Finance confirmed and cost savings for Dugald River

MMG Limited (MMG) today announced it had entered into an amended facility agreement of up to US$550 million in relation to the financing of the development and construction of the Dugald River zinc, lead and silver mine located in North-West Queensland, Australia.

The expected remaining cost of the project to first shipment of concentrate has been reduced by up to $US150 million – from US$750 million to US$600-620million plus interest costs*. This is the result of an improved development plan and savings secured through strategic sourcing in the mining construction downturn.

Since receiving conditional approval of the updated development plan in July 2015, MMG has further improved project value by:

• reducing project capital cost and ongoing mining unit cost; 
• enabling increased production and improved mill utilisation;
• targeting ore with higher geological confidence and lower risk; and
• increasing productivity through better mine and operations planning.

As a result, the optimised mine plan will support a 1.7 Mtpa nameplate plant with annual production of around 170,000 tonnes of zinc in zinc concentrate, plus by-products. The mine will operate over an estimated 25 years while the ore body remains open at depth. At this stage MMG expects to achieve C1 costs of US $0.68-0.78/lb when at a steady state of operation. This confirms Dugald River’s position within the world’s top ten zinc mines when operational.

MMG Chief Executive Officer Andrew Michelmore said the company remained positive about the long-term fundamentals for zinc.

“With the closure of recent major zinc mines globally, including the end of processing at our own Century mine in Queensland earlier this year, Dugald River will come on line at a time of ever-shrinking global supply,” he said. 

Early works have progressed successfully on site with pre-production mine development from two declines carried out throughout 2015 and 2016. Long lead time items have been ordered and key contracts for construction activities finalised. Following confirmation of these financing arrangements, construction of the processing plant will commence immediately. MMG maintains its previous guidance for first concentrate production in the first half of 2018. The Queensland Government has also recently granted Dugald River prescribed project status. The decision is expected to significantly streamline administrative decisions and accelerate the development of the mine.

“We greatly appreciate the strong support from the Queensland Government”, Andrew said. “The development of Dugald River and its’ long term operation is expected to provide significant employment and economic benefits to Cloncurry and Queensland for around 30 years.”

MMG continues to progress the negotiation of remaining service and construction contracts and necessary permits and approvals for the project.

The amended facility agreement is with China Development Bank Corporation (CDB) and Bank of China Limited, Sydney Branch (BOC Sydney).

* US$600-620 million cost to complete from Board approval of the updated development plan in July 2015 to first shipment of concentrate in 2018.