A memorandum of understanding signed between international mining company Ivanplats and La Societe Nationale d'Electricite will allow for a feasibility study exploring the possibility of restoring and upgrading the Nzilo 1 hydropower project.
Located on the Democratic Republic of Congo's (DRC) Lualaba River, the Nzilo 1 hydroelectric plant was commissioned in 1958 to provide power to copper mines in the nearby Kolwezi region.
Since then, however, Ivanplats (TSX: IVP) said the plant is only "partly operational" due to the age of its equipment.
According to the memorandum, Ivanplats would finance the refurbishment of Nzilo 1 to its original designed capacity of 111 MW through a repayable loan to La Societe Nationale d'Electricite (SNEL). In exchange, SNEL would grant Ivanplats' mining operations in the Kamoa region priority entitlement to power from the grid.
"As is the case with any major mine development project, a dependable supply of electricity is a key consideration in planning production rates," executive chairman Robert Friedland said.
The arrangement would be a win-win for each party, Ivanplats CEO Lars-Eric Johansson said, given the Congo's commitment to developing large-scale mining projects in the country.
"Anything we can do to assist SNEL to improve the capacity and reliability of the supply of sustainable, cost-effective hydropower to the national grid could potentially allow us to increase the mining and smelting capacity of Kamoa to a level significantly higher than our planned initial mining rate of 7.5 million tonnes a year," Johansson said.
In addition to the Nzailo 1 upgrade, Ivanplat said it is also contemplating rehabilitation of the Mwadingusha and Koni hydropower projects.
The two plants were subject of a recently completed feasibility report prepared by Stucky SA of Switzerland, which said work at the plants could eventually raise their combined output to 125 MW.
Per a 2011 memorandum between the mining company and SNEL, power from the Mwadingusha and Koni projects would be fed into the national grid, and the grid would supply 100 MW to Ivanplat's Kamoa mines after completion of the upgrades.
"The installation of modern power generating equipment at the existing Mwadingusha and Koni dams will secure hydropower for our Kamoa project in a relatively short timeframe, reduce greenhouse gas emissions, help to ensure reliable, affordable energy for future generations and maximize regional economic benefits," Friedland said.
SNEL granted Ivanplats an exclusive right to conduct full rehabilitation of the latter two plants in June 2012 pending completion of the Stucky feasibility report, with the rehabilitation to be a joint effort under an engineer, procurement and construction management contract.
Development work on Mwadingusha and Koni could begin as early as August, with completion scheduled for 2017.