Capital & Operating Costs

Capital Costs

The initial capital cost estimates for the EDP and Main Plant phases of the project have a base date of 2nd Quarter 2012, are expressed in United States dollars. They assume USD = 1.00 AUD and USD = 9,000 Rupiah (IDR).

US$ million BFS BFS Update Variance
EDP 37.1 40.0 2.9
Main Plant 100.8 110.0 9.2
Accuracy Provision 17.5 17.3 (0.2)
Total 155.4 167.4 12.0
Key reasons for the increase in costs are as follows:
Item Amount ($m) Description
Marine Fuel Oil (MFO) Power Plant $6.0 Increase in capacity from 13MW to 20MW to provide extra redundancy.
Additional EPCM $2.8 Increase in costs associated power plant/fuel
Freight Costs $2.1 Increase in landing craft charter rates
MFO Wharf and Fuel Farm $2.1 Increase to allow delivery of 2m litre shipments to reduce operating costs
Workshop and Warehouse $1.3 Upgrade to facilities
Structural Mechanical and Piping $0.9 Price inflation
Mobile Equipment $0.8 Purchase of additional mobile equipment to reduce operating costs
Airstrip ($2.2) Deferred to operating period
Spent Costs ($3.8) MFO, freight and engineering costs incurred
Others (net) $2.0 Items individually <$500k
Total $12.0

Operating Costs

The life of mine operating costs for both phases of theWetar Copper Project are as follows:

C1* costs (c/lb Cu) BFS BFS Update
Life of Mine
Variance BFS Update
Full Production
Mining $0.22 $0.23 $0.01 $0.21
Processing - Power $0.39 $0.33 ($0.06) $0.32
Processing - other $0.18 $0.18 $0.00 $0.16
G&A cost $0.30 $0.33 $0.03 $0.24
Total $1.09 $1.07 ($0.02) $0.93

* C1 costs exclude royalties (4%), head office expenses and marketing expenses which are expected to have no impact on costs after netting off sales premiums)

 

Note that the above numbers are a life of mine cash cost (i.e. including ramp up and ramp down). When the plants are operating at full capacity, cash costs are forecast to be around 90c/lb. Any extensions to mine life are likely to be achieved at costs similar to the full capacity cash cost estimate.

Key changes from the BFS are as follows:

  • Processing cost reduction (6c/lb) is almost entirely due to a decrease in fuel price as a result of sourcing MFO fuel shipments in 2m litre lots as opposed to 0.5m litre lots delivered via landing craft. The move to specialist MFO ships has resulted in design modifications for unloading fuel at the port facility and the requirement for extra fuel farm storage capacity (these are reflected in the new capital estimate).

  • G&A cost increases reflect:
    • An increase in community development expenditure (1c/lb).
    • An increase freight due to a significant increase in landing craft charter rates (2c/lb).
    • A provision for a medivac helicopter (not included in BFS) (1c/lb).
    • Increases are partially offset by reduced vehicle hire expenses (-2c/lb).

With $1.07/lb Cu operating costs (life of mine), the Wetar Copper Project remains one of the lowest cost copper cathode SX-EW operations and, compared to current worldwide operations, will have an operating cost base close to the average cost for all global copper producers.

Using the average copper price of approximately $3.75/lb, the Wetar Copper Project at full capacity would generate operating margins of greater than $155m per year.

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