The project was formerly a joint venture between ASX-listed Blackthorn and BHP Billiton (NYSE:BHP, ASX:BHP), but in 2011 BHP exited the JV, giving Blackthorn full ownership while BHP retained a 2 percent production royalty.
Wednesday’s prefeas points to an underground operation targettting high-grade ore, with an 11-year minelife. The deposit contains 33 million tonnes of mineable ore with 572,000 tonnes of contained copper. Initial annual production would be around 36,000 tonnes, rising in later years to 40,000 tonnes, with average cash costs of US$2.05 per pound of copper.
According to the study, the mine using a base case of $3.50 a pound copper has a net present value of US$108 million and would deliver a 12.7 percent post-tax internal rate of return.
“The completion of the PFS for the Kitumba Project along with identification of
optimisation and value enhancement potential is a very important milestone for the
Company and the latest in a series of positive developments since BHP Billiton exited the
JV just two years ago,” Blackthorn’s Managing Director Scott Lowe said in a statement. ”
“We have chosen a smaller scale underground operation rather than a much larger scale open pit as this allows us to target the higher grade zone much earlier, and to avoid expensive and time-consuming pre-strip. The economic comparison clearly showed that the internal rate of return is better for the underground scenario with a significantly lower pre-production capital cost.”
The next step in the project is to submit an application for a mining license to the Zambian government, followed by a feasibility study expected to begin in early 2014.
Blackthorn Resources closed down 6.35 percent Wednesday in Australia.
Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.