The safety culture and commitment at Ruashi is showing pleasing improvements. All of the initiatives previously reported on such as hazard identification and risk assessments and the implementation of the safe production rules are becoming an entrenched way of working. The introduction of a new integrated SHEC management system for reporting and control has augmented the safety effort. Total lost-time injuries for the six months ended 31 December 2010 (“current period”), were zero, compared to six in the six months to June 2010 (“June 2010”). The lost-time injury-frequency rate for the 12 months to December 2010 (lost-time injuries expressed as a proportion of man-hours worked) was the same as the rate for the year to June 2009 when the mine was in construction and ramp-up. This is a pleasing result as the level of complexity has increased substantially since then.

Milling volumes increased by one percent for the current period when compared to June 2010. Both periods were constrained because of the transformer and rectifier issues experienced at Ruashi. These issues have been extensively reported on during the relevant periods in separate market releases. Problems with the rectifier and transformers caused by external power surges and substandard transformer design and manufacture, eventually led to a decision to redesign and replace all of the transformers. This is in progress and production levels have since stabilised.

The copper and cobalt headgrades remained substantially constant for the previous six-month period. The confidence levels in the geological model continued to improve through the period due to continued infill drilling and grade control measures. The grades experienced in the current period are expected to persist into the next financial year.

Copper recoveries improved to 84 percent for the current period and are a function of both the acid solubility of the plant feed material and operating efficiencies. The improvements to the geological model allow Ruashi to control and predict its feed sources better, while operating efficiencies are subject to a process of continuous improvement. In addition to the continuous improvement efforts, the reduced throughput due to the transformer and rectifier problems allowed for a greater residence time in the leach section as well as better operational control, both of which had a positive influence on recoveries. Cobalt recoveries improved by 20 percent for the current period to 65 percent. Cobalt recoveries also benefited as per the copper discussion above, however, cobalt recoveries are very sensitive to feed grade. The higher grade cobalt fed to the plant therefore also contributed to the improved cobalt recoveries. Cobalt recovery improvements will be more modest off the current base.

Notwithstanding the production pressures caused by the rectifier and transformer issues, copper and cobalt production improved by eight percent and 28 percent respectively over the two halves of 2010.

On-mine costs per ton milled decreased by six percent when comparing the current period to June 2010. However, there was an offset due to less stripping of pit 1 and pit 2 which decreased the stripping ratio from 5,5 to 3,5. Stripping costs in the new pit 3 are being capitalised as mine development costs in line with the Group Accounting Policies. This reduced cash operating costs. Copper and cobalt realisation costs increased by five percent and 28 percent respectively when comparing June 2010 to the current period. These costs were both impacted by an incremental US$60/t export charge effective February 2010. Cobalt realisation charges were also significantly higher in the current period due to concentrate moisture levels rising to, as high as, 70%. This was due to the change to a magnesium oxide-based process as well as problems experienced in commissioning the cobalt drying circuit. Extensive modifications to the cobalt drying circuit are being planned. The mode of export was also changed towards the end of the year as it was found that transporting on the rail system was substantially more expensive than by road.

Total cash costs of copper sold net of cobalt credits improved by 14 percent over the first half of the year. The increased cobalt sales contributed to this cost indicator falling to US$2 228 per ton of copper in the current period. The overall cash mining profit of US$73,6 million was a substantial increase of 179 percent over June 2010. Capital expenditure amounted to US$24 million in the current period. The overburden stripping at pit 3 is being capitalised. These stripping operations will ramp up in the F2011 year and expenditure is expected to reach US$23 million for the 12-month period. The completion of the acid plant is proceeding according to plan and accounted for US$6,8 million in the current period. Capital spend in the coming year includes US$6 million to complete the acid plant, US$4 million on exploration drilling and US$20 million in ongoing capital expenditure.

Ruashi Mine will be stabilising production levels at approximately 3 000 tons of copper per month for the coming year. Production efficiencies and strategic initiatives should have the effect of somewhat offsetting certain cost increases such as power, diesel, taxes and wages. Brownfields drilling will improve the oxide and sulphide resource base of Ruashi and should continue to extend the life of the mine as well as increase ore reserve flexibility.

Key results

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Management
G Dempsey,
Managing Director
J Mukinkwe,
Deputy Managing Director
R Proulx,
Financial Director
E Mounsey,
Chief Operations Officer
J Lubbe,
Finance Executive

Directors
C Needham, Chairman
G Dempsey
R Proulx
D Castle
Dr M Mutamba
C Umba K Kasakoto