Antamina opening highlight of 2001

Vancouver — Despite the lacklustre performance of commodity prices and a weakening of the global economy, the mining sector put several mines into production and managed to expand some current operations. The scales were balanced, however, in that various other operations closed shop as a result of financial pressures and ore depletion.

The high-profile Antamina project in Peru reached commercial production in early October. The huge copper-zinc mine was completed four months ahead of schedule and slightly under budget. At a capital cost of US$2.3 billion, including acquisition, Antamina is one of the largest greenfield mines ever built. Compania Minera Antamina is the operator, with ownership shared among Noranda (NRD-T) and BHP Billiton (BHP-N), each with 33.75%, Teck Cominco (TEK-T), with 22.5%, and Tokyo-based Mitsubishi, with 10%.

Antamina is expected to generate US$700 million in revenue during its first year of operation, 30% less than originally forecast.

At a daily design capacity of 70,000 tonnes of ore, Antamina is scheduled to average, on an annual basis, 306,000 tonnes copper (contained in 1 million tonnes of copper concentrate) and 283,000 tonnes zinc (contained in 490,000 tonnes of zinc concentrate). These figures apply to the first 10 years of a mine life that is expected to exceed 22 years. Cash costs are to average US29 per lb. copper (net of byproduct credits) in the first 10 years and US35 per lb. over the entire life of the mine.

Bema Gold‘s (BGO-T) 79%-owned Julietta mine, in the Magadan region of far-eastern Russia, began producing commercially in early December. In its first year. the mine is projected to crank out 400 tonnes of ore per day, from which will be extracted 140,000 oz. gold and 2.4 million oz. silver. Cash operating costs per ounce of gold (net of silver credits) are in the area of US$25 per oz., whereas total cash costs per ounce are estimated at US$70. Over the first four years, the mine is expected to produce an average of 100,000 oz. gold and 1.7 million oz. silver annually.

Closer to home, North American Tungsten (NTC-C) has been working to restart its wholly owned CanTung mine, in the Northwest Territories, by year-end.

The junior recently raised $6.5 million in financing and entered into agreements with two leading producers of tungsten products: Pennsylvania-based Osram Sylvania Products (a subsidiary of Siemens of Germany) and Stockholm-based Sandvik. In addition to a $6.5-million cash advance, the two tungsten consumers have agreed to buy, over three years, all of North American Tungsten’s concentrate production from CanTung. This output is estimated to be 900,000 tonnes. CanTung’s reserves are pegged at 630,000 tonnes grading 1.82% tungsten trioxide.

AngloGold (AU-N) and Iamgold (IMG-T) each hold a 40% interest in Yatela, an open-pit, heap-leach mine in western Mali. The mine poured its first bar in early May and began commercial production two months later. Reserves stand at 13.4 million tonnes grading 3.7 grams gold per tonne. There are measured and indicated resources of 24.6 million tonnes grading 2.7 grams per tonne and inferred resources of 12.3 million tonnes grading 1 gram. AngloGold expects to produce 136,000 oz. gold in 2001 and 1.4 million oz. over the mine’s 5.5-year life.

Atacama Minerals (AAM-V) has kicked off commercial production at its Aguas Blancas iodine project in northern Chile. Mine construction began in February and the mine started up in April. The first-stage production rate is targeted at 720 tonnes iodine per year. Minable reserves are pegged at 44.6 million tonnes grading 512 grams iodine per tonne, 2.87% nitrate and 22% sodium sulphate.

IBI (YIB-V) made its presence known on the Canadian Venture Exchange through high-volume trading. The junior mining and investment company commenced production on its wholly owned vermiculite mine in Uganda in July. Vermiculite is a low-cost industrial mineral that resembles mica; it is used in hydroponics for growing plants, as insulation, as a component of cement/concrete, in brake-liners and for making boards. It is even used as a carrier for vitamins. The production process of the raw vermiculite ore involves dry stockpiling of raw ore, as well as milling, drying and cleaning of foreign materials and grit, followed by sorting and grading, laboratory process control, and dry storage of finished inventory of processed vermiculite. Proven reserves of recoverable high-quality vermiculite exceed 5 million tonnes, which represents more than 100 years of supply at planned production rates.

