HIGHLIGHTS FOR THE QUARTER
OVERVIEW
Equinox Minerals Limited is an international mineral exploration and development company listed on both the TSX and ASX stock exchanges (Symbol: “EQN”) with a focus on base metals. The Company’s primary business is the development of its 100% owned Lumwana copper project in Lumwana, Zambia (the “Lumwana Project” or “the Project”). The project is very close to practical completion and handover from the EPC contractor, Ausenco Projects Limited and Bateman International Projects BV, a subsidiary of Bateman Engineering NV (“ABV”). The Company expects to commence commissioning the plant with ore in November 2008.
The Company believes the Lumwana Project to be the largest new copper mine coming on-stream anywhere in the world for the period 2008-09 and once at full production during 2009, anticipates that the Lumwana Project will be Africa’s largest copper mine, which will elevate Equinox into the top 20 list of copper producing companies worldwide.
LUMWANA COPPER PROJECT (“LUMWANA PROJECT”) DEVELOPMENT SUMMARY
On July 7, 2008, Equinox reported that a fire had caused damage to the 20MVA transformer and adjacent 11kV substation at its Lumwana Project (the “Incident”). This equipment and facility forms part of the process plant that was being commissioned by the EPC contractor, ABV, under a US$407.6 million fixed price, fixed term contract as announced on October 16, 2006.
The Company further reported that assessments had been conducted by independent experts, insurance loss adjusters and ABV engineers to identify equipment that needed to be replaced due to the Incident. The Company advised that the replacement, installation and commissioning work was continuing on the Lumwana Project whilst the remediation program was being implemented.
The Company has in place a number of copper put option hedge contracts covering anticipated sales in the months of October and November 2008. As a result of the Incident and the delayed start-up, these anticipated transactions were no longer likely to occur. Consequently, these contracts were closed out in October 2008, generating revenue of $11.6 million. The Incident has not affected the Lumwana Project ‘take and pay’ smelter delivery commitments and the Company holds no outstanding delivery obligations due to the delayed start-up.
Given the anticipated delay due to the Incident and believing it prudent and advantageous to establish additional debt finance facilities, on October 2, 2008, the Company announced the signing of a new US$80.0 million loan facility (“New Loan Facility”) underwritten by Standard Bank Plc and Standard Chartered Bank and to be provided by certain members of the existing Lumwana Copper Project banking syndicate. The New Loan Facility is structured on similar terms to the commercial tranche of the US$582.7 million Project finance debt facilities as announced December 1, 2006. The Company also successfully renegotiated the debt repayment schedule to commence at the end of Q3-09 with respect to some elements of the primary US$582.7 million facility reflecting the revised startup timetable.
The New Loan Facility will enable the Company to meet the additional working capital requirements that resulted from the delayed startup. Equinox determined that the establishment of the New Loan Facility was preferable to drawing down its existing US$45.0 million Contingent Funding Facility, ensuring that the Company maintains appropriate levels of liquidity while limiting shareholder dilution. The Contingent Funding Facility (as announced June 29, 2007) was established to provide the Company with a Project cost overrun provision and still remains available to Equinox.
Equinox has in place material damage and delay in start-up insurance policies that cover daily standing costs and debt service costs. Coincident with the announcement of the New Loan Facility, the Company reported that insurance enquiries had concluded and that the insurance syndicate had accepted indemnity for the Incident. Equinox has quantified its losses and made submissions to the insurers.
During the quarter and to the extent governed by its contract with ABV, the Company continued to receive liquidated damages from the EPC contractor.
On October 2, 2008, Equinox reported that it had accepted from its EPC contractor handover of the Lumwana Project primary crushing and conveying circuit and successfully commissioned and put into production its first large scale Hitachi EX5500-6 electric shovel.
