El Boleo mine production falls short

Production at the El Boleo mine in Mexico was below forecasts in 2016 on account of processing interruptions.

Copper cathode production for the year was 14,284t, double that of 2015 but far below the 22,574t target, minority owner Camrova Resources (formerly Baja Mining) said in an update.

Output at the US$1.8bn Baja California Sur operation was impacted by unanticipated plant downtime related to unscheduled maintenance, Hurricane Newton and lower-than-forecast grades and recoveries.

Ore production of 1.40Mt was lower than expected due to the continued testing of underground methods, while surface mining was increased to partly offset the underground shortfall, Camrova said, citing information from a meeting of the board of operator Minera y Metalúrgica del Boleo (MMB).

The mine's cobalt and zinc sulfate circuits achieved commercial production in 2016, with output of 419t cobalt and 1,444t zinc sulfate.

El Boleo, majority owned by a consortium of South Korean businesses led by Korea Resources (Kores), has suffered a string of operational delays and financing challenges since cost overruns were identified in 2012.

OUTLOOK

Ore production is guided to almost double to 2.70Mt in 2017, comprising 2.00Mt from surface and the remainder from underground operations.

The mine is expected to produce 30,000t copper cathode, with output exceeding 2,500t per month following a maintenance shutdown in January.

Monthly cobalt and zinc sulfate production is targeted to exceed 50t and 770t, respectively.

Capex is forecast at US$45.0mn, focused on new mining equipment and a tailings storage facility expansion.

MINE PLAN

El Boleo is expected to achieve breakeven cash flow, assuming the refinancing of the MMB senior debt, according to an updated life-of-mine plan.

Production is expected at 528,000t copper cathode, 20,000t cobalt and 270,000t zinc sulfate over 15 years.

Beyond 2031, feasibility studies will investigate continued operations of the project as a refinery.

CASH SHORTFALL

The 2017 budget projects a US$160mn cash shortfall. Additional funding of US$30.0mn has been approved by Kores, with a remaining US$130mn payment subject to approval.

The additional funding requirements, on top of previous cash calls totaling US$346mn as of end-2016, may result in further dilution of Camrova's 10% stake in El Boleo. The extent of any dilution will be determined in a pending shareholders agreement due mid-January, the company said.