BAKU, Azerbaijan, Nov. 18
By Nargiz Sadikhova - Trend:
Ministry for the Development of the Russian Far East and the Arctic has submitted for approval by the Prime Minister of the Russian Federation a multi-party Complex Development Plan (CDP) for new infrastructure in the Chukotka region, which includes infrastructure to be used by KAZ Minerals for the Baimskaya project, Trend reports citing KAZ Minerals.
Under the CDP, KAZ Minerals will now take responsibility for a portion of the infrastructure capital costs. Together with a revised cost for the tailings storage facility and the impact of an approximate one year delay to the project schedule, the capital construction budget for the Baimskaya project is now estimated to be close to $8 billion.
Given the changes in the infrastructure plan, the bankable feasibility study (BFS) is now expected to be completed in the first half of 2021. In light of the delay to the finalization of the BFS, the Independent Committee is providing an update reflecting the Group’s current understanding of the key parameters of the Baimskaya project ahead of the planned shareholder vote on the Acquisition of KAZ Minerals by Nova Resources B.V.
A new Liquefied Natural Gas (LNG) power plant is to be constructed at Cape Nagloynyn in Chaunskaya Bay for start-up in 2026. The CDP also includes the investigation of an alternative nuclear power station option at the same location. The regional government of Chukotka is to finance and construct power lines from Cape Nagloynyn to the Baimskaya project site, via Bilibino by 2026.
The Russian government will construct sections of a new port facility at Cape Nagloynyn, to be completed by 2026, including dredging and facilities for the power plant. KAZ Minerals is now responsible for arranging the financing and construction of other sections of the port, including electrical infrastructure, port equipment, and accommodation. The new port will receive supplies for the operating phase of the Baimskaya project, whilst also serving as the export route for the copper concentrate to international markets.
A 428 km permanent road linking the Baimskaya site to the new port has been split into two sections which are approximately equal in length. The first section, from Baimskaya to Bilibino, will now be financed and constructed by KAZ Minerals by 2024. The financing of the second section of the road, from Bilibino to Cape Nagloynyn, which is expected to have other users, remains under discussion.
Whilst the Baimskaya project continues to benefit from strong support from the Russian government, under the CDP KAZ Minerals will now be responsible for sections of the port and a circa 200 km section of the permanent road. Initial estimates obtained from Russian design institutes indicate additional construction costs for KAZ Minerals to be in the region of $600 million for this infrastructure.
The Baimskaya project is now expected to commence production by the end of 2027 and has an annual ore processing capacity of 70 Mtpa. The BFS is being prepared with an initial mine life of approximately 20 years based on JORC measured and indicated resources.
However, recent drilling indicates the potential for the mine life to be extended by around 5 years. Life of mine copper and gold processing grades are estimated at 0.47 percent copper and 0.27 g/t gold respectively. The project will deliver elevated production and grades in the first five years and accordingly net cash costs are lower during this period.
Including the additional costs for external infrastructure now expected to be incurred by KAZ Minerals, a revised cost for the tailings storage facility, and the impact of an approximate one year delay to the project schedule, the capital construction budget for the Baimskaya project is now estimated to be close to $8 billion in nominal terms.
The construction plan for the processing plant will ramp up the two lines in consecutive phases around 12 to 18 months apart with around 5 percent of the capital budget expected to be incurred after production commences from the first line. The project is expected to require sustaining capital expenditure of approximately $70 million per annum in 2020 US dollar terms, with additional maintenance included in operating costs. As sales ramp up, timing differences between production and sales proceeds are expected to result in a peak working capital requirement of $700 million in nominal terms over the initial years of operation.
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