In September, Pan American Silver (PAA-T) began reconstructing the past-producing Huaron mine, 300 km northeast of Lima, Peru. The company holds a 71.8% stake in the mine. Mill production began in April, with annual output projected at 4.3 million oz. silver and 18,000 tonnes zinc. Cash and total production costs (net of byproduct credits) are estimated at US$3.46 and US$3.90 per oz. silver, respectively.

Proven and probable reserves total 6.2 million tonnes grading 252 grams silver per tonne, plus 3.59% zinc, 2.44% lead and 0.43% copper. Total resources are 13 million tonnes grading 239 grams silver, 4% zinc, 2.2% lead and 0.5% copper. The resource is based on a silver price of US$5 per oz. and a zinc price of US50 per lb.

In addition, the company initiated limited silver production at its wholly owned La Colorada mine in Mexico. Ore is being sourced from surface stockpiles mined during exploration activities from 1998 to 2000. Per month, about 3,500 tonnes of ore will be processed at the existing flotation mill, yielding silver-lead concentrates that will be treated at the Torreon smelter 300 km north of the mine. Monthly output is pegged at 45,000 oz. silver.

Pan American has signed a 2-year contract allowing a Bolivian company to extract, at its cost, up to 250 tonnes per day from the San Vicente silver mine in that country’s southern region. Pan American can earn a 100% working interest in San Vicente, which will mine high-grade ore for processing at an existing nearby facility to produce 1 million oz. silver per year. The junior will earn money from the operation through a gross revenue royalty.

Several companies expanded current operations in 2001, including

SouthernEra Resources (SUF-T), which kicked off diamond production at its newly commissioned no. 4 level at the Klipspringer mine in South Africa, six months ahead of schedule. Full production should total 186,000 carats per year, or about 18% above feasibility estimates. The mine is part of a joint venture with De Beers, now a subsidiary of Anglo American (AAUK-Q) and Steppon Investments (a De Beers-associated black empowerment group).

Placer Dome (PDG-T) expanded the Granny Smith gold mine in Australia. At last report, the mine’s Wallaby deposit was scheduled to begin processing material during fourth quarter.

The 60%-owned Granny Smith operation produced 161,677 oz. during the first nine months of the year, 28% less than in the comparable period of 2000. Cash and total costs for the period amounted to US$192 and US$203 per oz., respectively.

Agnico-Eagle Mines (AGE-T) opened its Penna shaft at the newly expanded LaRonde mine in Rouyn-Noranda, Que. The new shaft — the third built at LaRonde — was excavated to a total length of 2,250 metres, making it the deepest single-lift shaft in North America.

The shaft was sunk after new reserves were found more than half a mile from the existing shafts and up to 2.9 km below surface. Mine expansion then began in earnest, at a capital cost of $320 million, financed by bank loans and equity. Of this total, $105 million was used to modify the concentrator.

At the end of 2000, LaRonde’s proven and probable reserves stood at 30.5 million tonnes grading 3.4 grams gold and 80 grams silver per ton, plus 0.32% copper and
4.4% zinc. When combined with additional resources of 23 million tonnes, LaRonde’s global reserves and resources total 53.5 million tonnes of 4.5 grams gold, 58 grams silver, 0.5% copper and 2.68% zinc. Known mineralization extends to almost 3 km below surface and remains open in all directions.

After a US$353-million expansion, BHP-Billiton mined its first ferronickel from the Cerro Matoso nickel laterite operation near Montelibano in northern Columbia. An open-pit mine, Cerro Matoso has more than 40 million tonnes of ore grading 2.4% nickel. The expansion will increase annual production to 55,000 from 29,000 tonnes, making Cerro Matoso the largest ferronickel producer in the world.

