Rio Algom unveils expansion plans in Chile

In keeping with its plan to become one of the world’s largest copper producers, Rio Algom (ROM-T) is proceeding with a second phase of expansion program at its Cerro Colorado mine in northern Chile.

Annual production capacity will be boosted to 220 million lb. of refined copper from the current capacity of 130 million lb. The expansion represents a 250% increase from original design specifications of 88 million lb.

As a result of the expansion, average production costs will be reduced to US48 cents per lb. from current costs of US53 cents per lb.

“The expansion represents an important step in Rio’s copper growth profile,” says company spokesman Forbes West. Previously, Rio had been known as a uranium producer with some small amounts of copper production. Now it is closely focused on copper as its principal metal.

“Rio is aiming to become one of the top TSE copper producers,” adds West. “It already has the highest leverage per lb. — that is, a 10 cents change in the price of copper affects [Rio’s] earnings by 34 cents.”

Although current recovery rates are below the predicted 82% level, the company anticipates reaching its goal within the first half of 1997.

The total cost of the expansion program is pegged at US$198 million, which excludes interest and working capital. As a result of the expansion, current reserves of 188 million tonnes grading 1.08% copper are expected to provide a mine life of 20 years, compared with the original estimate of 30 years.

Rio Algom expects to produce about 250 million lb. of copper from its copper projects. In 1997, the company expects an additional 100 million lb. from the Alumbrera project, and in 1998, the Cerro expansion will provide another 90 million lb. By late 1998, the company expects to be producing about 450 million lb. copper.

Meanwhile, the company continues to carry out a 60,000-metre drill program on its recently acquired Antamina project. The program is part of a feasibility study being carried out with partner Inmet Mining (IMN-T). Rio plans to spend US$30 million on the study, which, if successful, could add another 220 million lb. copper to its annual production by 2000 or 2001.

The Antamina deposit hosts proven and probable reserves of about 128.6 million tonnes grading 1.61% copper, 1.33% zinc and 0.04% molybdenum, as well as 17.7 grams silver per tonne. The project is envisaged as a low-cost, open-pit mine.