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By Shapi Shacinda

LUSAKA (Reuters) – Zambia’s Luanshya Copper Mine (LCM) has suspended building of the $354 million Mulyashi copper mine while it reviews the copper recovery process, the firm’s chief executive said on Tuesday.

Derek Webbstock told Reuters that the Mulyashi copper project, expected to peak at 60,000 tonnes of A-grade copper output, had been suspended for four months from October this year.

“The Mulyashi project has been suspended until next year because we are reviewing the outcome of the recovery process … the metallurgical process is under review. We would like to have optimum recovery before we can restart the project,” Webbstock said.

Webbstock said LCM would also re-examine the viability of the Mulyashi project in view of falling global metals prices and the credit crunch, which have affected investments in many commodity-driven economies like Zambia.

Webbstock said prices of equipment had changed and the project cost for the Mulyashi mine might also rise.

“In light of the new world (financial) crisis … we will also review the viability of the Mulyashi project by looking at the economics of the project and the cost might then change,” he said.

“It’s a more complex issue now, but we are determined to complete the project,” he added.

LCM, a joint venture of International Mineral Resources (IRM) and Bein Stein Group Resources (BSGR), started to develop the Mulyashi project early this year under broader plans to peak copper output at 96,000 tonnes in the next few years.

Mulyashi was initially projected to start production by February 2009.

Touted as the future of LCM operations, Mulyashi will initially have an annual output of 60,000 tonnes and, together with production at the Baluba and other satellite units, will lift total LCM output to 96,000 tonnes in the long term.

Webbstock also said the Baluba mine, a unit of LCM, would produce 20,000 tonnes of copper this year, down from a January forecast for 24,000 tonnes, after disruptions to production partly caused by poor power supply early this year.

Webbstock, who also doubles as CEO for Chambishi Metals Plc, the country largest cobalt producer, said the Chambishi mine would produce 1,200 tonnes of cobalt in 2008, down from an earlier forecast of 3,200 tonnes.

A critical power shortage in southern Africa, forced Zambia to ration power to copper mines in the first quarter of the year, consequently forcing mining firms to trim production.