Lumwana is copper mine located in the Republic of Zambia, 400 km northwest of the capital Lusaka. Lumwana is situated in the Mwombezhi Dome, hosted in metamorphosed schists with disseminated sulphides. The area was first explored in the late 1950s eventually coming under ownership of Phelps Dodge. Equinox earned a 51% interest from Phelps Dodge in 2003 by funding a Bankable Feasibility study and acquired the remainder the following year. Barrick came to own Lumwana when it acquired Equinox in 2011. Lumwana started production in 2009 and at the time of publication of the technical report, 572.2 kt copper had been produced.
Open pit mining at Lumwana consists of two open pits, using conventional shovel and truck. The site operates at a throughput of 25 Mtpa, with mine life concluding in 2038 with an additional year of processing. LOM strip ratio is 2.73:1, producing 543 Mt ore grading 0.55% copper with 94.7% recovery. As a producing mine, Lumwana is under no obligation to disclose project economics and no production profile has been provided. Mining Momentum has roughly estimated a LOM production plan based on quantities in the technical report and used costs presented to estimate a Pre-Tax Cashflow of US$1,957 M using the Reserve copper price of US$3/lb. Applying a 10% discount rate resulted in negative NPV. Mining Momentum assumed an additional 25 Mt will be processed in 2014. Mining Momentum has not included closure costs in the cashflow analysis. The entire US$1,529 M capital spent in 2014 has an outsized impact on NPV; NPV should improve if the entire sum is not spent at the beginning of the cashflow. Project economics improve significantly with a copper price of US$4/lb, with a Pre-Tax Cashflow of US$4,240 M and NPV10% of US$1,646 M.
| Tonnes (Mt) | Grade Cu (%) | Contained Cu (M lbs) | |
|---|---|---|---|
| Reserve | 538.8 | 0.56% | 6,619.8 |
| OP | 536.9 | 0.56% | 6,603.2 |
| Stockpile | 1.9 | 0.39% | 16.7 |
| M+I | 486.6 | 0.50% | 5,375.6 |
| OP | 486.6 | 0.50% | 5,375.6 |
| Inferred | 0.5 | 0.57% | 5.8 |
Lumwana is a solid deposit, with a quarter century of mine life remaining. The challenge however is cost. In 2013, operating costs totalled US$2.24/lb copper leaving fairly small margins, especially considering the additional US$2.2 B capital expenditure that is layered on top. It is hard to see copper prices falling below US$2.24/lb and for those fairly bullish on copper, Lumwana appears attractive. Additional resource conversion opportunities likely exists, so long as economic conditions permit increased strip ratio and surface restrictions are not prohibitive. Regardless of sentiment, Mining Momentum believes that Lumwana will be operating for many more years to come!
The information presented above does not constitute investment advice. This is a summary from the NI 43-101 Technical Report effective December 31, 2013 (INSERT), with commentary from the author. Statements above do not represent the views of Barrick Gold. If any discrepancies arise, the information contained within the NI 43-101 are official and final. For latest depletion data, please refer to the AIF update.