Vancouver — Some two months after shipping its first load of concentrate, due to falling metal prices the massive new copper mine at Antamina in north-central Peru has cut its sales forecast for next year.
BHP Billiton (BHP-N) and Noranda (NOR-T) each own 33.75% of Antamina. Teck-Cominco (TEK-T) holds 22.5% and Japanese-based Mitsubishi holds the remaining 10%.
The copper-zinc mine is now slated to generate US$700 million in sales revenue in its first year of operation, down from the projected US$1 billion.
The original estimates were based on US$0.95 per lb. copper and US$0.55 per lb. zinc.
Base metals prices dropped this week as concern mounted that the terrorist attacks on New York’s World Trade Center and the Pentagon could spur a recession.
The prices of copper and zinc recently hit US$0.65 per lb. and US$0.38 per lb., respectively.
Antamina is expected to be one of the largest and lowest-cost copper-zinc producers in the world, with average annual production forecast at 675 million lbs. copper and 625 million lbs. zinc in the first 10 years.
The project is located high in Peru’s Andes Mountains, 400 km north of Lima.
The Antamina mill, designed to process 70,000 tonnes of ore daily, is operating at close to that level already.
The project’s operators are predicting the mine will be in full commercial production by the end of the year — two months earlier than expected.
Built at a cost of US$2.3 billion, Antamina is aiming to slash costs to enable it to face the weakening of its principal products — copper and zinc.
Low metal prices are also prompting Teck-Cominco to take a hard look at the economics of the San Nicolas deposit in Mexico.
A feasibility study is scheduled for completion shortly. With a resource of 75 million tonnes grading 1.4% copper and 2.1% zinc, the project may not arrive at the economic threshold set by the newly merged company.
“We have a large land position in the area and are actively seeking a higher-grade deposit that could push the project over the top,” says David Moore of Teck-Cominco’s newly formed exploration business development department.
Teck holds a 74% interest in the project, along with 29% of partner Western Copper Holdings (WTC-T). It can boost its interest to 81% by funding development costs.
Despite the weak base metal environment, the company is expecting to receive the benefits of the diversification created by the merged companies.
“With the low zinc price, our exposure to coal and gold will help us maintain a strong balance sheet,” says Moore. “The goal of the company is to take Teck’s entrepreneurial skills and mix them with Cominco’s mine-finding abilities to increase shareholder value.”
In a deal that would put $40 million in Teck-Cominco’s coffers, the company has announced its intention to sell its 80% equity stake in Australian-based gold miner PacMin Mining, plus a 12% stake in gold and tantalum producer Sons of Gwalia.
Nonetheless, Moore says Teck-Cominco will continue to look for promising gold projects. “We are a believer in gold,” he says. “But the PacMin deal is a business decision that allows us further diversification through an exposure to an up-and-coming commodity, tantalum.”
Teck-Cominco sees an opportunity to get involved in medium scaled deposits that are too small for the major gold mining companies.
“If you have a 2-to-5 million-oz. deposit, we would like to talk to you,” says Moore.
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