Crushing operations commenced with the Company’s operations team and crushed material is being stockpiled in preparation for commissioning of the remainder of the Lumwana Project process plant. In testing prior to hand-over, the crushing circuit, which includes the Company’s 4.5 km overland conveyor, had crushed and transported over 150,000 tonnes of material easily exceeding its design throughput rate of 3,309 tonnes per hour. Consistent rates in excess of 4,000 tonnes per hour were also achieved as part of this process; these rates representing approximately 30 million tonnes per annum.
At this time, the Company also reported that it had put into production and successfully commissioned its first large scale electric shovel (Hitachi EX5500-6) having achieved or exceeded all design productivity parameters. The electric shovel, with an operating weight of 518 tonnes, requires 1720kW to power two Hitachi TFOA-KK motors and is configured utilizing a 27m3 bucket designed to mine approximately 26 million tonnes of material annually at a mining rate of 4,000 tonnes per hour. The Company anticipates commissioning its remaining three electric shovels during Q4-2008 to work alongside the 3 diesel excavators/shovels that have been operating since 2007. Combined, these units are expected to complete the final commissioning and ramp up of the mining operation for the Lumwana Project production phase.
FINANCIAL RESULTS AND LIQUIDITY
Equinox recorded a consolidated net loss for the three months ended September 30, 2008 of US$0.7 million, or US$0.001 loss per share. This compares to a consolidated net loss of US$9.3 million, or US$0.0016 loss per share, for the corresponding three months ended September, 30, 2007. The primary variances arose as a result of other income/(expense) which was higher than the previous corresponding quarter as a result of net hedging gains of $7.5 million dollars resulting from discontinued and ineffective cash flow hedges. Exploration expenditures were in line with the corresponding period while general and administration costs were $0.9 million lower (due to a large one off payment in the corresponding period). Financing costs were higher at $1.8 million due to the Lumwana Project debt facilities.
The consolidated net loss for the nine months ended September 30, 2008 was US$10.6 million, or US$0.018 loss per share. This compares to a consolidated net loss of US$20.3 million, or US$0.038 loss per share, for the corresponding nine months ended September, 30, 2007. The primary variances arose as a result of other income/(expense) which was higher than the previous nine quarter as a result of net hedging gains of $7.5 million dollars resulting from discontinued and ineffective cash flow hedges and higher foreign exchange gains, Exploration expenditures were $2.9 million higher than the corresponding period due to work carried out on the Lumwana uranium feasibility study while general and administration costs were $2.7 million lower (due to a large one off payment in the corresponding period). Financing costs were higher at $3.0 million due to the Lumwana Project debt facilities.
As at September 30, 2008, Equinox had cash resources of US$51.8 million and undrawn debt facilities of US$151.4 million which includes the New Loan Facility ($80 million) as described earlier and the $45 million Contingent Funding Facility. The outstanding capital commitments of the Company relating to the construction of the Lumwana Mine at September 30, 2008 are $55.1 million. In addition the Company reports that insurance enquiries have now concluded with the Project insurance syndicate accepting indemnity for the Incident and that quantification of the amount to be claimed by the Company is progressing well. Further updates will be provided once information comes to hand.
EXPLORATION ACTIVITIES
On July 25, 2008, Equinox reported that recent exploration drilling at the Company’s Kanga Prospect (“Kanga”) continued to intersect significant copper intercepts. Kanga (at which Equinox has identified a series of highly prospective geophysical IP anomalies), lies directly on strike and immediately to the south of the Malundwe main pit. The drilling program at Kanga was completed in September and following compilation of all assay results, a revised inferred mineral resource compliant to Australian JORC and Canadian National Instrument 43-101 will be completed.
At Lolwa, two diamond core holes were completed within the uranium mineralization previously identified by RC drilling with the objective of providing a stratigraphic framework. In addition, the silicate minerals in the host sequence were analysed using PIMA (an infrared analytical system) to quantify the volume and extent of uranium-related alteration with the intention being to aid exploration of the Company’s many other uranium anomalies at Kabompo.
