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Perkoa commissioning in 2010 subject to finance

Blackthorn Resources has reported that the care and maintenance programme at the Perkoa zinc project in Burkina Faso is progressing well with site facilities and machinery being kept in good condition. In 2008, the global economic crisis had a severe impact on the global mining industry.

In July 2008, Blackthorn Resources did not have sufficient funds to complete development of the Perkoa zinc project and decided to suspend construction work on it.

At the time this decision was made, about 50% of surface works had already been completed. As zinc prices continued to weaken throughout 2008, the Perkoa project was not considered economically viable at then market prices. Zinc prices had declined by some 68% over the six months leading up to December 2008.

In recent months, the zinc price has improved considerably, from lows close to US$1,100/tonne in December 2008 to about US$1,800/t in August 2009. The cash costs for the project are estimated at some US$1,500/t and the zinc price required to achieve a positive Net Present Value is approximately US$1,850/t.

As of the beginning of September 2009, the process plant footings at Perkoa were 85% complete and ready for assembly of process plant components. In addition, structural and mechanical works had been done on the project which is estimated to require some US$72 million for completion, including capitalised mining costs. This brings the total capital for the project start up to some US$155 million.

The company’s plan is to remobilise in early 2010, subject to availability of funding, with plant commissioning targeted for the fourth quarter of next year.

All long lead-time items have been purchased and delivered to site, with the exception of two cone crushers and one jaw crusher. Major work that still has to be completed includes construction of the process plant building; steel work assembly and commissioning; a 20 km water supply pipeline from a local dam; electrical cabling and reticulation; construction of infrastructure such as fuel facilities; tailings dam construction; shafts and ventilation fans installation; and underground mining development of main access workings and stoping areas.

The mining schedule is ahead of process plant construction. For this reason mining will recommence later than construction of the process plant to manage run of mine production stockpile levels.

SRK is preparing an independent report on the Perkoa project, inclusive of a full audit of the technical aspects. The key outcomes of the updated financial model include a life of mine ore production of 6.3 million tonnes, with an annual production of 720,000 tonnes. This will result in the production of 170,000 tonnes of 53% zinc concentrate a year. Given Perkoa’s distance from the port, land transport, ocean freight and treatment charges together account for more than 60% of the total cash costs.

The Blackthorn Resources board believes that the best way to finance Perkoa is a joint venture at the project level. A number of parties have expressed interest, and Blackthorn believes that an appropriate partner would have the capacity to fund the balance of capital required to put the mine into production and also bring other benefits that serve to make the economics of the project more robust.