East Tarutin is a copper-gold skarn-type deposit with vein-disseminated mineraliza- tion. Infrastructure in the region is well de- veloped, with easy access to the electricity grid, the railway, and paved highways. Previous owners have completed 18 km of diamond drilling at the property. JORC-compliant mineral resources are estimated at 6.4 million metric tons (mt) grading 1.06% copper and 0.07 grams (g) per mt of gold. Polymetal plans to resume explora- tion at East Tarutin in 2018-2019 and to complete a JORC-compliant reserve esti- mate in the first half of 2020. The Tarutin license area being ac- quired by Russian Copper has estimated reserves of 4.6 million mt of ore at 1.39% copper and 0.09 g/mt of gold based on the Russian system for reporting mineral resources and reserves. The company did not comment on its plans for the deposit. Macmahon Commences Phase 2 at Batu Hijau Macmahon, a large mining contractor, has commenced Phase 2 of the Batu Hi- jau contract in Indonesia. Macmahon has been operating under a cost-plus arrange- ment (Phase 1) since the start of the con- tract last year. The progression to Phase 2 marks the commencement of the gain share/pain share mechanism in the agree- ment, whereby any cost savings or over- runs will be shared between the parties. Macmahon CEO, Michael Finnegan said he was very pleased with the opera- tional progress made to date, saying the workforce transition had involved minimal delays to production. "This transition has been a significant undertaking, but our previous experience in the region and our close working rela- tionship with PT AMNT has meant that we have been able to ramp up largely in line with our schedule," he said. "Moving to Phase 2 is a significant step forward and I could not be happier with the quali- ty and expertise of the personnel we have on the ground." As part of the preparation for transi- tion to Phase 2 of the Mining Contract, an assessment of the procurement op- tions available to the project was com- pleted in order to maximize cost savings opportunities. This exercise identified the benefit of implementing a joint Mac- mahon and AMNT procurement team to leverage pre-existing site supplier ar- rangements where they could deliver the most cost-effective outcome. As a result, the parties have agreed to adjust part of Macmahon's remuner- ation structure from a percentage-based margin, to an agreed management fee of comparable value, reset annually. Macmahon emphasized that the ref- erence to a comparable overall financial return relates to the expected net present value (NPV) of the Batu Hijau contract as described in Macmahon's Notice of General Meeting dated June 9, 2017. Finnegan said the adjusted structure would further assist the project team to achieve best for project cost outcomes whilst protecting Macmahon's expected financial returns. A rope shovel is trammed into service as Phase 2 begins at Batu Hijau in Indonesia.

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