Partners proceed with Antamina development

As expected, Rio Algom (ROM-T), Noranda (NOR-T) and Teck (TEK-T) have affirmed that they will develop the US$2.2-billion Antamina copper-zinc project in Peru.

In early September, the partners were asked by the Peruvian government either to announce a go-ahead decision or have the ownership of the project revert to the government.

To gain breathing room, the partners have taken advantage of a provision in the original 1996 contract to obtain a 9-month extension to its deal with the Peruvian government agency Centromin. The partners now have until June 6, 2002, to invest US$2.5 billion in Antamina or pay Centromin 30% of the difference. The extension was sought in recognition of both the evolution in Antamina’s ownership structure over the summer as well as the added difficulty in arranging financing due to low metal prices.

Rio Algom’s vice-president, Corey Copeland, notes that the extension does not necessarily mean there has been a change to the schedule for startup of production, originally slated for September 2001. “We now have more time to spend the money. We may end up coming on-stream sometime between the original deadline and the revised one,” says Copeland. “It just hasn’t been finalized yet.”

Until the spring, the project had been equally owned by Rio Algom and Inmet Mining (IMN-T), but as Antamina’s reserve base swelled during last year’s exploration program, it quickly became apparent that the project was too large for Inmet. The troubled producer sold its stake in May to Noranda and Teck for $70 million plus a 3.33% net-proceeds royalty.

Under a revised ownership structure, Rio Algom and Noranda now own 37.5% of Compania Minera Antamina (CMA), the Peruvian company that owns the Antamina project, with Teck owning the remaining 25%.

Currently at the Antamina

site, work on engineering, pre-stripping and road construction continues. A contract has been let for construction of the pioneer camp, and tendering of all major mining equipment has taken place. As well, an engineering, procurement, construction and management contract is under negotiation with engineering giant Bechtel, which compiled Antamina’s feasibility study, released in March.

Copeland says optimization studies have been ongoing at Antamina since the completion of the feasibility study and that, with Noranda and Teck’s input, the final technical dimensions of the project should be in place by Nov. 1 at the latest.

The partners say project-financing talks with an international consortium of banks and export-credit agencies are well-advanced, as are marketing arrangements, with letters of intent signed or pending for more than 75% of the concentrates. Copeland says the partners’ target for settling the financing question is the spring of 1999.

Situated at a 4,200-metre elevation, about 380 km north of Lima, the Antamina skarn deposit hosts an estimated in-pit resource of 500 million tonnes grading 1.2% copper, 1% zinc and 0.03% molybdenum, plus 12 grams silver per tonne. A further 500 million tonnes of resources exist at similar grades.

The open-pit mine is expected to produce 600 million lbs. copper and 360 million lbs. zinc annually over a 20-year mine life at projected average cash costs of US40 cents per lb. copper net of byproduct credits.

At a planned milling rate of 70,000 tonnes per day, Antamina will rank among the world’s largest producers of copper and zinc concentrate.