EMC updates Varvarinskoye with Senet
European Minerals Corp is currently constructing the Varvarinskoye gold/copper mine in Kazakhstan. This was to have been IM’s Operations Focus in the May issue, but the report on the operation has now been put back to a later date.
EMC has now received an independent review of the Varvarinskoye project from Senet CC regarding the design, cost of construction and target completion date for the Varvarinskoye process plant and associated infrastructure. The overall design parameters on which the Senet Review is based include the crushing, milling, flotation, leach/CIP, gold room and tailings disposal sections of the process plant and infrastructure. The designed throughput rate of 4.2 Mt/y with all of the associated infrastructure was detailed in the definitive feasibility study undertaken by MDM Ferroman in November 2004. EMC terminated its contractual relationship with MDM in January, 2006 (and indeed MMD has subsequently filed bankruptcy). Based, like MDM, in South Africa, Senet is a successful engineering and project management company specialising in the development of gold and copper heap leaching equipment and processes.
Capital cost estimates determined by Senet
US$Million
Process plant and infrastructure costs 60.81
EPCM costs payable to Senet:
Fixed fees and overheads 3.72
Project management and related costs 5.07
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Total 69.60
These capital cost estimates follow a detailed Senet review of all of the process flow diagrams as well as equipment lists and a current procurement schedule. This compares to the previous MDM lump sum turnkey contract price of $56 million.
Senet has confirmed the previous plant design and layout and the initial throughput of 4.2 Mt/y of ore. The majority of mechanical equipment items were also confirmed as valid orders already in progress and a review and update of costs with JSC Consolidated Development Corp (CDC), the main Kazakh subcontractor, was incorporated into the total capital cost estimate.
Following a detailed rescheduling of construction objectives with CDC and EMC’s project implementation team, Senet has concluded that the following key dates are achievable:
- Contract notice to SENET to commence EPCM - February 2006
- Practical completion and introduction of first ore - March 2007
- Anticipated date of first gold pour - April 2007
- Completed commissioning and handover - June 2007
Other capital cost escalations and variances, in addition to those costs outlined in the Senet Review, have ocurred since the previous estimates were made, which amount to approximately $6 million. These additional costs largely result from increased base costs of mining consumables over the last 12 months, which impacts on the project’s pre-stripping costs, additional mining support equipment and an increase in overheads arising through the change of the project’s contractor.
EMC has accepted the revised cost estimates and construction schedule submitted by Senet and has signed a letter of intent (LOI) appointing Senet as EPCM contractor, to supervise construction in conjunction with CDC and the EMC project team. Senet has commenced work under the LOI.
Following the Senet Review, overall project capital costs have increased to some $145 million (compared with the previously announced $125 million). The company has already disbursed some $50 million of this total from its treasury, approximately $4 million of which, earmarked for payment to suppliers, is being held by a South African bank and which the company is seeking to recover. Assuming full recovery of the $4 million, this leaves approximately $95 million as the revised estimated capital cost to completion. This increase includes all the additional new elements of the EPCM as well as the additional costs referred to above.
Site works have continued during the winter months. The Caterpillar mining fleet deliveries commenced on schedule; approximately 60% of the mining equipment has been delivered, is assembled and operating on pre stripping at Central pit. The balance of the mining equipment is being manufactured and is scheduled to be delivered by September 2006. EMC is currently adjusting the Varvarinskoye mining plan to take into account the revised target date for process plant completion in March 2007. Foundations for the main process plant and workshops have been completed and power line construction is on schedule. A 300-man temporary construction accommodation camp has been established on site by CDC; it is anticipated that CDC will recommence civil engineering and concrete works by the end of February. First steel for the mine fleet workshop is anticipated to arrive at site before the end of March 2006. The concentrate loading facility at the nearby railway siding has been cleared and fenced, ready for installation later in the year. Construction of the tailings dam was suspended over winter as planned, but clay for the base of the dam walls has continued to be stockpiled at the dam site ready for placement and compaction in Spring 2006. Boreholes for dewatering the mining area have been drilled and pipework installed and connected to the 2 million m3 capacity water reservoir which was constructed during the summer of 2005.
Tony Williams, EMC Chairman commented today "The Senet Review has confirmed that the Varvarinskoye plant is suitably designed with respect to metallurgical and engineering principles and will effectively process the initial planned ore throughput, as set out in the feasibility study. Although overall project costs are now estimated at around $145 million, some 16% higher than previous estimates, we have continued to make significant progress on the project . We believe the new team of Senet, CDC and our own project people will deliver a completed project by mid 2007 which, in the circumstances, is a significant achievement. At current metal prices Varvarinskoye is capable of producing significant early cash flows."