Name and Location
Zeta underground mine project, Botswana.

Client
Discovery Metals Limited (DML).

Project Description
The Zeta deposit forms part of the Boseto copper operation, where openpit mining operations have been progressing since October 2011.

A definitive feasibility study (DFS) for the Zeta underground mine was completed in 2012. The DFS evaluated the development of an underground mining operation at Zeta, based on the extraction of ore reserves and additional mineral inventory located under the Zeta openpit. The underground mine was evaluated as a standalone mine, with ore processed at the Boseto concentrator.

Further integration studies have been undertaken to refine cost estimates, finalise the mine design for construction, and confirm ramp-up parameters and production milestones.

Key design changes following the revision of the Zeta underground DFS include:
• Sequencing mine development into the northern and southern mines, with the start of the northern mine development leading the southern mine by about 18 months;
• Deepening the Zeta openpit at the southern end, providing an improved platform for the development of the southern decline in the footwall of the openpit;
• Developing portals for underground access from within the established Zeta openpit, rather than using northern and southern boxcuts, developed externally to the Zeta openpit;
• Accessing upper production (stoping) levels directly from the Zeta openpit through adits developed along the orebody strike;
• Establishing a temporary portal and decline at the base of the Zeta openpit to access the third production level, which will allow for the life-of-mine portal and access decline to be developed from both ends, reducing the overall construction time;
• Reducing vertical development through the installation of ventilation adits; and
• Reducing surface fixed installation costs through reusing existing facilities.

Expected average production from the combined northern and southern Zeta mines of 1.5-million tonnes at 1.2% copper is scheduled over an 11-year period, during which mining ore reserves and additional mineral inventory will be mined.

The underground mining operations will be accessed using twin declines through portals developed within the Zeta openpit.

The northern and southern declines and associated mine development are independent, providing flexibility for the time difference between the start of the northern and southern halves of the Zeta underground mine.

Sublevel caving has been selected as the most appropriate mining method. Each production level will be accessed centrally from the decline, with ore drives developed to the periphery of the orebody. Stope production from the sublevel caving will progress along the ore drives, retreating to the central decline access points.

Ore from development and caving operations will be trucked to the surface, stockpiled and then trucked about 9 km to the Boseto concentrator.

A contractor-based operation has been selected as the preferable option, owing to strategic considerations corresponding with the stage of the discovery’s development.

Net Present Value/Internal Rate of Return
The project has a net present value, at a 10%-a-year discount factor, of $97-million and an internal rate of return of 45% a year.

Value
Capital expenditure (capex) over the current planned life of the underground mine to complete all decline development to the base of the mine and fully equip the underground mine has been revised to:
• total capex to first stope ore production in the third quarter of 2015 being estimated at only $5.9-million, given the advanced stage of the openpit at Zeta;
• total capex to the first positive cash flow quarter totalling $34.7-million; and
• total capex to cash flow breakeven or payback being estimated at $69.7-million.

Duration
The start of decline development is expected in the third quarter of 2015.

Latest Developments
DML has secured a $110-million investment from equity fund Castlepines Global Equities to develop the Zeta underground mine at the Boseto copper project and to pay its debts.

DML was forced to find new funding after revealing earlier this month that its negotiations with Cupric Canyon Capital, regarding the possible sale of Boseto mine, had failed.

Under the terms of the memorandum of understanding (MoU) inked with Castlepines, the equity investor will invest $110-million in DML’s wholly owned subsidiary Discovery Copper, which owns the Boseto project.

In return, Castlepines will receive a 34% interest ownership in Discovery Copper.

DML’s 66% remaining ownership in Discovery Copper will be pledged as security to Castlepines during the 12-year term of the investment. The investment will attract a commercially competitive coupon rate, which will be subject to a yearly fixed escalation factor.

The Zeta underground mine has been a key strategic component of the Boseto development plan since its inception in August 2010.

“This was reaffirmed during our life-of-mine planning that was completed in early 2014. The future of the Boseto operation, and the entire mineral district, lies in the development of underground mining, ” says DML MD Bob Fulker.

The Boseto mine is expected to be mothballed in the next six months, after a review of the openpit operations determined that the prevailing high strip ratio would result in a high operating-cost environment, which is not sufficiently cash-flow positive amid the prevailing copper price.

However, DML is still pursuing the development of the Zeta underground mine.

“I have high hopes that within the Boseto mineral district we will have a minimum of three distinct mines with potentially five declines over the next decade, of which the Zeta underground will be the first,” Fulker says.

The closing of the financing is expected to take place following the execution of definitive documentation between the two parties, as well as DML satisfying any conditions precedent.

The MoU is subject to several conditions, including a due diligence study and the implementation of risk management strategies, as well as government and board approval by both companies.

Key Contracts and Suppliers
Mining Plus (DFS).

On Budget and on Time?
Not stated.

Contact Details for Project Information
DML, tel +61 7 3218 0222, fax +61 7 3218 0233 or info@discoverymetals.com.
Mining Plus, tel +61 8 9213 2600 or email info@mining-plus.com.