Blackthorn Resources gives conditional nod to Perkoa Zinc expansion with Glencore International

Blackthorn Resources (ASX: BTR) has agreed, on condition, to participate in the expansion of the Perkoa Zinc Project in Burkina Faso, as proposed by joint venture partner Glencore International (LON: GLEN).

The company has previously received an investment proposal from Glencore to enhance the business case for the Perkoa joint venture project.

The net present value of the expanded project to Blackthorn is estimated at US$65 million, a US$25 million increase on the current carrying value.

This expansion would be designed to reduce unit costs and diversify the commodities produced, making the project more economically robust.

Some of the proposed changes include:

- modifying the process plant configuration to include separate silver-lead and zinc concentrate product streams;
- increasing plant throughput capacity to 1 million tonnes per annum run of mine at peak production; and
- open cut mining to supplement underground production.

Importantly, the expansion work is not expected to delay project commissioning, which is scheduled for mid-2012.

Blackthorn managing director Scott Lowe said: “The decision to enhance the Perkoa Project represents a very important and positive milestone for the project. The addition of silver and lead credits plus the lower operating costs made possible through open-cut mining and increased throughput will make the project more robust and capable of withstanding zinc market volatility.”

Glencore has advised Blackthorn that it intends to proceed with the expansion, based on the expected improvement to the project’s return on investment.

Blackthorn has the right to participate in the expansion on a pro-rata basis of Glencore at 55% and Blackthorn at 45%. Funding for the incremental investment is available to the joint venture through project finance from Glencore.

Detailed information provided by Glencore includes a financial model supporting the investment case. This model uses tonnage and grade estimates based on both historical data and assays from drilling to explore for along strike extension of mineralisation in the proposed open cut area.

After reviewing the technical and financial information provided by Glencore and engaging external consultants to assess the proposal, Blackthorn has found that the information supports a decision to proceed.

Approval to participate in the expansion is subject to there being no material problems or inconsistencies being identified in the outstanding information to be provided by Glencore.

“We now look forward to Glencore continuing with the technical work required to deliver the expanded case, while negotiations to finalise the detail of the project financing are undertaken. Provided the outstanding technical information is within expectations, then Blackthorn Resources intends to go ahead and execute the financing documentation and participate in the expanded and improved project,” Lowe said.

Negotiations on detailed project finance terms and conditions are due to begin.

Perkoa zinc

The Perkoa project is located in the Proterozoic Boromo Greenstone belt in Burkina Faso, about 120 kilometres west of the country’s capital, Ouagadougou.

Perkoa is operated as a joint venture between Blackthorn Resources, with a 39.9% interest, and Glencore, with a 50.1% interest. The remaining 10% is held by the government of Burkina Faso as a free carried interest.

First ore

First development ore from a cross-cut driven off the main decline is expected by the first week of December.

Last month Blackthorn confirmed high grade silver and lead mineralisation along strike and adjacent to the existing ore body, which adds significant upside to the project.

Importantly, the presence of high-grade silver and base metal mineralisation is consistent with the assumptions used in the enhanced business case for expanding the Perkoa mine and increasing production throughput to 1 million tonnes annually.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/22782/blackthorn-resources-gives-conditional-nod-to-perkoa-zinc-expansion-with-glencore-international-22782.html