Namibia Economist (Windhoek)

Namibia: Memorandum of Understanding to Pave Way for Acid Plant Construction

Dundee Precious Metals has announced plans to proceed with two significant capital projects at Namibia Custom Smelter in Tsumeb as well as commercial developments related to a new concentrate tolling arrangement and a memorandum of understanding for the sale of acid.

In addition, construction relating to Project 2012, a fugitive dust management improvement project aimed at improving off-gas capture and workplace conditions to better comply with national standards, is substantially complete with commissioning expected to take place this month.

Jonathan Goodman, president and CEO of DPM, said these important capital initiatives and commercial arrangements not only illustrate our commitment to the health and safety of the Namibian people, they also reposition NCS as a sustainable and profitable enterprise that will benefit all our stakeholders."

As part of its long-term strategy to bring the smelter to internationally accepted environmental standards, and consistent with the directives issued by the Namibian government earlier last year, DPM entered into a definitive turnkey fixed-price Engineering, Procurement and Construction Management (EPCM) contract with Outotec, a Finnish engineering firm for the construction and installation of a sulphuric acid plant at the Tsumeb Smelter, which is expected to be completed in the third quarter of 2014.

According a statement issued by Dundee Precious Metals, after careful evaluation, the acid plant was determined to be the best solution to capture and process the off-gases from the copper smelter, and, in turn, reduce emissions and considerably improve working and living conditions around the site.

The acid produced from this plant is expected to be sold to domestic and international markets primarily through long-term, off-take agreements.

Following completion of detailed engineering and cost estimates by Outotec, the capital cost on a fixed price basis is expected to be approximately US$204 million.

Based on expected annual smelter production capacity, the plant will produce between 230,000 and 320,000 tons of sulphuric acid. In conjunction with Protea Chemicals, Namibia Custom Smelters has entered into a Memorandum of Understanding with Rio Tinto Rössing in connection with a long-term purchase arrangement for the acid produced by the Smelter.

Rössing currently imports sulphuric acid for processing at its Rössing uranium mine near Arandis. The acid is expected to be shipped by rail directly to Rössing from the Smelter. DPM and Rössing are currently negotiating the commercial details and expect to finalise definitive documentation during the first quarter of 2013.

Other projects in the pipeline for the Smelter includes the installment of an electric holding furnace to temporarily store and upgrade copper matte until it can be transferred to a converter furnace for final processing.

Namibia Custom Smelter has also entered into an agreement with Louis Dreyfus Commodities Metals Suisse, the exclusive concentrate supplier and blister off-taker, on smelting terms for an additional 200,000 tonnes of third-party copper concentrate to be supplied by LDC from 2014 to 2016.

Louis Dreyfus Commodities Metals Suisse has also agreed to rollback a portion of the increased pricing by amending the pricing on the final 100,000 tonnes under the existing arrangements forecast to be processed during 2013 and the first half of 2014 to enable NCS to begin realizing a portion of the benefits from this increased pricing sooner.

These projects are expected to be financed primarily from DPM's current cash position and free cash flow generation and supplemented, if necessary, with a US$150 million committed revolving credit facility expected to be in place in early January 2013.

With the new tolling arrangements in place, the blended revenue per ton from Chelopech and third-party concentrate is expected to increase to approximately $550 per tonne by the end of 2013, compared to $360 per ton in 2011, with further increases over the balance of the contracted volumes.

DPM is a Canada-based, international gold mining company engaged in the acquisition, exploration, development, mining and processing of precious metals.

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