Third Quarter 2014 Production and Project Update

MMG Limited (MMG) (1208.HK) today released its third quarter production results reporting a 2% increase in year-to-date copper cathode production and solid progress on major projects.

MMG CEO Andrew Michelmore said, “Kinsevere produced a year-to-date total of 50,727 tonnes, building on record results from the previous quarter and achieving another quarterly production and sales record.”

“We are very pleased with the quality and consistency of the Kinsevere ore body as we processed 22% more ore this quarter at an average grade of 3.7%,” he said.

Sepon copper cathode production was 9% higher in the third quarter 2014 compared to the previous quarter due to higher mill throughput partially offset by lower grades, however year-to-date production was 4% lower than in 2013.

Total year-to-date copper concentrate production for MMG was 7% lower than the previous year due to Golden Grove’s zinc focused mine plan. Year-to-date production at Rosebery, however, was 52% higher than the corresponding period in 2013.

Total year-to-date zinc production for MMG was 5% lower than in 2013, due to planned shipping maintenance at Century during the quarter. Century year-to-date zinc production totalled 319,230 tonnes with Golden Grove and Rosebery contributing an additional 73,859 tonnes.

Mr Michelmore said, “MMG continues to examine a number of options to utilise Century’s infrastructure while we prepare for last production from the open pit which is expected to occur in the third quarter of next year.”

“We have already commenced planning rehabilitation to return the area to its pre-mining use, but we will maintain all plant equipment and infrastructure including the concentrate pipeline and facilities at Karumba while the study of future options is underway,” he said.

Year-to-date lead production across MMG was 10% higher than the previous year, with a 21% increase in lead production at Rosebery compared to the previous quarter.

MMG has provided an update to annual guidance and the company expects to deliver 175,000–187, 000 tonnes of copper and 577,000–600,000 tonnes of zinc in 2014.

Las Bambas

MMG completed the acquisition of Las Bambas on 1 August 2014 with the first phase of integration completed following the change in ownership.

Las Bambas is a world-class project and our initial focus has been to address some of the high priority areas ensuring we have the right structures and controls in place to address risks and ultimately deliver the project on schedule and within budget.

As identified during the due diligence process, there were a number of areas that were likely to impact the previous project schedule and capital expenditure guidance.

Delays relating to the community resettlement, low productivity of engineering, procurement and construction management (EPCM) contractors and some changes to project scope have impacted the project schedule leading to an increase in capital expenditure. These factors were identified by MMG throug the due diligence process and the impact to schedule and capital expenditure were taken into consideration during the transaction process.

We have now completed our own review and as a result, MMG expects first production of concentrate in the first quarter of 2016, with the capital expenditure required to complete the Las Bambas project to be in the range of US$2.7–3.2 billion.

Major activity during the third quarter 2014 focused on the construction of the processing plant, primary crusher, overland conveyor and key surface infrastructure including tailings facilities, powerlines, mine access and mine maintenance facilities. As at 30 September 2014, the overall project was 75% complete.

“We are impressed with the calibre of the Las Bambas team and the quality of the construction to date,” said Mr Michelmore.

“We are pleased to have been on the ground at Las Bambas for the past few months reviewing the initial plans, making refinements and looking for opportunities to add value to the development.”

“Nothing has come as a significant surprise to us and we are looking at opportunities to optimise the project while maintaining a realistic outlook,” he said.

“This is a world-class asset that will become one of the top three copper mines in the world. Our focus is on successful completion of construction and bringing the asset into production,” he said.

MMG has initiated an extensive drilling program at Las Bambas to further define the reserves and resources both within and outside the existing planned pit outlines.

“Indicative results from this drilling program have started to validate MMG’s view that there is significant upside to the existing resource base,” said Mr Michelmore.

Follow-up drilling will enable detailed mine planning and the updating of the Las Bambas Reserves and Resources over the course of 2015.

Dugald River

The Dugald River mine stoping trial continued to progress in the third quarter with a total of 13 trial stopes now successfully mined and backfilled.

Stope spans between 15m and 30m have proven stable for the geotechnical conditions encountered.

A geological and geotechnical program is now underway to review the findings in relation to the entire ore body.

The stoping trial seeks to determine the accurate stope design parameters and productivity assumptions for Dugald River leading up to the assessment of future options for the project.

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Third Quarter Production Report (PDF, 789 KB)