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Thursday, 8 January 2009

Mine Watch (Lumwana & Mokambo)

Equinox have announced they are delaying construction of a uranium processing plant at its Lumwana copper-uranium mine, due to low uranium prices and difficulty raising financing. Full press release here, which also carries an interesting statement on the fiscal policy :

Lumwana Uranium Project

In April 2008 Equinox released the results of a feasibility study on the design of a treatment facility for the uranium ore stockpile that will result from the selective mining of the discrete, high grade uranium zones within the Lumwana copper orebodies. Subsequent to the release of this feasibility study the Government of the Republic of Zambia ("GRZ") has implemented its guidelines for uranium mining, processing and export that are consistent with International Atomic Energy Agency guidelines and the Nuclear Non-proliferation Treaty. The GRZ has recently approved the Lumwana Uranium Environmental Impact Assessment. However, due to current difficulty in international project financing as well as current market prices for uranium oxide, the Company believes it prudent to defer the implementation of this uranium project until such conditions improve sufficiently to deliver appropriate shareholder value. In the interim, high grade uranium ore will be stockpiled at Lumwana in accordance with Zambian legislation and international best practice.

Fiscal Policy

As the Company has highlighted in previous guidance, it remains confident that the material components of its Development Agreement with the GRZ will be honoured. The Company continues to work closely with GRZ to secure the relevant incentives to ensure the fundamental economics of Lumwana remain intact. To that extent, the Company has recently secured a Statutory Instrument for exemption of the concentrate export tax recently legislated by the GRZ for Lumwana concentrate production that may be exported. The Company has previously been granted Statutory Instruments for exemptions from import duty and for excise applicable to fuel and electricity consistent with the Lumwana Development Agreement, and continues to work with relevant Ministries in realizing the remaining incentives as they may be required. The recent international financial crisis has reinforced the Company’s consultative approach with the Government as being in the best interests of its shareholders as well as the people of Zambia.

TSX Venture Exchange-listed ICS Copper Systems have also announced that they will walk away from the Mokambo property, after studies indicated that the prospect did not contain copper grades or tonnage that would support a mine. The capitalised mineral property expenditures and nonmoveable equipment related to Mokambo, totalling $7.9 million at October 31, 2008, will be written off.

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