Latin American roundup

Mining companies have rediscovered how to rake in the really big bucks, led by Latin America’s big three: Chile’s state copper corporation Codelco, Santiago-based copper miner Minera Escondida and Rio de Janeiro-based conglomerate Companhia Vale do Rio Doce. The companies posted net profits of US$816 million, US$1.25 billion and US$1.75 billion, respectively, for the first nine months of the year.

Each of these companies carried out important expansions in 2004. Minera Escondida, which operates the world’s largest copper mine in northern Chile, has two major expansion projects underway. The US$400-million, 502-million-tonne Escondida Norte pit will allow the mine to keep copper production above 1.2 million tonnes/year (t/y) through the end of 2008, after which output will taper off. Pre-stripping is underway and the first ore from Norte is due to be processed in the fourth quarter of 2005. A US$870-million sulphide leaching project that will add 180,000 t/y of cathodes is also nearing completion.

In November, Codelco submitted to authorities the environmental impact assessment (EIA) for the US$900-million Mansa Mina project. Part of Codelco’s northern division, the project envisages a mining rate of 50,000 tonnes/day (t/d) with an average grade of 1.18% Cu to produce approximately 188,000 t/y of the red metal. The ore will be treated at Codelco Norte’s Chuquicamata facilities, which will be modified to deal with the different type of mineralization.

Also at Chuquicamata, the company is carrying out a scoping study for a transition to underground mining. Codelco anticipates investment of US$522 million will be required to initiate underground mining in 2013, with an overlap of up to three years with open pit operations. Latest estimates indicate underground resources of 2.4 billion tonnes grading 0.81% Cu plus molybdenum. Construction will take five or six years, and the plan is to mine using panel-caving methods. Operations will ramp up gradually to about 125,000 t/d, producing some 30,000 t/d from each of four different zones.

There is yet more: Codelco awarded a US$170-million engineering-construction-procurement-management (EPCM) contract to the Bechtel-ARA consortium in July for the crushing, conveying and leaching facilities related to the northern expansion of Chuquicamata’s satellite deposit Mina Sur.

At Codelco’s El Teniente underground mine in central Chile, the company is carrying out a US$700-million development plan to boost output to 450,000 t/y of copper by the end of 2005. This includes a 30% production increase to 439,000 tonnes this year. One of the initiatives involves utilizing remote-controlled load-haul-dumper units supplied by Sweden’s Sandvik in some extraction areas.

And while open-pit Chuquicamata has an underground future, at El Teniente they plan to go the other way. Codelco has started conceptual engineering studies to start open pit mining at Teniente by 2010. Preliminary open pit studies focus on ore zones west of the underground mine and indicate “potential reserves” of 1 billion tonnes grading 0.75% Cu. Open pit mining would boost daily throughput rates to 390,000 tonnes from 130,000 tonnes.

Companhia Vale do Rio Doce (CVRD)’s 2004 highlights included the signing of a joint venture with the AluminumCorporation of China (Chalco) to study the construction of a 7.2-million-t/y alumina plant, known as the ABC refinery, in northern Par state. The first phase alone is expected to cost US$1 billion and will have capacity of 1.8 million t/y alumina, with operations due to begin in 2007.

In early July, CVRD formally inaugurated its first copper mining venture, the US$413-million Sossego mine in the Carajas district of northern Brazil. The mine has reserves of 245 million t of ore. Output will be 140,000 t/y of copper contained in 467,000 t/y of concentrates.

CVRD also came out of 2004 with three handy auction wins. In its first foray into Africa, the company won a concession to explore and develop Mozambique’s enormous Moatize coalfields with a US$123-million bid, which could lead to total investments of some US$1 billion there.

A few days later, CVRD won an international concession to explore for and develop bauxite on lands held by fellow Brazilian metals company Paranapanema in the Pitinga region of the country’s northern Amazonas state with a US$20-million cash offer.

CVRD then beat out all comers with a US$15-million investment offer to secure the rights to potassium reserves in central-southern Argentina’s Neuqun province. Once operational, production could ramp up to 1 million t/y of potassium for Brazil’s fertilizer market.

Exploration from Tijuana to Tierra del Fuego

Higher metals prices made exploration much more lucrative this year. Drill rigs could be heard throbbing from Tijuana to Tierra del Fuego.

Mexico was especially busy, with a horde of juniors staking claims and carrying out exploration, while some of the more established projects such as Minefinders‘ Dolores and Gammon Lake‘s Ocampo, both gold-silver plays, made real progress towards becoming operating mines. The Dolores feasibility study is evaluating open pit mining using standard heap-leach and flotation recovery processes, with throughput of 15,000 to 18,000 t/d over a 12- to 15-year mine life. The measured and indicated resources stand at 101 million tonnes grading 1.34 g/t Au-equivalent, containing 2.65 million oz of gold and 128 million oz of silver. The inferred resource is put at 28 million tonnes (all at a 0.3-g/t cut-off), containing 670,000 oz of gold and 24.5 million oz of silver.

After years of drilling, Gammon Lake published a bankable feasibility study for Ocampo in November. The study estimates proven and probable open pitable reserves of 1.43 million oz of gold-equivalent, plus 833,000 oz of gold-equivalent in the underground area. Average annual production is predicted at 270,000 oz of gold-equivalent at a cash cost of US$152/oz. Mine production is expected to begin in the first quarter of 2006.

Explorers also dug up a few nuggets down in Argentina.

In December, Vancouver-based IMA Exploration reported a 29% increase in indicated resources at Navidad in southern Argentina. Navidad’s total resource now stands at 80.8 million tonnes of 103 g/t Ag and 1.45% Pb, for 268.5 million oz of silver and 1.18 million tonnes of lead in the indicated category and 15.7 million tonnes of 78 g/t Ag and 0.45% Pb, for 39.3 million oz of silver and 70,500 tonnes of lead in the inferred category. There are also traces of copper and zinc. Navidad encompasses the Navidad Hill and Galena Hill deposits.