Two stratigraphic holes were also drilled at the Ngala target on the Copperbelt to provide petrophysical samples of the lithologies considered prospective for copper mineralization. The data collected will aid interpretation of the IP geophysical data that the Company has acquired over this prospect and allow better targeting of structural positions likely to host mineralization.
At the Mwekere prospect, work in the 1970’s by RST identified copper sulphide mineralization and defined a non-compliant historical copper resource at depth. The resource lies at the Upper Roan / Lower Roan contact, and whilst that resource is considered to be too deep (100 - 500m) for viable open pit mining, the Company recently tested the economic potential of the interpreted near-surface contact position in a 9 hole diamond core drilling program. Assay results are awaited.
Three diamond holes were also drilled at the Akasuba prospect in the Kasanka property, 150 kms east of the Copperbelt. The objective of the two holes was to intersect the sulphide zone beneath previously identified oxide copper mineralization. The third hole tested a thick intercept of previously reported oxide copper mineralization. Petrophysical samples of the lithologies considered prospective for copper mineralization were also collected, as an IP geophysical program was also completed here during the quarter. The derived data will facilitate better interpretation of the IP geophysical data at Kasanka.
URANIUM ACTIVITIES
The Company has completed a Uranium Feasibility Study (“UFS”) investigating the onsite treatment of the discrete and high grade uranium mineralization contained within the Lumwana Project copper pitshells. The UFS has confirmed the potential viability of onsite uranium treatment in a dedicated uranium plant designed to treat 1 million tonnes of ore per annum producing an estimated 2 million lbs per annum of yellowcake (U3O8) and 12 800 t of copper concentrate per annum.
The UFS showed that the plant is expected to cost US$200 million in preproduction capital to build and should realise operating costs for yellowcake of $16/lb lowering to $11/lb should copper credits be available to account.
The Zambian Government has finalised and implemented its uranium mining/processing code (compliant to IAEA and NPT Guidelines). Before it can implement the UFS, the Company requires EIA approval for which submission has been made to the Government. Should Equinox be successful in negotiating economically viable yellowcake off-take agreements and secure the requisite project capital financing, the company expects plant construction to take 18-24 months.
In the meantime, mining and stockpiling of uranium ore is scheduled to commence during December 2008.
OUTLOOK
The Company is focused on the development of its 100% owned Lumwana Copper Project in Zambia. The Lumwana Copper Mine is expected to produce an average of 172,000 tonnes per year of copper metal contained in concentrates for the first 6 years of its 37 year mine life. The project is very close to practical completion and handover from ABV. The Company expects to commence commissioning the plant with ore in November 2008.
Full production is expected to be reached in 2009 at which time Lumwana is projected to be Africa’s largest copper mine.
At September 30, 2008 the Company had outstanding capital commitments for the Lumwana Project of $55.1 million. Despite the delay in production commencement the additional funding provided by the Company’s very supportive banking syndicate has allowed it to meet its construction commitments and on-going working capital requirements.
Equinox has completed a Uranium Feasibility Study (“UFS”) investigating the onsite treatment of discrete and high grade uranium mineralization contained within the Lumwana copper pitshells. The UFS has confirmed the viability of onsite uranium treatment. Should Equinox be successful in negotiating viable yellowcake off-take agreements and secure the requisite project capital financing, the Company expects plant construction to take 18-24 months.
The Company believes that at Lumwana there exists significant opportunity to expand and optimize the concentrator and mine throughput rate as well as opportunity to assess and evaluate the additional near mine deposits discovered to date.
Equinox maintains an active “pipeline” of exploration projects on its Zambian tenements which presently total some 6,284 km2. In particular, exploration of targets on properties near Lumwana is focused on resource definition which, if successful, could deliver additional ore to Lumwana Mill.
Equinox will continue to review and assess opportunities for organic growth and expansion, and corporate opportunities to grow the Company.
