A week after reporting massive profits and more spending on expanding their huge WA iron ore operations, BHP Billiton and Rio Tinto yesterday revealed they would spend around $US4 billion ($A3.75 billion) on the huge Escondida copper mine in Chile which accounts for around 8% of total annual global production.
A few years ago capital spending of that size would have been front page news for the business papers and lead stories for the business pages of the general papers. Now it’s just another resources boom story.
BHP will spend $US2.2 billion and Rio $US1.2 billion to replace a concentrator at the mine with a new plant to enable access to a higher grade of ore underneath the existing facilities.
BHP also said it will spend close to $US200 million re-starting a small mine in the US.
Construction at Escondida will begin later this month with completion expected in the first half of 2015.
BHP will also spend $US414 million and Rio $US216 million on a leaching pad and mineral handling system, which is expected to maintain leaching capacity at current levels past the end of 2014, BHP said.
Leaching is the process used to extract metals such as copper and gold from ore.
BHP holds a 57.5% interest in Escondida and operates the mine, while Rio holds a 30% stake.
It is one of the premier assets controlled by BHP and ranks with its Pilbara iron ore mines and central Queensland coal mines in being one of the company’s major profit centres.
The new projects have been mooted in the past year, especially in the wake of the revelation late last year by BHP that it had lifted Escondida’s resource in a massive, multi-million dollar drilling program over the past three to four years.
Yesterday BHP confirmed the results of that campaign with a big increase in ore reserves at Escondida.
With the expansion and new projects, BHP and Rio say they are looking at a substantial recovery in copper production at Escondida to more than 1.3 million tonnes a year from the 2015 financial year.
"The success of our brownfield exploration program suggests there are sufficient resources at Escondida to sustain production at current levels for more than a century," BHP said in yesterday’s statement.
That would reverse the decline in production and grades at the operation in the past couple of years.
The expansion of reserves and mining and output at Escondida will give the two companies control of three of the world’s major copper mines (probably the other is the huge Grasberg mine in Indonesia controlled by Freeport McMoRan).
Later this year BHP will almost certainly commit to expanding the huge Olympic Dam copper, gold and uranium project in South Australia.
Rio has just taken control of the enormous Oyu Tolgoi mine in Mongolia which will be expanded to become one of the largest mines in the world.
Last week BHP chief executive Marius Kloppers named it as one of three existing projects that is due for a dramatic ramp up production in the short term.
Rio Tinto has approved US$1.4 billion for two projects to support higher production at the Escondida copper mine in Chile.
The Organic Growth 1 Project (OGP 1) replaces the Los Colorados concentrator with a new 152,000 tonnes per day plant. It also allows access to the high grade ore located underneath the existing facilities. Construction of the new plant will be complete within three years. The project will cost US$3.8 billion.
The Escondida Oxide Leach Area Project (OLAP) involves the construction of a new dynamic leaching pad and a mineral handling system. The project will maintain processing capacity at current levels following the completion of the current heap leach in 2014. OLAP will cost US$721 million with construction expected to complete in July 2014.
Rio said its $US1.416 billion investment is expected to be funded through its share of Escondida’s cash flows.
BHP said it had confirmed a 17% lift in the mineral resources and a 25% increase in the ore reserves at Escondida following successful exploration and accelerated in-fill development drilling programs.
"The reserve increase also reflects the approval of OGP1, as most lower grade sulphide ore is now expected to be treated through the flotation circuit with an associated increase in process recoveries.
"A new resource at Chimborazo, based on more than 115,000 metres of drilling averaging 530 metres in depth, was also declared. The resource is being evaluated as potential feed for Escondida’s Sulphide Leach processing facilities," BHP said.
BHP’s head of base metals, Peter Beaven, said in yesterday’s statement that "OGP1 is the first of a series of potential projects that could substantially expand processing capacity at Escondida and help ensure it remains the world’s leading copper operation for decades to come”.
In the US, BHP said it will restart mining at its Pinto Valley operation in Arizona.
The mine, which will produce copper and molybdenum concentrate, will have annual production capacity of approximately 60,000 tonnes of copper in concentrate.
The project will create approximately 650 new jobs with mining expected to resume at the end of the year. The re-start will cost $US195 million.
