Copper looms large in Rio Algom’s future

Cut loose during a period of depressed metal prices and a stale global economy, producer Rio Algom (TSE) is out to prove it can make it on its own.

A major copper project in Chile should give the Toronto-based company excellent growth in the coming years.

Rio Tinto Zinc (RTZ), the world’s second-largest mining company, divested itself of its 51.4% interest in Rio Algom and in June, 1992, the long-time subsidiary became a free agent.

Rio’s 9-month earnings to the end of September, 1992, were $29.2 million, or 63 cents per share. Twelve-month figures will be released in late February, 1993. Earnings per share for each full year of 1991, 1990 and 1989 were 51 cents, $1.93 and $1.58 respectively.

Uranium has been the mainstay of the company for many years. Although only one mine operated at Elliot Lake, Ont., in 1992, compared with three in 1990, uranium still accounted for a third of total mine revenues.

Potash operations in New Brunswick and Saskatchewan and copper-molybdenum operations at Highland Valley, B.C., contributed about 28% each to revenues. The remaining 10% derived from the Bullmoose coal mine in British Columbia. Rio has a 33.6% interest in Highland Valley Copper and 29.1% in the Bullmoose mine. The potash operations are wholly owned.

Stanleigh is now the sole operating uranium mine at Elliot Lake. Despite the elimination of its uranium revenue by 1996, and the registering of the closure of the East Kemptville, N.S., tin mine in January, 1992, Kelly O’Connor, president of Rio’s exploration arm, is upbeat about the company’s future. “We will concentrate our activities in mineral resources, the field we know best, and copper will loom large in our future,” he said. Cerro Colorado in Chile is the star in that future and construction on the US$290-million copper project is well under way. First production is scheduled for the first quarter of 1994, with copper revenues clicking in as Stanleigh’s uranium production starts its final decline to mine closure in mid-1996.

Cerro’s reserves are 79 million tonnes grading 1.39% copper. A 23-year mine life and an annual production of 40,000 tonnes of electrowon metal is planned. According to O’Connor, condemnation drilling is cutting copper mineralization in numerous locations, inferring that ultimate minable reserves may be considerably larger than the 79 million tonnes currently delineated. Mining will be by open pit at the rate of 10,000 tonnes per day. After 40 million tonnes pre-stripping of earth and weathered rock, an operating stripping ratio of 2.1-to-1 is planned.

Conventional milling will not be conducted. Mine ore is to be heap-leached and copper recovered by a solvent extraction and electrowinning process. Open-pit ore will be crushed, the fines agglomerated and the granular product piled in 300,000-tonne lots in preparation for sulphuric acid leaching. Only 15-20% of the mineralization is copper oxide but a new bacterialogical process — “thin-layer-leaching” — ensures that the greater part of the sulphide copper is taken into solution. The process was initially commercialized by a Chilean mining company; that company and Rio subsequently entered into a joint research program and the process was modified to suit Cerro Colorado’s ores.

The ore piles are leached for 210 days using sulphuric acid spiked with the bacterial culture. Pregnant solution is delivered to electrowinning cells and high-purity, cathode copper delivered to market. An overall metal recovery of 82% is expected.

Elsewhere in Rio’s affairs, the company’s metal distribution assets have been withdrawn from sale because of poor market conditions. According to a company spokesman, they may be re-offered when the economy improves. And Rio retains a 30% interest in the South Kemess copper-gold property in British Columbia (T.N.M., Jan. 4/93).

Reasons for the divestiture of Rio Algom from RTZ’s stable are several. RTZ’s official contention is that two mining subsidiaries in North America is one too many.

RTZ preferred 100% owned Kennecott, which operates what is claimed to be the world’s largest copper mine at Bingham Canyon, Utah, producing more than 240,000 tonnes metal last year.

Other speculations by analysts are the currently unquantifiable costs of bringing Rio Algom’s uranium mine tailings at Elliot Lake, Ont., into environmental compliance and the deteriorating climate in Canada for mining investment in general.