Barrick Gold (ABX-T) kicked off production at the 5-million-oz. Rodeo deposit of the Meikle mine in Nevada. This portion of the Goldstrike property has come a long way since the first underground deposit was discovered in 1989. Rodeo is expected to contribute 66,000 oz. to the mine’s total production during Barrick’s fourth quarter.

Closures

This year, a couple of historic producers were retired from active service: the Sullivan mine in British Columbia and the Homestake mine in South Dakota.

Sullivan, owned by Teck Cominco, shut its doors in early November. The venerable operation got its start more than a century ago, in 1892, when Patrick Sullivan and three partners, John Cleaver, E.C. Smith and W.C. Burchett, were prospecting in the East Kootenay region.

Production began in 1909, and the mine became even more profitable when, in 1916, Cominco developed the technique necessary to separate lead and zinc ores in the milling process. Since that time, the mine has produced ore containing some 17 million tonnes zinc and lead metal and more than 285 million oz. silver for a total value, to the British Columbia economy, of more than $20 billion (in today’s prices).

The 9 million tonnes of lead produced by Sullivan from 1909 to 1999 are enough to produce 500 million lead-acid batteries for automobiles, which is equivalent to five years of North American production. The mine also produced enough zinc — 8 million tonnes — to supply the zinc content in 160 million cars.

Homestake’s namesake mine was decommissioned this year after producing nearly 40 million oz. gold. The mine finally shut its doors after completing 125 years of continuous operation.

The Golden Bear mine in northwestern British Columbia was shut down this year as a result of depleted reserves. Owner Wheaton River Minerals (WRM-T) says the leach pads released 33,000 oz. in 2001 at a cash operating cost of less than US$200 per oz. Reclamation is under way.

Financial troubles brought on by low copper and gold prices forced Imperial Metals (IPM-T) to obtain bankruptcy protection by the Supreme Court of British Columbia.

The producer is now attempting to secure financing and mend its balance sheet. Under a reorganization plan, Imperial proposes to split into two companies. Imperial would retain all of the company’s oil and natural gas and investment interests, whereas a newly created company, held by Imperial shareholders, would take over the mining assets.

In June, Imperial suspended operations at the Mount Polley copper-gold mine in British Columbia, less than a year after taking over sole ownership from Japan-based Sumitomo in an $11.5-million deal. The average grade for the site is 0.35% copper and 0.53 gram gold per tonne.

Viceroy Resources (VOY-T) took a $30.6-million writedown on its Brewery Creek mine in the Yukon. The operation produced 5,668 oz. gold during the second quarter at a cash operating cost of US$230 per oz. Heap leaching is expected to continue until year-end, and seasonal mining will not resume unless the price of gold increases. In addition, closure and reclamation activities are under way at the Castle Mountain mine, a joint venture owned 25% by MK Gold (MKAU-O) and 75% by Viceroy.

Farther afield, Placer Dome wrapped up production at its 80%-owned Misima mine in Papua New Guinea in late May. A month later, the Kidston mine in Australia met with the same fate.

Production from Misima will be sourced from a low-grade stockpile, and stockpile milling should continue through to 2004.

Echo Bay Mines (ECO-T) completed open-pit mining at the McCoy-Cove gold-silver mine last year while underground mining operations ceased during the second quarter at the Cove South Deep. Reclamation is under way, and re-contouring waste dumps will continue for the next two years.

Newmont Mining (NEM-N) intends to close its nearly depleted Minahasa gold operation in Indonesia. The open-pit mine is on the eastern tip of Sulawesi island in North Sulawesi province and, since 1996, has produced more than 1.3 million oz. gold. On an annual basis, output amounted to an average of 300,000 oz. gold at a cash operation cost of US$120-150 per oz. Newmont holds an 80% interest in Minahasa through its subsidiary, P.T. Newmont Minahasa Raya. Lower-grade stockpiles and rinsing of heap-leach pads will ensure gold production for about another year, though the mine is slated to be completely closed by 2003.