Costs, Schedule Cause Indefinite Suspension of Tulsequah Project
Early in December 2008, Redcorp had appointed Global Project Management Corp. to manage the mine’s development. GPMC subsequently developed a project execution plan that included a review and update of the project’s capital expenditure and schedule estimates. According to Redcorp, GPMC concluded that the estimated costs to complete construction of the mine were significantly higher and the construction period will be longer than estimated by Wardrop Engineering Inc. in 2008, which determined that the all-in preproduction capital cost would be around $332 million. A contingency of $16.9 million was included as part of total costs.
GPMC’s review of the previous estimate extended the completion date of the mine to August 2010 and forecast that total gross capital costs could exceed $500 million. Redcorp said an independent third party review of GPMC’s assessment indicates potential savings could reduce this amount to approximately $430 million on the assumption certain efficiencies can be achieved.
As of December 31, 2008, the company had spent $170.8 million on the project to establish 15 km of roads at the mine site; construct an airstrip and temporary camp infrastructure; and to purchase key long lead-time equipment including diesel power generating plant, rod, regrind and ball mills, river tugs and tow vehicles.
Redcorp said the longer development schedule, increased capital costs, current commodity prices and the limitations on its ability to access sources of additional funding raise serious concerns about the development of the mine without strategic partners. As a result, it is proposing to engage in discussions with its funding partners to evaluate strategic opportunities, including alternative development strategies.