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Sentinel development on track, as First Quantum takes steps to maintain financial stability

6th October 2015

  

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JOHANNESBURG (miningweekly.com) – A stabilising electricity supply situation in Zambia is leaving dual-listed First Quantum Minerals hopeful that its Sentinel project will ramp up to commercial production by the end of this year.

The project’s ramp-up had been affected by the limited power supply available in the country, as drought conditions affected hydropower generation.

However, the country’s generating capacity was expected to improve following the start of the rainy season in November.

In addition, about 400 MW of new power generation capacity was expected to come on line in 2016. This included 300 MW of thermal energy and 100 MW of hydropower.

Construction of a second power line connecting the Sentinel project to Lusaka West was complete and would be energised shortly.

“Once the second power line is connected and energised, Sentinel will be entitled to its full power requirement of 160 MW. This will allow for the mine to ramp up towards commercial-level production,” First Quantum said on Tuesday.

It added that full power of 153 MW was also being supplied to the Kansanshi mine and smelter.

First Quantum further pointed out that power utility Zesco had requested the mining industry to use supplementary power for 30% of their requirements. Discussions were under way regarding the related tariffs for the supplementary power.

The company expected to maintain full production at both Kansanshi and Sentinel through the purchase and sharing of supplementary power.

REVISED STREAMING DEAL
First Quantum Minerals also reported on Tuesday that it had revised its precious metal stream agreement with gold-focused royalty and streaming company Franco-Nevada Corporation, in terms of which Franco-Nevada’s initial contribution of $330-million to $340-million would be paid during October.

Under the terms of the revised agreement, Franco-Nevada subsidiary Franco-Nevada Barbados Corporation (FN Barbados) would provide a $1-billion deposit against future deliveries of gold and silver from First Quantum’s flagship Cobre Panama project, in Panama.

This deposit would be funded on a pro rata basis of 1:3 with First Quantum’s 80% share of the capital costs in excess of $1-billion. Execution of the revised documentation was expected shortly.

The changes from the original agreement had largely addressed standardising reporting arrangements and providing a mechanism for First Quantum to use the project as collateral while maintaining the FN Barbados security.

First Quantum noted that Cobre Panama was about 35% complete, with commissioning set to start before the end of 2017. It added that, even at current commodity prices, Cobre Panama remained economically highly attractive.

“The initiatives now being undertaken are aimed at protecting against disruption to the planned timetable to completion for Cobre Panama and, importantly, the current strong support of the company's lenders is maintained,” it said.

The estimated capital cost of the Cobre Panama had been reviewed and reappraised to $5.95-billion, about 7% below previous estimates with potential for further improvements.

The reduction in capital costs was owing to better construction efficiency, continued optimisation of detailed design and lower costs for equipment and bulk materials such as rebar and structural steel.

First Quantum said in a statement that it had also given early priority to the completion of the power station, taking advantage of virtually all required materials being available on site. Mechanical installation works were also progressing well.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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