The development of Frontier Mining’s (LON:FML) Benkala copper project has taken another step forward, with the contracting of the technical design work to Calder Maloney Pty Ltd. The company’s 50%-owned subsidiary, KazCopper hired the engineering contractor to design the project’s proposed SX-EW (Solvent extraction/electrowinning) plant
"The Benkala project is progressing in line with our strategic plans. Calder Projects is an experienced design company, having previously constructed a large number of SX-EW plants, and we are looking forward to working together", Frontier Chief Executive Erlan Sagadiev commented.
The proposed SX-EW process plant will be developed in two stages. It is intended that Phase 1 will have a production capacity of 25 tonnes per day, equating to 7,000 tonnes per year. Once the plant has been successfully commissioned, and has been operating and producing at that rate, the Phase 2 development will commence.
In Phase 2, the plant will be expanded to 75 tonnes per day, or 21,000 tonnes per year. The company highlighted that the design of the SX-EW plants, will allow easy expansion through Phase 2, without any major effect on the operability and capital cost of phase 1.
Calder Maloney’s Calder Projects Services (CPS) unit will carry-out the design work in conjunction with its own associated consultant and SX-EW specialist, Miller Metallurgical Services Pty. Also as part of the deal, CPS has agreed to take an equity stake, equal to 20% of the contract value, in Frontier.
"KazCopper's plans are highly impressive and the solid progress made to date at Benkala is very encouraging. We are therefore delighted to be sharing in the future success of Frontier. Taking shares as part payment demonstrates our confidence in a successful outcome", Calder Projects Director Jim Calder said.
Last week, Frontier Chairman and CEO Erlan Sagadiev described 2009 as a critical and transformational year, during which “a new and stronger management team brought fresh financing and a re-energised vision to the company”.
“We consider 2009 as a turning point in Frontier's history ... the company has been able to re-establish itself on a growth trajectory and move to aggressively develop its asset portfolio ... Frontier completed most of the work to turn its gold assets into a firm and steady source of cash flow to support the company's further expansion, Sagadiev stated.
One of the key highlights was the re-focusing of the company’s efforts on the Benkala project and the company’s deal to merge with Colville Intercorp - its JV venture partner at Benkala. The partners are currently working towards the completion of a merger, which is set to complete in the third quarter of 2010.
The merger sees Frontier take full control of Benkala and also adds another key development project to the portfolio, the Maminskoye gold project in Russia. Also last week, Frontier announced the results of Independent technical reviews and preliminary economic assessments which were carried out at both properties.
The assessments, carried out by Wardell Armstrong International (WAI), envisage a 5 million tonne per annum (Mtpa) copper open-pit mining operation at Benkala, and a 1Mtpa open-pit gold mining operation at Maminskoye. Collectively, the economic assessment values the two projects at over US$300m.
The economic assessment estimates that Benkala has an US$191m NPV, using a 10% discount rate and an internal rate of return (IRR) of 116% based on initial CAPEX of US$55m and a US$6,000/mt copper price.
The WAI preliminary economic assessment is based on 5Mtpa ore mining rate, average grade of 0.36% copper and 63% overall recovery.
At Maminskoye, MAI’s a preliminary model contemplates the development of an open-pit mine, operating at an initial mining rate of 700ktpa for the first three years, and increasing to 1Mtpa for a 14 year project life.
Frontier noted that WAI sees Maminskoye as an "attractive project" with the NPV estimated at US$110.9m, using a 10% discount rate and IRR of 48% with a 3 year payback. The assessment is based on an estimated capital cost of $75M and a $950/oz gold price.