Crew-led consortium awarded Zambian copper mine

A consortium led by Vancouver-based Crew Development (cru-t) has been awarded the Chibuluma copper project in Zambia as part of the privatization of Zambia Consolidated Copper Mines (ZCCM).

The Chibuluma project includes the producing Chibuluma West copper-cobalt underground mine, which hosts proven minable reserves of 1.5 million tons grading 3.63% copper and 0.13% cobalt. The remaining mine life is pegged at between three and four years.

An additional 6 million tons of proven minable sulphide reserves grading 4.35% copper, plus oxide reserves of 2.4 million tons grading in excess of 3% copper, have been defined 12 km away at the Chibuluma South prospect.

John Darch, president of Crew Development, says the Chibuluma project was originally part of a larger package of projects which the Zambians wanted to privatize. “We approached the privatization authority on the basis that this was an ideal project for a junior, rather than a larger mining company,” he tells The Northern Miner.

“The rationale we gave was that a larger mining company would not regard the adjacent deposit [Chibuluma South] as sufficiently large to warrant developing it with the other properties.”

Subject to final legal documentation, the consortium can acquire an 85% interest in the project for an initial cash payment of US$17.5 million, further unspecified payments, and a commitment to spend US$34 million to develop the Chibuluma South deposit. ZCCM retains a 15% net profits interest.

The consortium consists of: Crew Development, holding a 35% interest; Metorex, an independent junior South African mining company with a 15% interest; South African zinc and copper producer Maranda Mines, with 30%; and Genbel Securities, a South African investment bank, with a 20% interest.

Crew owns a half interest in Metorex, which holds varying interests in four operating junior mining companies in South Africa, including a 27% interest in Maranda Mines. Combined, Crew holds a 48% direct and indirect interest in the consortium.

Early this year, Crew changed its name from Canadian Crew Energy and was refinanced through an $18.1-million private placement with primarily European and British financial institutions.

The company was established to invest exclusively in the natural resources sector, both directly in projects and in mining companies worldwide. It made its first acquisition with the purchase of a half interest in Metorex for $15.5 million. The junior mining company has more than 20 years’ experience managing and developing roughly 30 projects. Armed with a treasury of about $11 million, Metorex serves as the operating arm of Crew Development in southern Africa.

Crew believes southern Africa holds immense opportunities for junior mining companies over the next five years, and it is the desire of management that the company become a sort of mini-mining house to the juniors.

“Over the next 12 months, we will continue to identify projects that we can move into in a fairly swift manner and bring to production,” says Darch.

The Chibuluma West mine was developed in the 1950s and is currently operating at a rate of 35,000 tons per month. The ore is trucked 15 km and treated at the Nkana concentrator on a contract basis. Production amounts to 9,500 tons of copper and 200 tons of cobalt per year. Darch describes the mine as one of the lowest-cost producers in Zambia, at US$30.22 per tonne (US60 cents per lb.) combined copper and cobalt. He projects that, over the next three years, the mine will produce net operating profits of US$5 million per year.

Crew believes there is potential to extend the reserves, particularly of the North oreshoot, and that this could extend the mine life to five or six years.

The consortium intends to bring the Chibuluma South deposit to production prior to closing the Chibuluma West mine. Metorex will be responsible for the existing operations and the new mine development. Chibuluma South is expected to be phased in over a period of about three years.

15,000 tons per year

At a rate of 40,000 tons per month, Chibuluma South is projected to produce an annual 15,000 tons of copper over a 14-year mine life, netting a profit of about US$12 million per year. The capital cost of putting the second deposit into production is estimated to be US$23 million.

A shaft will have to be sunk, followed by the construction of a concentrator and the acquisition of mining equipment during the second and third years.

Maintenance and development costs during years four and five will raise the capital expenditure to beyond US$30 million.

The consortium is seeking metal loans and project financing for half of the anticipated cost of US$40 million, to be incurred during years one to three.

Darch has calculated that Crew alone requires US$3 million to cover its 35% interest in year one, US$800,000 in year two and about US$600,000 in year three.

With $2.3 million in its treasury, the company is considering financing options. Crew has 21.6 million shares outstanding, or 26.9 million fully diluted.

Crew Development is a member of the Crew Group of Companies, whose principals are Gerald Wright and Darch. Other public companies in the group include: Asia Pacific Resources (apq-t), which is developing a potash project in northeast Thailand; Botswana Diamondfields (bwd-v), a southern Africa diamond mining and exploration company active in southern Africa; and South Crofty Holdings (sfh-t), a majority shareholder in the South Crofty tin mine in Cornwall, England.

South Crofty recently announced that continuing adverse economic factors have forced the closure of its tin mine. The company blames weak tin prices, along with a substantial weakening of the U.S. dollar against the pound.