Algeria to approve zinc mine project by end of April

12 April 2011

Feasibility study for $600m scheme was completed in 2010

Feasibility studies for a major zinc mining project in northeast Algeria are expected to be approved by the end of April, says a senior project source. The estimated $600m project is Algeria’s biggest mining development for 30 years and the first major project to be carried out under new mining regulations introduced in 2001.

The definitive feasibility studies for the mine, at Tala Hamza near Bejaia, were completed in mid-2010. They have been approved by Terramin Australia, which has a 65 per cent stake in the project company, Western Mediterranean Zinc (WMZ).

Terramin submitted the studies to its local partner, the state-owned mining company Entreprise Nationale des Produits Miniers (ENOF), in October, but doubts over the proposed mining method have slowed ENOF’s approval of the studies.

“The soft consistency of the ore body means that the only methods that work are open-pit mining, which would require the removal of billions of tonnes of earth, or block caving, where infrastructure is developed below the ore body and exit points are drilled to remove the ore,” says the project source.

It is the second method that is proposed for the development of the resource, but it is one that has not been tried before in Algeria. “Neither the energy ministry nor ENOF were confident with block caving, simply because it was completely unfamiliar to them, so they needed reassurance that it works,” says the source.

In the past three months, ENOF has allayed these doubts by recruiting IMC, a UK-based mining consultancy, to assess the proposed mining methods. IMC’s report, which is expected to give the green light to the project, is now close to completion. “IMC’s report is expected to be completed by mid-April, then we expect an agreement from ENOF to go ahead with the application to mine,” says the source.

Once submitted, the development plans will be studied by the Energy and Mines Ministry, in accordance with the 2001 mining act, which sets out the terms and conditions for private investment in Algeria’s mining sector.

“We are waiting for the agreement of our partner to proceed,” says Nicholas Clift, the head of Terramin’s Algeria operations. “They are doing a review with the assistance of a third party, after which we will go through the approval process, which typically takes five months.

“We’re going to work through this at a pace that the government wants to, because they’re an important partner and it’s important that both partners are comfortable. This is the largest single mining project in 30 years and the first significant project since new legislation in 2001, so we’re essentially a guinea pig.”

Construction of the mine is expected to take approximately four years, with operational start-up in 2015. The work will be split into two major contracts, which will be put out to international tender, with local subcontractors expected to carry out much of the work.

The first phase of construction will involve drilling the tunnel beneath the ore body, which is expected to take about 12 months. Detailed engineering and design will be carried out in parallel to these activities.

The project will be financed on a 70:30 debt/equity basis, with local banks providing the debt element. Banque Exterieur d’Algerie is expected to provide at least some of the financing.

A resource body of 69 million tonnes has been delineated at the Tala Hamza site, of which 51 million tonnes are classified as mineable. The ore contains an estimated 6.1 per cent of zinc and lead, in a proportion of four parts to one. Once operational, the mine will have output of between 2 million-4 million tonnes a year (t/y) of ore, which will produce between 250,000-400,000 t/y of concentrated zinc. The UK’s Bateman is the engineering consultant on the project.

Once the Tala Hamza project is under way, other targets may also be developed. “We have an area of 110 square kilometres,” says Clift. “Everywhere we drill there seems to be lead, copper, zinc or silver. If this project goes ahead it would almost certainly make further activities possible.”

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