St. LOUIS () -- First Quantum Minerals [TSX:FM; LSE:FQM] has resumed production at its Frontier copper mine on the border of Zambia in the Democratic Republic of Congo (DRC) after reaching an agreement with the government to recommence shipments into Zambia. First Quantum's Lonshi mine remains closed.
On Dec. 11, the governor of Katanga province in DRC, Moses Katumbi, banned mineral exports to neighbouring Zambia and ordered authorities to close the frontier to all trucks carrying copper. This is the second time this year that the Katanga governor decided to ban exports of copper ore.
On March 6, he proposed a ban on the export of concentrate, vowing that only refined metal would be allowed to leave the province. He said that there would be a grace period of six months for those miners exporting laboratory-certified concentrate from Katanga, but after that, "they have to make the metal here."
First Quantum said it had been informed on Nov. 28 that the governor of Katanga province in DRC, Moses Katumbi, had ordered the border closed to the shipment of copper ores and exploration core samples from the 100%-owned Lonshi mine. The company was also advised to not ship copper concentrate from its 95%-owned Frontier mine.
The Lonshi operation involves open pit mining of high-grade oxide ore in the DRC and transportation of the ore into Zambia where it is processed at the Bwana SX/EW facility. Frontier sends copper concentrate to the Mopani smelter at Mufulira in Zambia, but holds oxide/mixed mineralization for possible processing in the future at the Bwana plant.
G. Clive Newall, President of First Quantum, said in a statement that issues at Lonshi involve communication details about the mining of the final remaining oxide ore and the mine's various social programs. At Frontier, issues include improving the measurement procedures and export procedures for concentrate movement on the DRC side of the border.
Katanga province Mines Minister Bartelemy Mumba Gama told sources on Monday that the Frontier mine was specifically ordered shut after the government accused First Quantum of illegally exporting copper to Zambia. A representative of First Quantum did not return phone calls prior to publication.
The company previously said that mining operations at both the Frontier Mine and the Lonshi Mine had continued unaffected, but Frontier suspended milling operations on Dec. 11 after the storage shed filled to capacity. The agreement today will help drawdown the stockpile so milling operations can move to full capacity.
The Frontier mine achieved commercial production in Nov. 2007. Ore throughput at the process plant is currently 15,000 tonnes, or between 65% and 70% of design capacity at 22,000 tonnes of ore per day. The Frontier mine is forecast to produce 8,000 tonnes of copper in concentrate in 2007 and 75,000 tonnes of copper in concentrate in 2008.
The total construction capital cost for the Frontier project is forecast to be $226.4 million, while life of mine (2007-2026) capital for the project is estimated at $448.7 million. However, the new agreement reportedly includes a commitment by First Quantum to build a metals warehouse in DRC by June 2008.
The restart of Lonshi Mine ore shipments is still awaiting final authorization from the DRC authorities. In 2006, approximately 520,000 tonnes of ore grading 10.3% copper were mined from Lonshi. Copper cathode production was a record 51,068 tonnes. In 2007, the Bwana/Lonshi operation is forecast to produce 45,000 tonnes of copper cathode in 2007.
The company is currently assessing the alternative and most beneficial uses for the Bwana processing plant after the Lonshi ore body has been depleted. The oxide orebody at Lonshi will be exhausted in 2008.
Zambia is one of the world's top producers of copper, which contributes more than half to the country's domestic gross product. However, the DRC is estimated to hold one-tenth of the world's copper reserves. The country has produced as much as 475,000 tonnes of copper a year in the past, but output has declined in the past 30 years due in part to smelter inefficiencies.
Although the DRC state-owned Gecamines has a refinery in Katanga, it is in bad shape and requires a minimum of $60-million in investment to restore. The governor previously said the plant would need to be rehabilitated through an arrangement with miners to allow raw ore to be processed in the DRC itself.
First Quantum shares dropped C$3.67 to C$82.31 on the Toronto Stock Exchange shortly after the news was released on Monday. Now trading at C$80.01, the company's stock has fallen 20% in a week.