5th Jun 2020 10:26
(Alliance News) - KAZ Minerals PLC on Friday said the estimated capital budget for its Baimskaya copper project in Russia has increased significantly.
Shares in KAZ were down 11% at 441.40 pence in London in morning trading.
The mining company said work at Baimskaya, located in Russia's Chukotka region has been limited in the second quarter of the year as a result of Covid-19 control measures. Materials and equipment were delivered before the disruption, with pioneer works set to take place in the year.
Activity is on track "to resume in due course", and KAZ's guidance for 2020 capital expenditure of USD150 million still holds true. However, given results from ongoing drill campaigns and work so far, the project's total estimated capital budget has risen to around USD7 billion from USD5.5 billion.
KAZ added that progress on its bankable feasibility study has been hindered by "Covid-19 related issues" as its Moscow and Vancouver teams have had to work from home and have been restricted in both international and domestic travel.
KAZ and the Russian government are working to agree details in terms of power and transport infrastructure for the operational phase of the Baimskaya project, including possible take or pay agreements. However, given the additional time needed to finalise the infrastructure plan due to the pandemic, the bankable feasibility study is now expected to complete by the end of 2020.
More positively, results suggest a possible increase in mineral resources, which would extend the mine life beyond the original guidance of 25 years. The economics of the project have also been "optimised by increasing design capacity for the concentrator" 70 million metric tonnes per annum of ore processed from 60 million.
The construction timetable is still at around seven years and further details on the timeline, as well as production guidance, operating costs, and capital expenditure, are all to be published once the bankable feasibility study completes.
"Discussions will then be further progressed with potential lenders and the group will also assess opportunities for partnering on the project," KAZ explained.
Chair Oleg Novachuk said: "We are working to develop our execution strategy for the delivery of the Baimskaya copper project, one of the world's largest undeveloped copper assets. Study work and drilling completed so far at Baimskaya indicates that a larger project will unlock the potential of the world class Peschanka deposit. We look forward to updating the market with the details of the bankable feasibility study when it is completed later this year."
By Anna Farley; [email protected]
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