While engineering, procurement and construction continue at the Antamina copper-zinc project in Peru,
Unlike Antamina, which Rio Algom and its partners acquired from the Peruvian government through a bidding process, Spence was a blind discovery made by the company’s exploration team in 1997. And unlike Antamina, which is remote and perched high in the Peruvian Andes, Spence sits at a relatively low elevation of 1,700 metres above sea level, is crossed by the highway linking Antofagasta and Calama, and is near mining infrastructure and sources of labour.
Considerable exploration drilling has taken place at Spence since the initial discovery was made. As part of a prefeasibility study, which began in 1998, a 1,100-metre exploration tunnel was created so that bulk samples could be collected for metallurgical testing. Last year, Rio Algom processed some of the samples at a new pilot plant constructed at its nearby Cerro Colorado copper mine; others were processed at commercial laboratories for flotation testing.
The results of this work prompted the company to examine options beyond the small, heap-leach, solvent extraction-electrowinning (SX-EW) operation originally envisioned. The feasibility study is examining a larger, hybrid option, because traditional milling and flotation techniques will allow a larger portion of the deposit to be processed with increased annual output over the mine life.
This revised option triggered a 33% increase in resources to 400 million tonnes averaging 1% copper, and a 66% increase in potential output to 500 million lbs. of copper per year.
The hybrid option is better able to handle the three types of ore present at Spence, which are:
– an oxide layer lying below about 70 metres of gravel and overburden;
– a middle supergene or eniched sulphide layer; and
– a lower, hypogene or primary sulphide layer.
The oxide layer contains an estimated 50 million tonnes grading 1.3% copper; the middle layer contains about 200 million tonnes averaging 1.2% copper; and the lower layer has about 150 million tonnes grading 0.6% copper.
Current plans call for the oxide ore and part of the enriched sulphides to be leached and treated by the SX-EW process to produce cathode copper. The remainder of the enriched sulphides and the primary sulphide layer will be processed by milling and flotation to produce copper-in-concentrates.
Development and capital costs for the combined operation are estimated at US$1 billion. If all goes as planned, construction could begin in 2002, with startup slated for 2004.
Meanwhile, the US$2.3-billion Antamina project, about 270 km north of Lima, is taking shape, with first production scheduled for the third quarter of 2001. Proven and probable reserves are estimated at 494 million tonnes with a copper-equivalent grade of 1.7% copper.
The project is held by Compania Minera Antamina, which, in turn, is owned 33.75% by Rio Algom, 33.75% by
Rio Algom’s share of Antamina is expected to provide average annual production of 200 million lbs. copper and 120 million lbs. zinc, plus 2.1 million oz. silver and 2 million lbs. molybdenum for more than 20 years.
The deposit will be mined by open-pit methods, with ore treated by conventional grinding and flotation in a mill with a design capacity of 70,000 tonnes per day. The copper and zinc concentrates will be transported by way of a 300-km pipeline to the port of Huarmey.
Cash costs are expected to average less than 30 per lb. in the first 10 years and 35 over the life of the mine (net of byproduct credits). The project is expected to generate a leveraged rate-of-return of at least 15% based on US95-per-lb. copper and US55-per-lb. zinc.
Antamina and Spence will add to Rio Algom’s already significant presence in South America. The company’s current copper operations are anchored by the wholly owned Cerro Colorado mine in northern Chile.
The mine has been expanded twice since production began in 1994. The latest expansion, completed on schedule and on budget in late 1998, boosted annual production to 220 million lbs. of cathode copper. Cash costs reached a new low of US45 per lb.
A total of 43.3 million tonnes averaging 1.31% copper was mined last year at Cerro Colorado, resulting in production of 221 million lbs. copper. The stripping ratio averaged 2.4:1 waste-to-ore, while rcoveries averaged 79%.
The company also owns 25% of the Alumbrera copper-gold mine in northwestern Argentina, which was plagued by various startup problems in its early years. However, the mine finally hit its stride last year when cash operating costs (net of byproduct credits) improved to US31 per lb. Rio Algom’s share of production exceeded the target levels of 100 million lbs. copper and 160,000 oz. gold. The mine contributed $14 million in equity earnings last year, compared with an equity loss of $5 million the previous year.
Despite the improved performance, a review of the mine plan reduced reserves by 172 million tonnes (or 27%), thereby shortening the mine life to about 14 more years. As a result, Rio Algom reduced the carrying value of its investment in Alumbrera by $125 million to $284 million at the end of 1999. Production over the next decade is expected to remain similar to current levels.
Rio Algom’s share price has strengthened in recent weeks in response to rumours that the company is a take-over candidate. While these rumours have been surfacing for some time, analysts have recently named
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