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Kinsevere Copper Project: due diligence in the DRC

Anvil Mining Limited, a public company listed on the Toronto and Australian Stock Exchanges, is engaged in exploring and developing base metals mineral properties in Southern Africa. Anvil’s principal development asset, the Kinsevere Copper Project, is located in the Democratic Republic of Congo and is managed via its 95% interest in a local joint venture. Relying on input from various technical teams located on three continents, the company completed a Feasibility Study in 2007. Additional exploration drilling and technical updates led to a further update following which, the company sought access to the debt capital markets to fund construction and commissioning of an SX-EW plant with rated capacity of 60ktpa of LME grade A quality electrolytic copper cathode.

In 2008, as the independent engineer, SRK completed a full technical due diligence of the project and authored an Independent Engineer’s Report (IER). Since local knowledge and specialist input for review of milling-in-raffinate technology was key, SRK established a multi-disciplinary team from its European and Southern African practices supplemented by expert associate metallurgists. The process did not identify any fatal flaws but presented specific recommendations, which were incorporated in a detailed action plan.

During the second half of 2008, as turmoil mounted in the financial markets and copper prices declined, the company was unable to secure funding and in November 2008 all construction activities were placed on hold. At this stage the plant construction was 35% complete with detailed engineering 77% complete. In the ensuing six months, sustaining dry conditions in the open-pits while completing technical optimisation studies and the detailed action plan were critical to maintain the momentum and identify alternative sources of funding should market conditions change.

In 2009, SRK again worked with Anvil, maintaining the original team of consultants. Following the development of updated mining plans and construction/commissioning schedules, Anvil announced that it had reached an agreement for US$200m of debt and equity financing with Trafigura Beheer B.V., the second largest independent commodity trader in the global non-ferrous market. The updated IER was made available to all parties.  

Following recent (December 2009) shareholder approvals, syndication of the Trafigura project finance remains a possibility. The intellectual capital vested in the process to date is significant, and the updated action plans and the IER remain the principal independent technical due diligence reference documents. The ability to retain a core team of consultants with local and specific experience, through a global network of practices, to support access to the international debt capital markets is crucial.  

Iestyn Humphreys:

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SRK United Kingdom