Review of Operations - Base Metals

Full production of Chambishi Metals’ expanded facility is now expected during the first quarter of the 2002 calendar year

Cobalt and copper Chambishi Metals plc is in the process of building up its production to become one of the world’s largest primary cobalt producers. This will occur when the newly-built smelter and downstream processes ramp-up to full production during calendar 2002. Based in Zambia and owned 90 per cent by Avmin, Chambishi Metals also currently toll refines concentrates for various clients. It produces copper and sulphuric acid as by-products.

Gerry Robbertze, 58

Senior vice president: cobalt/copper

Pr Eng, ACSM

Gerry spent his early career on the Zambian Copperbelt and then worked for various mining companies in southern Africa as a mining engineer holding numerous management positions. He joined the Anglovaal Group in 1987.

Ed Munnik

Chambishi Metals’ chief operating officer

Chambishi Metals plc (Chambishi) reported a loss of R64 million (R21 million – loss) for the year fromits existing toll refining operations. The existing plant refined 91 500 tons (64 000 tons) ofconcentrate for its clients, producing 2 700 tons (1 900 tons) of cobalt, of which 500 tons was for Chambishi’s own account. The plant produced 10 000 tons (7 700 tons) of copper, of which 400 tons was for its own account.

Existing refinery
Chambishi continued its upgrade programme of the refinery and this refurbishment, together with the necessary training and development of staff, is now at a level that maximises plant efficiencies. The availability and quality of concentrates for tolling was problematic for most of the year and the cessation of production by one of the suppliers impacted on the year’s results. In addition, poor pyrite availability and quality also had an impact on the operation during the year. The raw material supply issues are currently satisfactory.

New smelter
The new smelter, built to treat slag material from a resource 35 km from the plant, was commissioned during the third quarter of the financial year.However, during the heating-up process, the copper taphole block moved, causing a leak in a section of the copper cooling system and an opening of the seal between the copper sidewall block and the tapping block. Water ingress to the magnesite lining occurred resulting in hydration of the magnesite bricks. This necessitated re-bricking the furnace. Re-heating of the furnace commenced during July 2001. During this period extensive enhancements to the alloy atomising facility were undertaken. Theleach plant, the zinc solvent extraction and the cobalt tankhouse expansions have all been completed and are currently accepting material from the smelter. Full production in the expanded facility is now expected during the first quarter of the 2002 calendar year.

Business development
Avmin Zambia continues with exploration and project identification work within both Zambia and the Democratic Republic of Congo. This region has high potential for realising short- to medium-term results from this work, which is centred on base metal prospects. The Konkola North copper exploration and evaluation has been completed and a decision has been made to dispose of the property. Work has also continued on added value products such as cobalt oxides for the ceramics industry, superalloys and battery materials. These markets are an integral part of the current cobalt and future nickel marketing strategies.

Arné Lewis

The Nkomati mine had another good year. The mine milled 280 000 tons (239 000 tons) of ore, selling 42 000 tons (41 200 tons) of concentrate at an average nickel grade in concentrate of 10,47 per cent (10,66 per cent). While nickel head grades averaged 1,9 per cent for the year, Nkomati entered lower grade mining areas during the latter part of the year and this is expected to continue for the majority of the current financial year. Various factors contributed to the mine achieving significantly higher tonnages than planned. New underground equipment was acquired and improved efficiencies in the underground crusher and ore conveying systems as well as in the shaft winding system were achieved.

Sales tonnages
The metallurgical plant recoveries exceeded 80 per cent and the mine sold 4 000 tons (4 100 tons) of nickel. This operation also produces copper, cobalt and PGMs as by-products and 2 500 tons (2 300 tons) of copper and 54 tons (59 tons) of cobalt were sold. As a result of higher prices received during the year,PGMs contributed 51 per cent of total revenue, butthis is expected to reduce to about 43 per cent as a result of the expected lower platinum and palladium prices. The mine sold 32 600 ounces (25 400 ounces) of PGMs over the year and this was the primary reason that enabled the mine to produce nickel, netof by-products, at minus US$0,82/lb (minusUS$0,01/lb). The mine’s revenue for the year rose to R436 million(R352 million) and cost of sales, as a result of the higher tonnages mined, were R187 million (R141 million). This led to an operating profit of R243 million (R204 million) and after adding other income, mainly interest received, profit before tax rose to R249 million (R207 million).

Expansion
The feasibility study on a large expansion of the Nkomati mine will be completed in early 2002. This includes mining the existing high grade MSB orebody to the end of its life and the lower grade MMZ orebody through both underground and openpitmethods. Run-of-mine ore will be fed into a concentrator plant to produce a sulphide concentrate. This plant will be designed to mill approximately 325 000 tons a month of a blend of openpit and underground MMZ ore. The floatconcentrate will then be sent to an ‘Activox’ low-pressure leach plant where the base metals will be extracted. The leach liquor containing the base metals will then be sent to the base metals refinery to produce about 17 500 tons of nickel annually, nearly 9 000 tons a year of copper and 800 tons a year of cobalt contained in the carbonate. The leach residue will be sent to a flotation plant to recover the PGMs and thereafter be sent for tollsmelting and refining. Over 80 000 ounces of PGMs will be produced. The total capital cost of this expansion is expected to be in the region of R1,8 billion. A part of this requirement will be funded by the current MSB operation, but the majority of the funding will be contributed pro rata by the two joint venture partners, Avmin and Anglo American plc. Subject to the satisfactory conclusion of the feasibility report and to the joint venture partners’ reviews, it is expected that construction will start in the 2002 financial year.