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Environmental opponents to the Polish KGHM Ajax Mine in Canada question economic long term viability

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The Kamloops Area Preservation Association, with the group Mining Watch, added an economic component to their case against the mine, arguing that company estimates for long-term prices of its key products are too high and costs too low, which could affect its long-term viability.

Environmental opponents to the KGHM Ajax Mining Inc. proposal for an open pit mine near Kamloops are questioning whether the project will wind up being a marginal operation subject to early closure, according to a recent report.

The Kamloops Area Preservation Association, with the group Mining Watch, added an economic component to their case against the mine, arguing that company estimates for long-term prices of its key products are too high and costs too low, which could affect its long-term viability.

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Those groups made their case in a report, characterized as an economic risk analysis, which was in their filings to the B.C. environmental assessment process.

“Copper is in trouble and this (mine proposal) isn’t different from others,” said Joan Kuyek, the analyst who prepared the report, who is the founding national co-ordinator for Mining Watch Canada.

For its part, the company dismissed the assessment by KAPA and Mining Watch, pointing out that the proposed mine would cost more than $1-billion to build and “it would be foolish to move forward with such an investment without solid assurance and confidence in the project’s economic prospects.”

KGHM Ajax, a consortium of Poland-based KGHM International and Vancouver firm Abacus Mining & Exploration Corp., is proposing a $1.3-billion open-pit copper mine, which would produce 140 million pounds of copper and 130,000 ounces of gold annually over its mine life, stated as 18 years in a Feb. 19 update to its feasibility study.

The company’s application to the B.C. Environmental Assessment Office cites a 23-year mine life. The discrepancy between the two documents is one concern of the opponents, but Kuyek said the feasibility update’s projection for copper prices was “the big flag” that caught their attention.

The world copper price remain at low levels (it closed at US$2.17 per pound in trading Monday on the New York Mercantile Exchange), with analysts forecasting that it will be the end of the decade before there is any meaningful rebound.

So Kuyek believes the forecast in KGHM Ajax’s feasibility update for copper to average US$2.54 this year, $2.90 in 2017 and $3.21 over the period to 2024 is overly optimistic.

Kuyek used the World Bank’s most recent forecast — which says that copper will average the equivalent of US$2.27 per pound this year and $2.35 in 2017, and not exceed $3 until about 2024 — to question how the cost of copper would impact the project’s viability.

She said the updated feasibility was also missing a more detailed revenue forecast and a model for how fluctuations in currency exchange rates would impact its financial performance.

No one from KGHM Ajax was made available for an interview. However, in an emailed statement, a company spokesman said he wasn’t surprised that the mine’s opponents, working with an NGO he characterized as anti-mining, would come up with such a result.

“They started with the conclusion and worked backward,” Yves Lacasse, KGHM Ajax’s manager of external affairs, said in the statement.

Source: Vancouversun

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