Johannesburg - African Rainbow Minerals (ARM) has put back by more than two years its target of raising copper output from three projects in the Democratic Republic of Congo (DRC) and Zambia to 80 000 tons a year.
Last January, Teal, which is developing the projects and in which ARM has a 65 percent stake, said it could produce a combined 50 000 to 70 000 tons of copper a year by 2011 while raising up to $300 million (R2.7 billion) over five years to develop the projects.
Dan Simelane, the Africa executive for ARM, said yesterday that the group intended to expand its copper output fortyfold to as much as 80 000 tons a year from the Kalumines project in the DRC, and the Mwambashi and Konkola North projects in Zambia. This would be done within five years by spending as much as $385 million.
Feasibility studies for the two Zambian projects have been completed. A study at the Kalumines project needs to be completed by next September.
The reasons for putting the projects on hold include the increase in Zambian mining taxes that have decreased the viability of the two projects in that country, and high processing costs that have resulted in Teal seeking ways to build facilities to turn copper ore into metal.
Since the Kalumines project in the DRC and Konkola North project in Zambia are 100km apart, it makes sense to build a smelter between the projects.
At the same time, ARM has decided to develop the projects on a large-scale format rather than starting with small production and expanding over time. As a result of this decision, ARM has increased its exploration spending to prove a greater amount of copper resource.
The company has five exploration drill rigs operating in the DRC and will drill for copper at Konkola North in Zambia in the next 18 months.
Last June Teal said it could raise up to R1 billion in the second half of the year to start ramping up production at the three projects. However, ARM's spokesperson Monique Swartz said it was up to two years away from a funding decision. Construction of one of the projects could start within three years.
Simelane said Teal expected to have spent up to $85 million by the middle of next year on developing its projects.
ARM sustained a loss of R211 million from its operations in the rest of Africa in the year to June. Swartz said the group expected to generate a loss in the next three to five years as it invested in projects in the rest of Africa.
ARM lost 2.25 percent yesterday to close at R130. The mining sector gained 3.19 percent.