In October, Toronto-based AquilineResources released a scoping study for Calcatreu, also in southern Argentina. Mining would be carried out as a series of open pits at a rate of 2,000 t/d for capital costs of US$43.5 million. The project has an estimated mine life of seven years, with production of 97,000 oz/year of gold and 580,000 oz/year of silver at average cash costs of US$191/oz Au over the first four years.

Peru remained a favourite hunting ground for explorers. Progress was made on several projects this year, such as Caariaco, where Canadian junior Candente Resources drilled seven holes, which averaged 0.7% Cu over a 151-m width, all bottoming in mineralization. Twelve more holes were drilled in follow-up work, and an independent resource estimate is expected in January.

Also in Peru, London-based MonterricoMetals advanced with its Ro Blanco copper project. The property has an indicated and inferred resource of 177 million tonnes grading 0.99% Cu, but a new estimate is due early in 2005. More drilling is also underway.

Where the new projects are growing

In August, London-based Anglo America
n approved an US$80-million project to extend the life of its 70,500-t/y El Soldado open pit and underground copper mine in central Chile following successful exploration. The projected pit expansion, due to come into full swing in 2008, will extend the mine’s life to 2027 while maintaining current output levels.

In Brazil, Canadian junior Desert Sun said it would reactivate the Jacobina gold mining district in northeast Bahia state, with initial production of 75,000 oz of gold in 2005, ramping up to 108,000 oz/year from 2006 to 2011.

It was a momentous year for Toronto-based Yamana Gold. In June, it began operations at its Fazenda Nova gold mine in Brazil’s Gois state. Gold production is expected to be 36,000 oz/year for the first four years. Later in November, the company green-lighted two more projects in Brazil, Chapada and Sao Francisco, which require combined capital spending of US$210 million. Chapada, also in Gois state, is slated to produce 59,000 t/y of copper and 134,000 oz/y of gold for the first five years and total payable copper of about 862,000 tonnes and recoverable gold of about 1.3 million oz over a 19-year life. The smaller Sao Francisco project in Mato Grosso state will start production in the last quarter of 2005. Its feasibility study outlines proven and probable reserves of 47.8 million tonnes grading 0.68 g/t Au for 1.04 million oz contained gold. The mine is expected to produce an average 106,866 oz/year of gold over 7.5 years at cash operating costs of US$212/oz.

Also in Brazil, the country’s national development bank, BNDES, granted a 132-million-Real (US$46 million) loan to finance a nickel-cobalt expansion at Companhia Niquel Tocantins, Cnt., a unit of Brazilian industrial conglomerate Votorantim, which aims to boost output 28% to 22,800 t/y of nickel and 48% to 1,420 t/y of cobalt from its operations in central Tocantins state.

Peru’s mining and energy ministry approved the EIA for local miner Milpo’s US$65-million Cerro Lindo copper-zinc project in southern Ica department in July. Cerro Lindo has 41.6 million tonnes of reserves grading 5.1% Zn, 0.8% Cu and 35.4 g/t Ag, with traces of gold and lead. Production is due to begin in 2007. Milpo was also the target of a takeover bid by Mexico’s Industrias Peoles this year but the below-market offer was easily shrugged off by shareholders.

Switzerland’s Xstrata beat out a bevy of majors to win the state auction for the Las Bambas copper-focused property in Peru. Las Bambas has estimated resources of over 500 million tonnes grading 1% Cu. Xstrata has said it estimates the potential open pit mine could produce 200,000 t/y of copper in concentrate. It now has six years to come up with a production plan.

Two new mining projects in Bolivia were confirmed late this year. The board of Denver-based Apex Silver Mines gave the go-ahead to develop its 100%-owned San Cristbal silver/zinc/lead project. The US$585-million project is expected to produce 22 million oz/year of silver, 180,000 t/y of zinc and 85,000 t/y of lead over the first five years of operations, with production set to start in the second half of 2007. This was followed by news that the board of U.S. miner Coeur D’Alene had approved the start-up of the US$135-million San Bartolom silver project. San Bartolom is designed to produce 8 million oz of silver for the first five years of operations and has total reserves of 123 million oz.

Back to Chile, where BHP Billiton gave the nod to the US$990-million Spence copper project, projecting 200,000 t/y production of cathodes over a 19-year mine life. The porphyry copper deposit has total proven and probable resources of 310 million tonnes grading 1.14% Cu, including both sulphides and oxides. Chile also saw the reopening of the 20,000-t/y Ojos del Salado underground copper mining complex by its owner, Phoenix-based Phelps Dodge, after a six-year break. Some 10,900 tonnes of the red metal was expected from Ojos last year.

Setbacks

Despite the flurry of investments, discoveries, start-ups and business deals, 2004 saw its fair share of setbacks for the mining industry. Peru introduced a mining royalty, while Chile nearly did (and still might in 2005), and a Guatemalan congressional committee recommended a whopping 10% royalty on mining activities.

There was also a groundswell of ill-feeling towards mining in some areas, especially in rural Peru, from the very people that the mining companies like to tell us stand to benefit most from their activities. Local opposition forced U.S. miner Newmont and Lima-based Buenaventura to scrap development of their Cerro Quilish deposit, part of the 3-million-oz/year Yanacocha gold mine in the north of the country.

Memories of perceived past injustices are still fresh, not just in Peru. It seems that today’s mining companies will have to work just as hard on winning over public opinion as they do on the technical aspects of their projects.

Jaquelina Jimena is a business writer based in Mendoza, Argentina. She can be contacted at jjimena@ciudad.com.ar.

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