Chris Cann in London, 3 November 2011

IT’S been a long time coming, but EMED Mining’s historic and politically charged Proyecto Rio Tinto copper development in Spain is looking like a proper mining project at last.

PRT has been the source of almost intolerable frustration for EMED’s pragmatic managing director Harry Anagnostaras-Adams. With the ore in the ground, all infrastructure more or less in place, and a willing workforce on standby, the reasons for a three-and-a-half year delay have also had investors scratching their heads.

Last week, EMED received a request from the government of Andalucía for documents required for the final permitting of mineral rights at PRT. This is not necessarily a major breakthrough on its own but according to Anagnostaras-Adams it represents consistency, which is actually more important.

“They’ve (the government) announced a couple of things in the last few weeks apart from this letter,” he told HighGrade. “They’ve said they’re happy with our technical and financial competencies, which is the formal criteria for triggering the project. They’ve also formally announced they want the project to be triggered by us by the third quarter next year, which is consistent with the date that we have been working toward.

“For the past 18 months we’ve been looking at commissioning, or at least triggering commissioning, by the third quarter of next year and then a ramp up to follow over the next 18 months. So that’s a big step forward that they’ve actually bought into the same timetable and are ratifying it.”

A government facing serious unemployment issues and in need of taxes doing its part to get a brownfields site up and running might sound like a given, but it’s something to get excited about for investors as those who have followed this story will understand.

The project was a political and legal mess when EMED bought it back in late 2007, the legacy of a previous owner who resided over a “particularly corrupt cess pit”, according to Anagnostaras-Adams. In March the following year, the managing director predicted a Christmas restart, which clearly did not materialise. New timelines were set and subsided time and time again as the government failed to put its weight behind the project in any real sense despite a string of public endorsements.

It wasn’t until March this year when local would-be employees of the mine risked their lives during a sit-in in the ancient underground workings that the government finally got on board. Since then it has been – touch wood – plain sailing, with the last six months moving in line with expectations. That’s something new for EMED.

Included in this period of relative bliss was a rare announcement inspired by geology rather than bureaucracy. In June, EMED told the market that investigations of existing data related to areas outside the current mine plan had unearthed “significant underground potential”. One of these zones – the San Dionisio deposit – presented a “second important potential mine development opportunity”, which may complement the open pit.

The deposit has a historic resource of 17.2 million tonnes at 1.45% copper (using a cut-off grade of 0.6% copper), containing some 250,000t of metal, which was released back in 1993 but is not market compliant. EMED believes the deposit is worthy of further investigation, which it plans to do as soon as drilling permits come through, and that there is the potential for an even larger system of mineralisation.

"The first step is to get the existing operation up and running so we won’t be complicating the permitting process by introducing an underground component,” Anagnostaras-Adams said. “But at the same time we want to make it clear that this project will be refined and expanded in due course.

"[PRT] was a mining camp with a number of mines on it, not just the open pit. All we’re doing is highlighting that there are significant metal endowments in the underground, that’s the first point. The second point is that they have been extensively drilled by RTZ for they are significant, well-constructed and well-described mineral deposits.

“I wouldn’t be surprised if we came up with as much [copper] underground as we have in the surface operation but we can’t come out with any figures until we’ve done our own work.”

EMED plans to deliver a 15Mtpa openpit copper operation based on current resources and reserves of 205Mt and 120Mt, respectively. Plans are in place to increase these to more than 300Mt and 200Mt within a year.

Just as the government has befriended EMED, a previous ally in the copper price has backed off. From almost $US10,000/t in July, copper dropped below $US7000/t last month before regaining its composure somewhat in the past fortnight. Anagnostaras-Adams, however, is happy that PRT will not become marginal any time soon based on current project economics and his outlook for the red metal.

“The base case we run with for banking, project planning and reserve determination is based on a $US2 per pound ($US4400/t) copper price; and a $US2.50/lb ($US5510/t) price is used for cash flow planning. So fluctuations between $US2.50/lb and $US5/lb ($US11,000/t) won’t adversely affect project planning assumptions.

“The other thing I’d add is that the impact for us needs to take the Euro into consideration because that’s what we pay our costs in. And so the lower copper price has been buffeted because the Euro has dropped along with it.”

The project economics have not been lost on the financial community or potential offtake partners, which have both put offers on the table that will more than cover PRT’s $US120-130 million capital expenditure price tag. Meanwhile, EMED’s €12 million cash at bank will easily see it through to production at the current burn rate.

“Between now and this time next year there will be a series of announcements in project refinements agreed with the government, project plans that have been costed-out and refined, along with term sheets and mandates finalised with financiers.”

So, on reflection there are plenty of reasons to be pleased with the current state of affairs. However, speaking from EMED’s Cyprus office, Anaganostaras-Adams is without emotion. He is acutely aware that the project’s recent history has been littered with false dawns.

Perhaps, if he’s not too exhausted from the five-year battle, he’ll crack a smile when he sees the concentrate emerge from the plant next year.

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