TWO DECADES ON A ROLLERCOASTER

As one of the lowest-grade producers in North America for the past 20 years, the Gibraltar open-pit copper mine has constantly striven to control, and reduce when possible, operating costs. At the outset and given the project’s low grade, a three-year tax holiday on new mines was a major factor in Gibraltar’s production decision.

In fact, there were concerns the tax holiday provision might be axed. Recalls Mac Gibbs, Gibraltar’s first mine manager: “We wanted to get the mine going early because we were fearful we could lose the tax holiday.” Their concerns were well-founded. Ottawa scrapped it in 1974.

The key to successful mine development, says Gibbs, who oversaw the development of Hemlo’s Williams mine, is to draw up a realistic feasibility study, one that has substantial input from operations people, “because they, in the end, have to live with it. You do a feasibility to justify a mine, not just to satisfy financial people.”

Brought into production in 1972 at a capital cost of about $63.9 million, the Gibraltar development was well-timed in another important way. A subsequent jump in copper prices to about US80 in 1973, up from the US49 level in 1971 and 1972, helped pay back the capital cost in about 19 months.

A further increase in the average price of copper to the US93 level in 1974 provided the company’s balance sheet with a solid foundation for some tough times in the mid-1970s when copper prices slipped back to the US60 level and the British Columbia government imposed its onerous mineral royalties tax.

Low copper prices through to 1978, rising energy prices, and a drop in the average copper grade to 0.38% from 0.46% in its first two years of operation prompted the company to cut costs.

In 1978, Gibraltar ordered a new shovel and five, new 170-ton haul trucks and bought a used conveyor system. A $9.3-million in-pit crusher and conveyor system for the East pit was completed in 1980.

The mine manager at the time, Jim Wright, recalled in a recent interview with The Northern Miner Magazine that during the early years of his tenure development stripping was a priority. He also oversaw the installation of a molybdenum circuit.

The moly helped because Gibraltar was probably the lowest grade copper operation in North America. “I used to tell the fellas, I’m not sure we’re doing everything right, but we are doing something right to stay in business’.”

With an eight-month labor dispute settled in February, 1979, Gibraltar, an 80-million-lb.-per-year producer, capitalized on another upswing in the price of copper.

Living up to its fickle nature, the copper market again took a turn for the worse in 1981 and further weakness pushed the copper price to the US67 level in 1982, prompting the company to suspend mining operations in June and reduce its workforce by 50%. At the end of 1982, Gibraltar employed 351 people, down from 649 people at the end of 1981.

But the mill operated in 1982. It processed low-grade stockpiles while the company revised its operating plans in an effort to decrease mining costs by lowering the average strip ratio. As a result of the revisions, Gibraltar slashed the mining rate by half in 1983 to 65,000 tons per day.

Copper prices remained at the US60 level to the end of 1986, prompting a search for further cost savings as well as additional revenue.

“It was pretty bloody tough,” says Jeff Thompson, mine manager between 1981 and 1988. Innovation was the key. Old scrap bars were cut to make 2-inch rods for the ball mill. Engine and transmission rebuilds, formerly contracted out, were taken in-house.

Gibraltar also replaced a number of bulk cleaner cells with flotation columns in late 1985, boosting concentrate grade the following year to 30% from 28%. Savings in shipping, smelting and maintenance costs were estimated at about $1 million per year.

A second significant initiative in 1985 was the decision to build a solvent extraction electrowinning plant. The acid leach of low-grade oxidized dumps produced high-purity cathode copper. The cathode copper plant was a first in Canada. The $12.6-million plant came on-stream in October, 1986. “We spent about $13 million to build the plant and it paid itself off in 13 months,” Thompson says.

Cathode copper production peaked the following year at more than 11.1 million lb., generating an additional $8.6 million in revenue. Production from the dumps has declined slowly since then to about 7.3 million lb. in 1991. Today, the three operating dumps contain roughly 79.5 million pounds of leachable copper, or about 12 years of production.

Gibraltar’s innovative dump leaching proved well-timed. Copper prices began a sustained, four-year rally to peak at US$1.21 in 1990. Shareholders enjoyed the ride, pocketing, in sum, $4.20 per share in dividends over the four-year period. Despite the healthy dividend payments, Gibraltar finished 1990 with more than $33 million in working capital and no long-term debt.

Art Brown, Placer Dome’s vice-president, Canadian operations, was mine manager from 1988 to 1991, a period of solid copper prices. He had the happy chore of “putting some fat back on the bone.” He adds: “I get lucky sometimes and hit the high spots.”

Today, the company is developing the third stage of its Gibraltar East pit at an estimated cost of $22.8 million. Along with the development, Gibraltar bought a new P&H 2800 40-cu.-yd. shovel and six new Unit Rig MT4000 240-ton haul trucks.

Also on the rehabilitation list is the old conveyor and in-pit crusher system, a late-1970’s installation in Gibraltar East. The $3-million rehabilitation should be complete by the end of September. Reserves in Gibraltar East, at 67.3 million tons grading 0.293% copper and 0.0072% molybdenum, will provide millfeed to 1997.

Overall cash production costs, including smelting and transport, totalled about US81 per pound in the first half of 1992, compared with US91 in the first half of 1991. The drop primarily resulted from an increase in average grade to 0.34% copper from 0.31% copper, as well as a jump in average daily throughput to 38,300 tons from 33,600 tons.

However, smelting costs have become a significant factor.