OVERVIEW
Equinox Minerals Limited is an international mineral exploration and development company listed on both the TSX and ASX stock exchanges (Symbol: “EQN”) with a focus on base metals. The Company’s primary business is the development of its 100% owned Lumwana copper project in Lumwana, Zambia (the “Lumwana Project” or “the Project”). The project is very close to practical completion and handover from the EPC contractor, Ausenco Projects Limited and Bateman International Projects BV, a subsidiary of Bateman Engineering NV (“ABV”). The Company expects to commence commissioning the plant with ore in November 2008.
The Company believes the Lumwana Project to be the largest new copper mine coming on-stream anywhere in the world for the period 2008-09 and once at full production during 2009, anticipates that the Lumwana Project will be Africa’s largest copper mine, which will elevate Equinox into the top 20 list of copper producing companies worldwide.
LUMWANA COPPER PROJECT (“LUMWANA PROJECT”) DEVELOPMENT SUMMARY
On July 7, 2008, Equinox reported that a fire had caused damage to the 20MVA transformer and adjacent 11kV substation at its Lumwana Project (the “Incident”). This equipment and facility forms part of the process plant that was being commissioned by the EPC contractor, ABV, under a US$407.6 million fixed price, fixed term contract as announced on October 16, 2006.
The Company further reported that assessments had been conducted by independent experts, insurance loss adjusters and ABV engineers to identify equipment that needed to be replaced due to the Incident. The Company advised that the replacement, installation and commissioning work was continuing on the Lumwana Project whilst the remediation program was being implemented.
The Company has in place a number of copper put option hedge contracts covering anticipated sales in the months of October and November 2008. As a result of the Incident and the delayed start-up, these anticipated transactions were no longer likely to occur. Consequently, these contracts were closed out in October 2008, generating revenue of $11.6 million. The Incident has not affected the Lumwana Project ‘take and pay’ smelter delivery commitments and the Company holds no outstanding delivery obligations due to the delayed start-up.
Given the anticipated delay due to the Incident and believing it prudent and advantageous to establish additional debt finance facilities, on October 2, 2008, the Company announced the signing of a new US$80.0 million loan facility (“New Loan Facility”) underwritten by Standard Bank Plc and Standard Chartered Bank and to be provided by certain members of the existing Lumwana Copper Project banking syndicate. The New Loan Facility is structured on similar terms to the commercial tranche of the US$582.7 million Project finance debt facilities as announced December 1, 2006. The Company also successfully renegotiated the debt repayment schedule to commence at the end of Q3-09 with respect to some elements of the primary US$582.7 million facility reflecting the revised startup timetable.
The New Loan Facility will enable the Company to meet the additional working capital requirements that resulted from the delayed startup. Equinox determined that the establishment of the New Loan Facility was preferable to drawing down its existing US$45.0 million Contingent Funding Facility, ensuring that the Company maintains appropriate levels of liquidity while limiting shareholder dilution. The Contingent Funding Facility (as announced June 29, 2007) was established to provide the Company with a Project cost overrun provision and still remains available to Equinox.
Equinox has in place material damage and delay in start-up insurance policies that cover daily standing costs and debt service costs. Coincident with the announcement of the New Loan Facility, the Company reported that insurance enquiries had concluded and that the insurance syndicate had accepted indemnity for the Incident. Equinox has quantified its losses and made submissions to the insurers.
During the quarter and to the extent governed by its contract with ABV, the Company continued to receive liquidated damages from the EPC contractor.
On October 2, 2008, Equinox reported that it had accepted from its EPC contractor handover of the Lumwana Project primary crushing and conveying circuit and successfully commissioned and put into production its first large scale Hitachi EX5500-6 electric shovel.
