Thompson Creek Metals diversifies its approach to mining by adding gold to its plans
The peak sits at the highest, northernmost point in a chain of mountains in northwestern British Columbia and beneath its face sits a porphyry-type mineral reserve containing an estimated 2.1 billion pounds of copper, and 6 million ounces of gold; making it one of the larger undeveloped gold reserves in Canada.
Undeveloped, that is, until now because after a year-and-a-half of construction and a capital cost expenditure approaching C$100 million, Thompson Creek Metal’s Mount Milligan project has the adrenaline pumping among the company’s executive.
“When Mount Milligan is done, it would equal or exceed the revenue generating capacity of both our existing mines in northern B.C.,” says Chairman and CEO Kevin Loughrey. “This project is hugely important.”
“You don’t have many opportunities to build mines around the world these days,” adds Thompson’s President and Chief Operating Officer, Scott Shellhaas. “So any time you’re part of a team that has the opportunity to build a world class facility like this, it’s exciting.”
Their greatest excitement early on is for the extraction of higher grade and gold-rich reserves at Mount Milligan is: in the first six years of its 22-year life cycle the mine is expected to average just over 262,000 ounces in annual gold production, accounting for 55% of the mine’s revenue. The starting line for all that largesse is not far off, says Loughrey; With 95 per cent of the engineering and procurement and nearly half the construction finished since January 2011, builders will put down tools in the third quarter of 2013 and commercial production beginning by the fourth quarter.
Despite the progress, Loughrey acknowledges the way forward hasn’t always been smooth sailing. “Heads winds,” include lower than expected production, sales volume and prices for molybdenum – the company’s bread and butter – culminating in a first quarter 2012 revenue drop of 45% to $113.6-million. Part of the blame was placed at the feet of the Mount Milligan copper-gold project and a capital cost projection that rose 50 per cent above the original $900 million figure originally supplied by the previous owner. Shellhaas insists the strip ratio is low and will hold steady at just under 1.0 over the life of the mine, while Loughrey estimates the final capital project cost at just over $1.5 billion.
“Costs generally, labour especially, have gone up, but most of the big parts or pieces now have been purchased or the price fixed. We have also subjected the amount of inflation on the project to a much smaller number. So we feel really good about our numbers and feel confident we can complete it within that range.”
Know your strengths…
Mount Milligan will be a conventional truck-shovel open pit mine providing mill feed at a nominal rate of 60,000 t/d. The initial equipment fleet consists of 311 mm electric blast hole drills, 16 m3 front end loaders, eight 240 tonne 793F mining trucks and two 495 electric rope shovels (“They are big pieces of equipment,” Shellhaas marvels. “Our 495 shovel can fill one of these 240 tonne trucks in basically two passes.”) These will be supplemented by a range of graders, track and rubber-tired dozers, with gold concentrate trucked 82 km to a storage and load out facility then transferred onto railcars for transport to the Port of North Vancouver and delivered to Asia.
Mineral and waste transport costs often represent the bulk of an open-pit mine’s working costs, requiring computerized truck dispatch. A relatively small footprint at Mount Milligan (4 km x 3 km) and low waste will result in short hauls and material seldom handled more than once. So, while computerized truck dispatch may be helpful later on as the mining expands for now coordinating operational and maintenance sequencing for the relatively small fleet of Cat trucks will be done manually.
Shellhaas’s confidence in the truck and shovel operation is not solely due to its brand new, state-of-the-art production equipment; Thompson Metals has also designed the control room so that mill and mine operators sit side by side for easier communications. “This helps to maximize productivity and utilization,” says Shellhaas, “and of course we’re always talking to Cat about new ways to increase productivity and fleet positioning.” The other asset, adds Kevin Loughrey, is Thompson Metals’ people. “We have a small group here whose only job is procurement,” he says. “We have another group’s whose only job is maintenance and we measure and hone and improve the process every day.”
That said, Thompson Metal’s main business is molybdenum mining, so not surprisingly Loughrey is often challenged on the company’s diversification into copper and gold. Fly over Thompson Metals’ three mines in northwestern BC on any given day, he responds, and you “wouldn’t know which was which.” Moly, gold and copper are mined and milled in very much the same way, he stresses – dig it, blast it, shovel and truck it to the crusher. “Put it into the crusher, put it into the mill, put it into the float circuit, put it into the concentrator and you’ve got the concentrate.” The one difference at Mount Milligan, Loughery adds, is that concentrate produced at the end of the process will be shipped to overseas smelters that work exclusively in copper and gold concentrates. “That’s the most efficient way for us to do it.”
According to Shellhaas, moderately sloping terrain made pre-stripping relatively easy and eliminated the waste dump stock piles that accumulate at most operations. “The waste,” he says, “will be used in the construction of the tailings dam during the life of the project.” With concrete pads for the concentrator and the power station completed last year, attention now turns to the mine’s centerpiece; the concentrator facility housing the grinding section (i.e. SAG mill, two ball mills, floatation circuit and re-grind area), all of which will be fully roofed and enclosed this fall.
Meantime, concrete pads have been poured for the truck shop, an administration building and concrete crusher to be completed in the first quarter of next year with the SAG and ball mill installation complete to follow in the second quarter. Typically Thompson Metals mines at bench widths of 45-50 feet, and while “mine plans are always flexible” Shellhaas says he doesn’t see that plan wavering during the first three years of operation.
“There’s just too many projects like this at the moment chasing too few skilled people.”
Kevin Loughrey’s comment just about sums up the challenge facing the entire global engineering and construction industry. But the demand for highly skilled workers is particularly critical in the mining sector. To fill the gap, his company advertises worldwide for engineering and construction personnel, sets up recruiting offices in local communities, and provides training programs for local people who don’t currently qualify for these kinds of jobs.
So far that effort seems to be paying off, but Thompson Metals’ labour strategy is also focussed on the tricky challenge of staff turnover. Typically, the company employs a three-week-on/one-week-off schedule. “We changed that to a two-week-on/one-week-off schedule that’s been well received and reduced our turn over.” Another challenge has been providing adequate accommodation. Thompson decided building a camp to house construction crews wasn’t enough, and that operational staff required something better than room and board in some of the local towns.
“We concluded that recruiting people to live in one of those towns was too difficult and the commute too long so we’re going to build an operations camp that allows people to live there for stretches at a time, then can leave for a stretch and t
hen come back.”
One group that will be paying close attention to Thompson Metals’ labour strategy will be First Nations. Elders routinely tour the Mount Milligan site, some sit on the company’s sustainability committee and, of course, First Nations work on site. Notable among these are members of the McLeod Lake Indian band who are employees of the trucking firm, Duz Cho Construction. Loughrey says like a great many other First Nations, they’ve taken the time learn more about what’s required on a mining site.
“The First Nations individuals who are concerned about this, who are charged with the responsibility of working with us are informed, are knowledgeable, are articulate and are helpful.”
Thompson Metals must also strike a balance between the high premium it attaches to higher grade, gold-rich reserves and the value First Nations place on sustainable wildlife habitat, clean rivers and lakes. For their part, shareholders may take added comfort from the position the Mount Milligan mine enjoys within the world’s commodities market. Kevin Loughrey believes the mine has the potential to provide Thompson Metals with “counter cyclicality benefits” so that when molybdenum and copper prices drop on world markets, gold strengthens and evens up the balance sheets. Simply put, a more diversified mineral portfolio strengthens the company’s future.
“We’re headed in the right direction. We’re going to be bigger, we’re going to be more profitable, we’re going to be more diversified and healthier. We’ll be a huge presence in British Columbia.”