A scoping study was completed in April 2012, and it outlines the potential for a 1.5-million-tonne-per-year mining operation with an initial capital cost of US$234 million. It also points to production of roughly 15,000 to 20,000 tonnes of copper equivalent per year at a cash cost of US$1.80 per tonne after by-product credits. When the study was released, KGL suggested it would move the project immediately into the feasibility stage; however, it appears that did not happen, with the company instead focusing on two other projects within its stable, including the Murchison gold project in Western Australia and the Andash gold project in Kyrgyzstan.Since then those projects have fallen away. Murchison was put into production in August 2012, but closed within six months due to high operating costs, plunging KGL's operating subsidiary into administration, but leaving the holding company intact. Andash, on the other hand, had the potential for lower costs, but was politically troubled, and following the closure of Murchison, the company took the decision to sell Andash in May 2013 for AU$15 million. Focus again thus shifted to Jervoise. Extensive drilling over the intervening period has led KGL to this point, and the company has also indicated that a prefeasibility study (PFS) is near completion, with results due within days. Clarification needed On paper Jervoise looks robust, with reasonable grades and widths from surface; however, several key points will need to be addressed by the PFS and subsequent work. Firstly, the question of metallurgy will need greater definition. The scoping study of early 2012 suggests copper recoveries of 94 percent from simple flotation. But because the mine is starting from an open pit, it is likely that much of the initial years will bring oxide or transition ore, which is not as amenable to flotation as the deeper sulfide ores. The company has not yet released information on open-pit recoveries, and that will be key.
Second is the remoteness of the site in the arid interior of Australia, more than 200 kilometers east of Alice Springs. In the 2012 scoping report, the total start-up CAPEX estimate of US$234 million includes US$70 million for infrastructure, reflecting the high cost of establishing a mining operation in one of the more remote and inhospitable regions of Australia.It is likely that these factors, plus the depreciation of the Australian dollar, may result in higher cost estimates in the soon-to-be-released PFS. Should that be the case, the company and the market may then begin to give consideration to possible development synergies and economies of scale that might result from a tie up with surrounding projects such as Rox's Bonya. Securities Disclosure: Brad George holds no investment interest in any of the companies mentioned. Brad George is a geologist by trade, and has spent over 25 years working in the mining industry around the world in a variety of capacities. Primarily focused on exploration, Brad has gained extensive experience in iron ore, base metals and gold on five continents. He has extensive experience in the management of public resource companies.Upon completing an MBA, Brad spent several years in London as a partner in a boutique brokerage house, developing a franchise as a rated mining and metals analyst. Brad now resides in Perth, Western Australia. KGL Resources Adds Fuel to New Copper Mining District from Copper Investing News