Special to The Northern Miner
Construction at the Antamina project in northwestern Peru has moved into high gear since its Canadian owners secured more than US$1.3 billion in debt financing to develop what will become one of the world’s largest base metal producers.
Partners
The shallow deposit contains proven and probable reserves of 494 million tonnes grading 1.3% copper, 1% zinc and 0.03% molybdenum, plus 12 grams silver per tonne.
“We’re not counting on a significant rebound in copper prices this year or next year or even the year after that,” says Rio Algom President Pat James. “But by 2002, when Antamina reaches commercial production, we believe prices will be much closer to historic norms — about ninety-five cents [U.S.] per pound, by our reckoning. Moreover, we are fundamentally comfortable with copper’s long-term future.”
Copper is currently trading in the US70-to-80 cents range, while zinc is changing hands at closer to US50 cents. James’s optimism is based on copper demand, which has grown by an average annual rate 3% over the past 20 years in the Western World. If this growth rate continues, as is forecast, the world will need more than a new Antamina every year.
The mine financing consists of US$680 million provided by import and export credit agencies from Japan, Germany, Canada and Finland and another US$640 million from international banking syndicates. It took almost two years of negotiations to convince the banks that Antamina would be a good fit for their portfolios.
The deals also cleared the way for Japan’s Mitsubishi to acquire a 10% interest in Compania Minera Antamina, the company created to develop the project, for about US$54 million.
Ownership of Minera Antamina is now split among Noranda (33.75%), Rio Algom (33.75%), Teck (22.5%) and Mitsubishi (10%).
As this issue went to press, the key personnel that make up the advisory committee for Antamina had convened in Peru and were unavailable for comment. The committee, chaired this year by Noranda’s senior vice-president of project development, Lance Tigert, consists of two representatives each from Noranda, Rio Algom and Teck plus one member from Mitsubishi.
The committee, which normally meets in San Francisco or Miami, chose to meet at the mine just as construction was beginning to accelerate.
“It’s all systems go,” says Corey Copeland, vice-president of corporate affairs for Rio Algom. “We now have more than 4,500 people on-site.”
While the number of personnel required for the construction phase might seem extreme, Antamina is a project full of extremes. The deposit sits high in the remote mountains of Peru at an elevation of 4,300 metres. It is one of the largest orebodies on the planet in one of the world’s poorest regions. The recent financing, which took place during the bottom of the commodity cycle, was the biggest ever for a greenfield mining project. At US$2.3 billion, projected capital expenditures are also in the stratosphere.
The current construction phase includes building two access roads, erecting housing and a permanent construction camp, excavating a site for the concentrator, digging a tunnel to carry ore from the pit to concentrator site and installing a power transmission line.
In the meantime, the partners are addressing some of the challenges that go hand-in-hand with building a huge, open-pit polymetallic mine in an elevated, remote locale.
The main technical challenge is the complexity of the ore in the skarn-hosted deposit. The orebody consists of four separate metals, including copper, zinc molybdenum and silver, as well large quantities of bismuth, a semi-metallic element.
To address this dilemma, Minera Antamina has designed separate processing steams for different ore types and a blending process that will dilute the bismuth content to acceptable levels. Although the mine will have only one pipeline to carry concentrate to the coast, copper and zinc concentrates will have separate slurry runs.
“Noranda has extensive metallurgical expertise,” says Copeland. “Given the complexity of the concentrates and ore types, that’s a real advantage.”
An entirely different but equally daunting challenge is managing the social impact of building one the world’s most expensive mines in one of the world’s poorest regions.
To overcome this hurdle, Minera Antamina has teamed with non-governmental organizations to establish programs that will ensure sustainable development. It has committed about US$1 million to community development over the 3-year construction period and hired a full-time community relations officer.
The development program includes training the local workforce, improving agricultural practices to enhance productivity, developing micro-enterprises such as shoe and glove manufacturing, and improving health and nutrition.
The program also aims to boost local procurement and hiring. For example, Minera Antamina will buy fish from the local trout farm and produce from nearby farmers. At the moment, more than 95% of the 4,500-strong workforce is Peruvian and the mine has hired 85 people from the immediate area in the past couple of months.
“So far, we’ve had good relations with the communities because we worked hard from the outset to bring them into the process and ensure that they were fully informed,” says Copeland. He adds that one of the trickiest parts of the process is managing the community’s expectations of full employment in a region where most of the people are unskilled and many are illiterate.
At 4,300 metres, the workforce is also susceptible to health problems associated with altitude. Copeland say making the most of local workers, who are accustomed to the altitude, limits this problem considerably. For those who do have problems adjusting, a full medical team is available on-site. In addition, Minera Antamina is examining alternatives, such as pumping oxygen into accommodations to improve sleeping conditions and building the base camp at a lower elevation.
The mine’s proximity to Huascaran National Park has raised environmental concerns. The main snag was a proposal in the environmental impact assessment to truck the concentrates to the coast. The company has since decided to build a 300-km pipeline for the concentrates, which will bypass the park.
Antamina is expected to produce 600 million lbs. copper and 360 million lbs. zinc annually for 20 years at an average cash cost of US29 cents per lb. copper in the first 10 years and US35 cents per lb. thereafter.
Minera Antamina has pre-sold 75-80% of the concentrates to smelters in Europe, North America, Korea and Japan, including one owned by Mitsubishi. The smelter contracts cover 12 years of the mine life.
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