Crushing operations commenced with the Company’s operations team and crushed material is being stockpiled in preparation for commissioning of the remainder of the Lumwana Project process plant. In testing prior to hand-over, the crushing circuit, which includes the Company’s 4.5 km overland conveyor, had crushed and transported over 150,000 tonnes of material easily exceeding its design throughput rate of 3,309 tonnes per hour. Consistent rates in excess of 4,000 tonnes per hour were also achieved as part of this process; these rates representing approximately 30 million tonnes per annum.
At this time, the Company also reported that it had put into production and successfully commissioned its first large scale electric shovel (Hitachi EX5500-6) having achieved or exceeded all design productivity parameters. The electric shovel, with an operating weight of 518 tonnes, requires 1720kW to power two Hitachi TFOA-KK motors and is configured utilizing a 27m3 bucket designed to mine approximately 26 million tonnes of material annually at a mining rate of 4,000 tonnes per hour. The Company anticipates commissioning its remaining three electric shovels during Q4-2008 to work alongside the 3 diesel excavators/shovels that have been operating since 2007. Combined, these units are expected to complete the final commissioning and ramp up of the mining operation for the Lumwana Project production phase.
FINANCIAL RESULTS AND LIQUIDITY
Equinox recorded a consolidated net loss for the three months ended September 30, 2008 of US$0.7 million, or US$0.001 loss per share. This compares to a consolidated net loss of US$9.3 million, or US$0.0016 loss per share, for the corresponding three months ended September, 30, 2007. The primary variances arose as a result of other income/(expense) which was higher than the previous corresponding quarter as a result of net hedging gains of $7.5 million dollars resulting from discontinued and ineffective cash flow hedges. Exploration expenditures were in line with the corresponding period while general and administration costs were $0.9 million lower (due to a large one off payment in the corresponding period). Financing costs were higher at $1.8 million due to the Lumwana Project debt facilities.
The consolidated net loss for the nine months ended September 30, 2008 was US$10.6 million, or US$0.018 loss per share. This compares to a consolidated net loss of US$20.3 million, or US$0.038 loss per share, for the corresponding nine months ended September, 30, 2007. The primary variances arose as a result of other income/(expense) which was higher than the previous nine quarter as a result of net hedging gains of $7.5 million dollars resulting from discontinued and ineffective cash flow hedges and higher foreign exchange gains, Exploration expenditures were $2.9 million higher than the corresponding period due to work carried out on the Lumwana uranium feasibility study while general and administration costs were $2.7 million lower (due to a large one off payment in the corresponding period). Financing costs were higher at $3.0 million due to the Lumwana Project debt facilities.
As at September 30, 2008, Equinox had cash resources of US$51.8 million and undrawn debt facilities of US$151.4 million which includes the New Loan Facility ($80 million) as described earlier and the $45 million Contingent Funding Facility. The outstanding capital commitments of the Company relating to the construction of the Lumwana Mine at September 30, 2008 are $55.1 million. In addition the Company reports that insurance enquiries have now concluded with the Project insurance syndicate accepting indemnity for the Incident and that quantification of the amount to be claimed by the Company is progressing well. Further updates will be provided once information comes to hand.
EXPLORATION ACTIVITIES
On July 25, 2008, Equinox reported that recent exploration drilling at the Company’s Kanga Prospect (“Kanga”) continued to intersect significant copper intercepts. Kanga (at which Equinox has identified a series of highly prospective geophysical IP anomalies), lies directly on strike and immediately to the south of the Malundwe main pit. The drilling program at Kanga was completed in September and following compilation of all assay results, a revised inferred mineral resource compliant to Australian JORC and Canadian National Instrument 43-101 will be completed.
At Lolwa, two diamond core holes were completed within the uranium mineralization previously identified by RC drilling with the objective of providing a stratigraphic framework. In addition, the silicate minerals in the host sequence were analysed using PIMA (an infrared analytical system) to quantify the volume and extent of uranium-related alteration with the intention being to aid exploration of the Company’s many other uranium anomalies at Kabompo.
