June 2015 Quarterly Activities Report
SECOND QUARTER HIGHLIGHTS
- Long term finance package secured: credit approved $137.5 million term facility agreed with Taurus Mining Finance Fund
- Record copper cathode production in Q2 2015: Kipoi quarterly production of 6,732 tonnes of copper cathode with 6,972 tonnes sold at realised copper price of $6,154/t. All copper sales fixed with no price exposure as at 30 June 2015
- Cash operating costs down 5% from Q1 2015: a cash operating cost1 of $1.48/lb and an all-in sustaining cash cost2 of $1.64/lb
- Full year 2015 production guidance maintained: guidance of 25,000 tonnes of copper cathode and cash operating cost guidance of $1.30/lb - $1.40/lb remains unchanged
- Engineering and costing study confirms high return potential of the Kipoi debottlenecking project: The study conducted by Tiger with assistance from independent consultants Worley Parson and Cube Consulting returned a forecast IRR of 107% and a payback period of 10 months
- Lupoto: Mining licence granted. Identified resource to provide pathway to increase the Kipoi SXEW mine life
OPERATIONS - KIPOI COPPER PROJECT, Democratic Republic of Congo ("KIPOI")
Kipoi's exemplary safety record was maintained. The lost time injury (LTI) rate at 30 June 2015 remained at zero with no LTIs reported in 3,829,222 cumulative man hours. Kipoi continues to entrench safety as the number one value on site through maintaining robust safety management standards and an active safety leadership development program.
Copper cathode production for Q2 2015 was 6,732 tonnes, an increase of 18% on the previous quarter, and included two consecutive months of record production in May and June. Impacts of the wet season extended into April, affecting production levels in that month.
In June the SXEW plant produced 2,409 tonnes, demonstrating its capability to produce cathode at an annualised rate of 28,900 tonnes, 16% higher than the nameplate rate of 25,000 tonnes per annum.
The average grade of material stacked was 3.82% total copper, with a reported acid soluble copper grade (AsCu) of 1.88% copper. The lower than average AsCu grade reflects the stacking of high sulphur oxide (HSO) material, in preference to material from the HMS oxide floats stockpile as per the production schedule. Test work carried out as part of the reserve estimate indicated that ~33% of the total copper contained within HSO material is chalcocite. Whilst chalcocite is acid leachable, it does not leach within the time limit for reporting AsCu. Nevertheless, approximately 80% of copper contained in the chalcocite material is expected to be recovered.
Cash operating costs for the quarter were $1.48/lb, with all-in sustaining costs of $1.64/lb.
Processing costs remained stable for 2Q 2015. Approximately 58% of this cost relates to power generation, in particular the costs of diesel fuel required for power generation.
The plant operated exclusively on diesel power in April and May. In June, the first of two 30 MVa transformers installed to access grid power was successfully commissioned and synchronised with the DRC state-owned electricity network operated by Société Nationale d'Electricité ("SNEL").
The connection to grid power represents an important milestone, and was achieved ahead of Tiger's guidance for grid power utilisation to commence in the third quarter. General and administration (G&A) costs per unit of production were US$0.08/lb lower for the quarter at $0.31/lb of copper produced, in line with guidance. Tiger does not expect to incur any material increases in general and administration costs (which are largely fixed) under an expanded/debottlenecked Kipoi operation, with the consequent potential for a significant reduction in G&A unit costs.
Sales of Copper Cathode
Sales for the quarter was a record 6,972 tonnes of copper cathode at a realised average copper price of $6,154 per tonne, inclusive of quotational period (QP) pricing adjustments.
QP pricing was fixed for all copper cathode delivered during the quarter, with no pricing exposure for copper cathode sales up to 30 June 2015.
Tiger is on track to produce in excess of 25,000 tonnes of copper cathode for 2015. Costs for the quarter were consistent with previous guidance that 1H 2015 costs would be higher than full-year cost guidance.
Full year cost guidance of $1.30/lb - $1.40/lb and AISC of $1.57/lb - $1.67/lb was based on an average 50:50 grid:diesel power supply over the year. Kipoi commenced drawing grid power in June (4.5% of total power consumed) and now expects to ramp up grid supply.
The key outstanding items prior to the drawing of 50% power draw are: completion of the 47km line upgrade between Kipoi and Likasi by Megatron, and confirmation by SNEL of the energy savings initiatives undertaken by Tiger and Megatron which have exceeded 10MW required to run the Kipoi operation under the current installed SXEW production capacity.
