Freeport McMoran and Lundin Mining criticized for Congo operations

Dagens Industri writes that a non-profit organization called Southern Africa Resource Watch (SARW) has once again harshly criticized a mining project in Democratic Republic of Congo where Lundin Mining (TSX: LUN, OMX: LUMI) is taking part. The company has a 24% stake in an operation called Tenke Fungurume in southern part of Katanga Province with Freeport- McMoRan Copper & Gold Inc. (NYSE: FCX) as the main owner with 56%. A local state owned company gets 20% free carried interest. SARW worries that an expansion programme will further highlight the perceived ills of discrimination against local people vs. those from other provinces in attaining jobs, damage to agricultural land. An article explaining the critique can be found here.

Tenke Fungurume is an open pit mine with a 40-year initial mining plan. Production of copper cathode and cobalt in hydroxide form began in 2009. Since then subsequent upgrades have raised capacity output to 130,000 tpa of cathode copper and approximately 10,000 tpa cobalt. During Q1 2012 Lundin’s share of the copper production in Tenke was 8 924 tonnes, which delivered a cash flow from operations of 31 million USD. This will be retained at the mine to fund expansion phase 2, which is expected to raise production to 195 000 tonnes of copper cathode and 15 000 tonnes of cobalt in hydroxide. This expansion is expected to complete in 2013. Small scale heap leach pad trials on low grade ore are also being done. FCX recently changed guidance on 2012 total Tenke Fungurume copper sales from 131 500 to 136 000 tonnes.

In the first quarter of 2012, Lundin Mining had a net income of 58.3 million USD from sales of 212.2 million. Sales were flat vs. Q1 2011 but net income was down vs. the year ago period, although up vs. Q4 2011. As far as other projects are concerned, Neves-Corvo mine in Portugal produced 16 609 tonnes of copper at a cash cost of 1.63 USD per pound (3.6 USD per kilo) for the quarter, which was better than the company’s own expectations. Zinc plant in the same location produced 7 020 tonnes of zinc as a by-products and that amount is expected to increase as the year goes on. Zinkgruvan mine in Sweden produced 20 431 tonnes of zinc and 10 348 tonnes of lead at a cash cost of 0.22$ per pound (0.48 USD per kilo).