Two stratigraphic holes were also drilled at the Ngala target on the Copperbelt to provide petrophysical samples of the lithologies considered prospective for copper mineralization. The data collected will aid interpretation of the IP geophysical data that the Company has acquired over this prospect and allow better targeting of structural positions likely to host mineralization.
At the Mwekere prospect, work in the 1970’s by RST identified copper sulphide mineralization and defined a non-compliant historical copper resource at depth. The resource lies at the Upper Roan / Lower Roan contact, and whilst that resource is considered to be too deep (100 - 500m) for viable open pit mining, the Company recently tested the economic potential of the interpreted near-surface contact position in a 9 hole diamond core drilling program. Assay results are awaited.
Three diamond holes were also drilled at the Akasuba prospect in the Kasanka property, 150 kms east of the Copperbelt. The objective of the two holes was to intersect the sulphide zone beneath previously identified oxide copper mineralization. The third hole tested a thick intercept of previously reported oxide copper mineralization. Petrophysical samples of the lithologies considered prospective for copper mineralization were also collected, as an IP geophysical program was also completed here during the quarter. The derived data will facilitate better interpretation of the IP geophysical data at Kasanka.
URANIUM ACTIVITIES
The Company has completed a Uranium Feasibility Study (“UFS”) investigating the onsite treatment of the discrete and high grade uranium mineralization contained within the Lumwana Project copper pitshells. The UFS has confirmed the potential viability of onsite uranium treatment in a dedicated uranium plant designed to treat 1 million tonnes of ore per annum producing an estimated 2 million lbs per annum of yellowcake (U3O8) and 12 800 t of copper concentrate per annum.
The UFS showed that the plant is expected to cost US$200 million in preproduction capital to build and should realise operating costs for yellowcake of $16/lb lowering to $11/lb should copper credits be available to account.
The Zambian Government has finalised and implemented its uranium mining/processing code (compliant to IAEA and NPT Guidelines). Before it can implement the UFS, the Company requires EIA approval for which submission has been made to the Government. Should Equinox be successful in negotiating economically viable yellowcake off-take agreements and secure the requisite project capital financing, the company expects plant construction to take 18-24 months.
In the meantime, mining and stockpiling of uranium ore is scheduled to commence during December 2008.
OUTLOOK
The Company is focused on the development of its 100% owned Lumwana Copper Project in Zambia. The Lumwana Copper Mine is expected to produce an average of 172,000 tonnes per year of copper metal contained in concentrates for the first 6 years of its 37 year mine life. The project is very close to practical completion and handover from ABV. The Company expects to commence commissioning the plant with ore in November 2008.
Full production is expected to be reached in 2009 at which time Lumwana is projected to be Africa’s largest copper mine.
At September 30, 2008 the Company had outstanding capital commitments for the Lumwana Project of $55.1 million. Despite the delay in production commencement the additional funding provided by the Company’s very supportive banking syndicate has allowed it to meet its construction commitments and on-going working capital requirements.
Equinox has completed a Uranium Feasibility Study (“UFS”) investigating the onsite treatment of discrete and high grade uranium mineralization contained within the Lumwana copper pitshells. The UFS has confirmed the viability of onsite uranium treatment. Should Equinox be successful in negotiating viable yellowcake off-take agreements and secure the requisite project capital financing, the Company expects plant construction to take 18-24 months.
The Company believes that at Lumwana there exists significant opportunity to expand and optimize the concentrator and mine throughput rate as well as opportunity to assess and evaluate the additional near mine deposits discovered to date.
Equinox maintains an active “pipeline” of exploration projects on its Zambian tenements which presently total some 6,284 km2. In particular, exploration of targets on properties near Lumwana is focused on resource definition which, if successful, could deliver additional ore to Lumwana Mill.
Equinox will continue to review and assess opportunities for organic growth and expansion, and corporate opportunities to grow the Company.
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