If the above initiatives are further delayed, costs are expected to remain around 2Q 2015 levels until the line upgrade and SNEL confirmation are completed. These are 5% higher than the upper end of the guidance range.
Partially offsetting the potential higher cost impact should the ramp-up to majority grid power in 2H15 be delayed is the benefit from lower acid prices. Acid is the second largest input into processing costs at Kipoi and Tiger has entered into a supply agreement for sulphuric acid at approximately $235/t for the remainder of 2015, which compares favourably to the budgeted figure for 2015 of $365/t.
Tiger has today announced the results of an engineering and costing study for the debottlenecking of the Kipoi SXEW to potentially increase capacity to 32,500tpa (See ASX release, Tiger announces positive results of engineering and costing study for debottlenecking of Kipoi, 31 July 2015). The study focused on potential modifications to utilise the identified latent capacity of the SXEW processing train at Kipoi and was completed by Tiger with assistance of independent consultants, Cube Consulting and Worley Parsons.
The study confirms the potential for a high return, low capital cost debottlenecking of the Kipoi SXEW train. The debottlenecking project has a forecast IRR of 107% and a payback period of 10 months at a copper price of US$3.00/lb.
The debottlenecking works are expected to be completed within an eight-month period including detailed design, procurement and construction. Thus a commencement of works in 4Q15 would see completion during 3Q16.
Highlights of the study include:
- Reserve-backed life of mine (LOM) of +16 years at 32,500tpa rate
- Low risk debottlenecking project
- Average LOM cash costs of US$1.27/lb at 32,500tpa
- Capital cost of
- High return 107% IRR and 10 month project payback
- Detailed engineering and design commenced with investment decision targeted in 4Q15
The Lupoto Exploitation Permit (Mining License) has been granted giving Tiger three years to complete all additional test work and planning prior to being required to commence development of the mining operation at Sase Central. The 168,000 tonne copper resource at Sase Central is expected to be processed through the Kipoi SXEW facility located 25 km to the north of Sase Central.
A full evaluation of Lupoto drill core was completed to source suitable samples for further metallurgical testwork and geotechnical studies, with drilling activities scheduled to recommence during 4Q 2015.
Total expenditure on exploration activities at the Kipoi and Lupoto Projects for 2Q 2015 was $1.0 million (1Q 2015: $0.4 million).
Corporate and finance
Tiger has executed a credit approved term sheet for a $137.5 million facility to be provided and fully underwritten by Taurus Mining Finance Fund ("Taurus"). Credit committee approval followed the completion of Taurus's technical due diligence, and facility documentation has now commenced.
The facility will be used to refinance Tiger's existing debt facilities at drawdown, which is currently targeted for 30 September 2015.
Key terms of the facility include a term of approximately 6 years and 3 months to 31 December 2021 and a fixed interest rate of 9.25% per annum. Further terms of the facility can be found in the ASX release, Tiger Announces debt refinance, 1 July 2015.
Tiger and Taurus have also reached agreement for a second tranche of $25 million to fund the debottlenecking plans for the SXEW to increase capacity to 32,500 tonnes per annum.
The second tranche is expected to have a maturity date of 31 December 2023. Tiger is in the process of optimising the debottlenecking plans and, as such, drawdown of Tranche 2 will require the completion of an Independent Technical Expert's report in relation to the debottlenecking prior to receiving Taurus credit committee approval. The Tranche 2 documentation and arranging process will be undertaken in parallel with Tranche 1 outlined above and the work being undertaken by Tiger management to finalise the investment case for debottlenecking.
Tiger held cash on hand and deposit of $31.5 million at 30 June 2015, (31 March $21.2 million). The balance of copper cathode inventory on hand was 775 tonnes as at 30 June 2015.
In addition to operating and capital costs, cash outflows for the quarter included: $12.5 million of principal repayments to Gerald Metals, $6.5 million of interest payments to Taurus for the period 18 October 2014 to 17 June 2015, and $11.6 million reduction in trade payables.
As previously announced, Tiger drew down the remaining $25 million of the Taurus bridge facility following the agreement on terms for Taurus to provide a long term refinancing package to term out the bridging loan.
To view a Summary of Kipoi SXEW plant production, sales and costs, please visit:
About Tiger Resources Limited
Tiger Resources Limited (ASX:TGS) has established itself as a producing copper/cobalt company with excellent growth potential after making the transition from an explorer. We have a highly-rated portfolio of properties, all strategically located on the world renowned Katanga Copperbelt in the Democratic Republic of the Congo (DRC), central Africa.
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