Name and Location
Perkoa joint venture (JV) project, Burkina Faso.

Client
The project is a JV between Blackthorn Resources (39.9%) and Glencore International (50.1%), with the remainder being held by the government of Burkina Faso (10%).

Project Description
The project involves the development of the first zinc mine in West Africa.

The project is located within the Proterozoic Boromo greenstone belt, about 120 km west of Burkina Faso’s capital, Ouagadougou.

In May 2012, the Perkoa JV announced mineral resources of 12.17-million tons at 10.3% zinc and 53.9 g/t silver at the Perkoa project, including measured and indicated mineral resources of 7.15-million tons at 11% zinc and 53.8 g/t silver.

Further, Blackthorn approved participation in a proposal by Glencore to upgrade the project, including:
• Extraction of silver and lead concentrate in a separate processing circuit by bulk mining the hanging-wall zone of the deposit;
• Opencut mining of near-surface mineralisation, situated along strike and adjacent to the underground mining area; and
• Increased throughput of the processing plant from 720 000 t/y to 1-million tons a year.

Value
Glencore previously agreed to provide development capital of $120-million to fund the expanded project construction and commissioning through a combination of project equity and project loans. In addition, Glencore agreed to provide or source a maximum working-capital facility of $20-million for a total financing package of $140-million.

However, the revised estimate of costs to the completion of commissioning provided by Glencore to the JV is now expected to be $180-million. This amount includes costs relating to project construction, capacity expansion, underground and opencut development and the addition of a lead and silver circuit, as well as the accumulation of working capital to the completion of commissioning.

This revised estimate brings the total cost of the project until the end of commissioning, including Blackthorn Resources’ initial $80-million capital spend, to an estimated $260-million.

In addition to the increased costs to complete commissioning, further short-term funding will also be required in the first year of production to cover revised capital and working-capital estimates that are not yet finalised.

The JV partners are collaborating on budget optimisation to minimise future short-term working capital requirements. It is expected that the final budget will be agreed upon with Glencore in February 2013.

Duration
Commissioning is expected to be completed by the end of February 2013 and the first export vessel is expected to sail during the second quarter.

Latest Developments
Blackthorn Resources has secured an additional $80-million in equity funding from JV partner Glencore to complete the construction and commissioning of the Perkoa zinc project.

Earlier this year, Blackthorn announced that the price tag on the Perkoa project had increased to about $260-million, following a revised cost estimate by Glencore.
To date, the JV partner has provided an estimated $140-million in funding for the project, including $50-million in direct project equity, $70-million in project loans and $20-million in working capital facilities.

The additional $80-million funding will be used to cover the increased construction and commissioning costs, as well as working capital and additional capital requirements until the end of this calendar year.

Blackthorn has also taken the decision not to fund its $35-million share of the capital requirement, but is instead undertaking a strategic sell-down of its interest in the project from 39.9% to 27.3%.

Meanwhile, commissioning of the process plant continued in February, with improvements in the throughput into the plant and the quality of the concentrate being produced.

Ongoing training of operators and adjustments to the plant are continuing and it is expected that export-quality concentrate will soon be produced, with the first marketable quantity expected by the end of the second quarter of the 2013 calendar year.

Mining in the openpit continues, with work on the second push-back to start again.

Zinc grades being mined from the openpit are better than originally expected.

Development of the underground mining area is also progressing well, with the decline advancing towards the 250 m level. Development drives are being advanced in the 100 m, 130 m and 160 m levels, with the mined ore supplementing production from the openpit.

The second ball mill is expected on site in April 2013, with installation and commissioning expected to be completed in June, enabling ramp up to one-million tons of throughput capacity.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
The cost of the project has escalated from $140-million to $180-million.

Contact Details for Project Information
Blackthorn Resources, tel +226 50 31 66 35, fax +226 50 31 70 97 or email info@blackthornresources.com.au, or MD Scott Lowe, tel +61 2 9357 9000.
Glencore International, tel +41 41 709 2000, fax +41 41 709 3000 or email info@glencore.com.