Global mining giant Barrick Gold’s Lumwana copper mine, in Zambia, performed in line with expectations during the three months ended June 30, having contributed 63-million pounds in production at C1 cash costs of $2.01/lb, the company notes in its 2015 second quarter report.

“Further, [full year] production is anticipated to be 250-million to 270-million pounds [of copper] at C1 cash costs of $1.90/lb to $2.15/lb,” the company states.

The Lumwana openpit mine, in Zambia, is located in one of the most prospective copper regions in the world. The Lumwana ore is predominantly sulphide and is treated through a conventional sulphide flotation plant, producing copper concentrate for smelting, according to Barrick Gold.

Barrick Gold reports that segment earnings before interest and tax for Lumwana for the three months and six months ended June 30 were 45% and 29% higher respectively, compared with the prior corresponding periods.

The company attributes these increases to higher 2015 sales volumes, noting that 2014 production was impacted on by the mill shutdown that occurred in the second quarter of 2014, owing to the partial collapse of the terminal end of the main conveyor.

“[The 2015 sales increase, was, however,] partially offset by a lower realised copper price,” the company states, noting that the costs of sales for the three-month and six-month periods ended June 30 were also 86% and 25% higher respectively, compared to the prior corresponding periods.

Barrick Gold primarily attributes these increases to higher mining costs as a result of more ore tonnes mined, which was also partially offset by lower depreciation expenses resulting from the impairment charge taken in the fourth quarter of 2014.

Further, also owing to the 2014 conveyor collapse, combined with “better operating conditions in 2015 resulting from less rainfall”, the mine’s copper production for the three-month and six-month periods ended June 30 jumped 385% and 105% year-on-year respectively.

Meanwhile, for the three-month and six-month periods ended June 30, 2015, C1 cash costs were 19% and 24% lower respectively, compared with the same previous year periods.

These decreases were primarily a result of the impact of higher sales volumes on unit production costs and a continued positive trend in mining and processing efficiency, resulting in a lower unit cost.

Further, C3 fully allocated costs were $0.48/lb and $0.64/lb lower during the three months and six months ended June 30 respectively, compared with the same prior year periods, reflecting the impact of lower C1 cash costs and lower depreciation as a result of the impairment taken in the fourth quarter of 2014, the company states.

Barrick Gold notes that this was partially offset by a higher royalty rate of 20%, which was effective in the first six months of 2015, compared with the 6% royalty rate that was in force during the first half of 2014.

However, in April, the Zambian government announced amendments to the country’s mining tax regime that would replace the recently adopted 20% gross royalty on openpit mines with a 9% royalty, along with the reintroduction of a 30% corporate income tax and a 15% variable profits tax. The legislation was passed in late July.

Moreover, capital expenditures for the three-month and six-month periods ended June 30, 2015, decreased by 51% and 53% respectively.

The decreases were primarily as a result of lower capitalised stripping costs combined with the deferral of mine site sustaining expenditure in anticipation of the suspension of operations, the company states.

Further, Barrick Gold is also working with the industry and State-owned power authority Zesco to develop an optimal load-shedding programme to reduce the impacts to production, following Zesco’s announcement of a power reduction of 30% in July.

The reduction in power generation was necessitated by the low water levels in Zesco’s reservoirs as a result of the poor rainfall experienced during the recent rainy season.

Downgraded
Meanwhile, risk management firm Moody’s Investors Service last month downgraded the senior unsecured ratings of Barrick Gold and all guaranteed rated subsidiaries to Baa3 from Baa2, Mining Weekly reported.

The rating Baa3, the lowest rating under Moody's long-term ‘investment grade’ corporate obligation rating means that Barrick’s obligations are subject to moderate credit risk. Barrick’s large-scale, diverse and low-cost gold assets, sizeable copper operations, favourable geopolitical risks and “excellent” liquidity underpin this rating.

The risk management firm expects Barrick to achieve its debt reduction target of $3-billion by the end of 2015 and continue to take aggressive action to further reduce its costs and capital requirements in response to the current, lower gold price environment.