Bill Nielsen appreciates just how lucky he was to discover a large, high-grade volcanogenic massive sulphide (VMS) deposit in the middle of the Eritrean desert, 150 km west of the country’s capital of Asmara.
The geologist had been sent to look at some properties in northern Eritrea in early 1998, but at the time he arrived in the East African nation there weren’t any helicopters available to take him there. So instead he was shown several other properties in the desert to the south. One of them — called Bisha — was a large, surface gossan that people had walked over for centuries.
As vice-president of exploration for Nevsun Resources (TSX: NSU; NYSE-MKT: NSU), Nielsen started fieldwork at Bisha later that year, but his work was interrupted by Eritrea’s two-and-a-half-year border war with Ethiopia at the turn of the millennium. It wasn’t until the war ended that he got back to exploring the property.
When he began drilling in late 2002, the third of six holes hit extensive massive sulphides and the deposit — configured in three layered zones (a 35-metre-thick surface gold–silver oxide zone overlying a 30-metre-thick copper-enriched supergene zone over a primary sulphide zone containing both zinc and copper) — went on to become a mine in 2008.
“It’s a world-class deposit — the best of the best — a fabulous orebody,” Nielsen says in a telephone interview from his home near Guelph, Ont. “Will I ever work on another Bisha again? No. Will I ever discover another Bisha? No, I won’t.”
Still, Nielsen isn’t ready to hang up his pick just yet, and while he says he typically rejects 95% of the projects that come through his door, he took the reins at Kombat Copper (TSXV: KBT; US-OTC: PNTZF) because he’s excited about bringing the junior’s dormant copper mine in northern Namibia back into production.
The Kombat mine first produced copper between 1911 and 1925 and then again from 1962 until 2008, when its owner, copper miner Weatherly International (LSE: WTI), put it on care and maintenance — a casualty of both the economic crisis and a power outage the year before that resulted in extensive flooding. Over its 54 years in production, Kombat churned out 12 million tonnes of ore grading 2–3% copper, along with credits for lead and silver.
Most of the infrastructure is already there, Nielsen says, including a 1,100-tonne-per-day mill; an 800-metre modern shaft and 3,000-tonne-per-day hoist facility; and three other recently operational shafts, ramp systems, underground workings, buildings and a tailings facility.
There is also a railroad siding at the site, where copper concentrates were once transported 100 km to a copper smelter in Tsumeb, one of five commercial-grade smelters in Africa that is now owned by Dundee Precious Metals (TSX: DPM; US-OTC: DPMLF). The rail line also runs to the port of Walvis Bay.
Nielsen estimates it could cost between $75 million and $100 million to get the mine back up and running. “It’s not a lot of money in today’s terms, which is one of the reasons why we think we can do this,” he says. “If we had to start from scratch it would be in the order of US$300 million to $500 million.”
The project comes with a mining permit, which leads Nielsen and the management team at merchant bank Forbes & Manhattan to believe that it could get permits in “a relatively short period of time, as opposed to if it were brand-new.”
In November 2013, China’s Jilin Jien Global Resources Fund took a strategic investment in the company, acquiring 20 million shares plus warrants for $2 million. “One of the pluses with the Forbes & Manhattan people is that they can locate these funds and obviously advance the more attractive projects,” Nielsen says. “You may not get big dollars to start with, but at least it’s something.”
In a January press release, executive chairman of Forbes & Manhattan Stan Bharti said he was excited to be involved with Kombat and described it as “one of the premier resource plays in Southern Africa, with excellent exploration upside.” Bharti noted that Forbes & Manhattan has had success with juniors restarting previously operating mines, including Avion Resources in Mali, which it sold to Endeavour Mining (TSX: EDV; US-OTC: EDVMF) in 2012, and Desert Sun in Brazil, which it sold to Yamana Gold (TSX: YRI; NYSE: AUY) in 2006.
The next step is to complete a technical report before 2015 that provides reasonable costs and time frames — including the permitting time frames — needed to bring the Asis Far West sector of the past-producing mine back into production.
“If it were easy someone else would have done it,” Nielsen says. “The earliest we feel we could get into production is at least three years, and in all likelihood four. But if you have a new deposit it would likely take you six or more years because of permitting issues.”
The Asis Far West area of the property was drilled from surface in the 1980s, and a number of intersections were reported over a strike length in excess of 650 metres, including 10 metres grading 8.05% copper and 9 metres of 2.67% copper. It was then decided to sink a shaft 800 metres to the upper limits of the favourable stratigraphy. The shaft was completed in 2006. Limited underground drilling was later carried out, with intersections of 18 metres of 3.53% copper and 6.15% copper over 8 metres.
Kombat Copper says it hopes to define at least 4 million to 5 million tonnes of copper mineralization averaging between 2.5% and 3.5% copper in the Asis Far West zone. “We still have several kilometres of strike length to explore on our mining licence, and believe that the favourable stratigraphic horizon hosting significant copper mineralization is present to the west, where a 1980s drill hole intersected 1.7 metres assaying 11.7% copper and 151.48 grams silver per tonne.” The company is also looking into expanding its milling facility from a 1,100-tonne-per-day operation to something larger that would offer better economies of scale.
The junior wants to prioritize exploration targets on the five mining licences it owns in the Otavi Mountainlands, and on ground the company owns near Weatherly International’s nearby Tschudi open-pit solvent-extraction–electrowinning development project in its financing phase. (Kombat holds the Tschudi deposit’s strike extension. Its ground is less than 1 km from Tschudi and abuts their mining licence.)
“This project is one of the ones that sort of jump out at you when you first see it,” Nielsen says. “It’s going to require a lot of hard work to get this done, but it’s doable. This mine was operating for 50 years, so it’s just a matter of defining more resources and making it go again. It won’t have the cash flow or size of Bisha, but it certainly is an economically doable project, and it will bring in positive cash flow.”