Homestake chairman sets optimistic tone for AMC convention

Describing it as the “dawn of a new day for the American mining industry,” Homestake Mining Chairman Harry Conger set the tone for what was certainly an upbeat American Mining Congress convention here recently.

In his opening remarks to a standing-room-only crowd, Conger said the story today is “one of an industry going back to work,” a point illustrated later by Frank Joklik, president and chief executive officer of BP Minerals America.

Colorado Governor Roy Romer’s address was conciliatory in tone, reflecting government acceptance of mining as an integral part of the state economy. Colorado has always had a strong environmental lobby and restrictive policies have been to the detriment of the industry, he conceded in his speech.

“I believe in economic free enterprise with environmental ethics,” he said, noting that Colorado had initiated a 9-point plan to help its minerals industry. That plan could include making the “regulatory climate more reasonable,”and a streamlined permitting process for smaller mining operations, he noted. Colorado’s depressed coal mining industry will also be addressed in the program and he said reducing royalty rates for expensive operations is being considered.

But the best news in years for the industry, at least in the base metals sector, happened just over a week ago when BP Minerals commissioned its Bingham Canyon project, something Joklik said was “a milestone for the U.S. mining industry.”

Putting the project into a historical context, he noted that prior to 1980, Bingham Canyon, a huge porphyry copper deposit, had a very definite cost advantage over many of its competitors. But when that advantage evaporated, the company had no choice but to lower those costs to more competitive levels.

Joklik argued that the competitive gains made in recent years would enable the industry to “ride out the next downturn.” But he emphasized that people should “maintain a cautious outlook for the long term.”

The company’s 8-phase recovery program included massive layoffs and a reduction in staff from 7,500 employees in 1980 to about 4,300 in 1984. (That level has almost been halved again to about 2,300).

Productivity increased dramatically, but high labor costs and depressed copper prices caused further losses in 1984; and after failing to re-negotiate its union contract, BP Minerals closed down Bingham Canyon in the spring of 1985. The company had no intention of leaving such a valuable resource in the ground, however, and that same year BP announced plans for a $400 million capital program at Bingham Canyon. One-third of that amount went to improving ore transportation at the minesite and the rest towards a new concentrator.

A throughput rate of 77,000 tons- per-day was achieved in July and they are processing 107,000 tons each day through the old plant at what he said was at “mine cut-off.” Since 1980, mine costs have been reduced by 40% which does not include byproduct credits, he added. Approximately half of that reduction was attributed to the $400-million capital program.

Joklik noted that mine labor costs averaged about $25 per hour at the time in 1985. But as a condition of re-opening-the union agreed to accept $3 per hour less, a reduction in company paid benefits, and the elimination of certain restrictive work practices. They also signed a 4-year labor contract which should guarantee labor peace through this present copper cycle.

“U.S. mining has become internationally competitive,” Joklik emphasized.