Cape Lambert Resources Limited (ASX:CFE) has taken another major step on its fast-track to cobalt and copper production in the DRC with the strong possibility of securing an EPCF provider to fund and develop the project.
Chairman Tony Sage said appointing Kobu Capital to facilitate the Engineering, Procurement, Construction and Financing (EPCF) process was likely to result in the Kipushi Cobalt-Copper Tailings Project being built for free.
EPCF offer fielded from suitable provider
Kobu has already received an offer from a suitable international EPCF provider and a site visit is planned on January 6, 2019.
Sage said this arrangement would have no impact on the company’s cashflows.
The purpose of an EPCF provider is for self-funding of the design and building of the process plant, with repayment of the financing coming from future project revenues.
This will “derisk the project”
“It is a fantastic solution for Kobu to find an EPCF provider to fund the design and construction whilst waiting to be repaid out of future revenues of the project,” Sage stated.
“This will completely derisk the project for our shareholders and allows the company’s cash reserves to be deployed on other projects.”
READ: Cape Lambert Resources receives $7.5 million funds boost, puts cobalt tailings project on fast-track
Kobu is a venture investment platform for, amongst other things, innovative industrial technology products.
It believes it can offer a more economical development and financing process for the Kipushi project through partnering with its strategic Chinese partners.
Following the Kipushi site visit next month, Cape Lambert will undertake negotiations directly with the EPCF provider regarding the terms and conditions of an EPCF contract.
A success fee of 7.5% on the value of the EPCF contract will be payable to Kobu in eight equal instalments payable from project earnings.
Following signing of a contract with an EPCF provider, Cape Lambert will appoint Ipilot Australia Pty Ltd, a related party to Kobu, as a project management consultant to assist in managing the development.
After the project is commissioned, Cape Lambert will then negotiate with Ipilot to provide additional services to ensure the effective operation of the project.
The Kipushi project consists of a large tailings dam and is held by Soludo Lambert Mining SAS, which is a 50/50 joint venture between Cape Lambert and Paragon Mining SARL.
Cape Lambert has ambitions to produce thousands of tonnes of material a year at the project near the town of Kipushi in the prolific Katanga Copper Belt.
The tailings dam extends for a kilometre, is more than 400-metres wide and up to 15 metres deep in areas.
The extensive tailings dam at the Kipushi project.
Sage said, “What we expect to produce is around 2,900 tonnes per annum of cobalt and about 7,500 tonnes per annum of copper (dry basis).
“If you use today’s prices, that is close to US$205 million of contained metal produced each year and the operation could last as long as five years.”
Given there are about 2,204 pounds of copper in a tonne, the expected copper production would be worth approximately US$45 million a year at current pricing levels.
The company expects relatively low costs of production at the project with Sage saying, “The operating costs are reduced as there is no requirement for crushing or grinding.
“It is basically reprocessing the tailings in a very simple process. It is easy to build the plant, the technology is already there — it’s now just a matter of quantifying the resource, which will then be used to help attract funding.”
Aerial view of the proposed Kipushi leaching plant adjacent to the existing flotation plant.
Once the project’s resources are quantified, Sage expects them to be reflected in Cape Lambert’s share price.
“We are very confident that as soon as those numbers come out, the share price will better reflect the value of the project and we will be off and running.
“We have covered only part of the whole tailings dump with 173 holes, with an initial volume calculation of 2.7 million tonnes of tailings available from the area drilled,” he added.
A flow sheet for Kipushi Leaching Plant separates out cobalt-rich and copper-rich high-grade mixed hydroxide precipitate products to attract a wider market.