Intriguing investment news from global copper majors MMG and Rio Tinto this week underlines how the rising importance of renewables is allowing some miners to look through the present uncertainty and instability and still find growth opportunities.
The decisions run contrary to the move discussed last week by Newmont to delay a $US2 billion plus expansion of its Yanacocha gold mine in Peru to become a gold/copper operation – that will now happen around 2024 instead of this year with the completion now 2027-28 instead of 2024-25.
The OZ Minerals decision last week to go ahead with its $1.7 billion West Musgrave nickel copper mining in WA is more in line with the moves by Rio, and especially MMG (the Hong listed, Melbourne based Chinese state-controlled copper miner – see separate story) to continue pushing expansion.
Rio’s small US mining move might not be as important as a separate statement later in the week revealing that it has been more active in the lithium business than previously thought with a trial plant now operating in Canada and testing ore from another Australian company.
Rio Tinto is making a small addition to the world copper supply with a $US55 million investment to start underground mining and expand production at its existing Kennecott copper operations in the US state of Utah.
This has all the hallmarks of a trial operation with electric underground vehicles mentioned as being part of the small project, with the mining as some sort of trial for a larger operation later in the decade.
Rio’s copper move is small beer – it says that it will initially focus on the Lower Commercial Skarn (LCS) area at Kennecott, which is expected to deliver around 30,000 tonnes of mined coppers through the period to 2027.
The company said that the first ore is expected to be produced in early 2023, and full production to be achieved in the second half of the year.
The ore will be processed through the existing facilities at Kennecott, one of only two operating copper smelters in the United States.
Kennecott holds the potential for significant and attractive underground development. The LCS project is the first step towards this, with a mineral resource of 7.5 million tonnes at 1.9% copper, 0.84 grams to the tonne (g/t) gold, 11.26 g/t silver, and 0.015% molybdenum identified based on drilling and a Probable Ore Reserve of 1.7 million tonnes at 1.9% copper, 0.71 g/t gold, 10.07 g/t silver, and 0.044% molybdenum.
Rio said underground battery electric vehicles are currently being trialled at Kennecott to improve employee health and safety, increase productivity and reduce carbon emissions from future underground mining fleets.
A battery electric haul truck and loader supplied by Sandvik Mining and Rock Solutions are being used to evaluate performance and suitability as part of underground development work.
But late in the week came news from Rio Tinto about its lithium ambitions, now focused on Argentina after its Serbian mine proposal was put on hold because of local opposition.
Rio surprised some in the sector with the news that it had started making spodumene concentrate at a plant in Quebec.
“We are seeing strong interest in the market for a North American supply of spodumene concentrate to support production of lithium batteries,” Stéphane Leblanc, managing director of Rio Tinto Iron and Titanium, said in a statement on Friday.
The Quebec plant was quietly commissioned in June and produced its first tonne of spodumene concentrate in July, according to Rio.
In December last year, the company acquired Rincon Mining in Argentina for $US825 million to develop a large lithium brine project in the heart of Argentina’s “lithium triangle”.
And where is the raw material coming from? Well, here’s the interesting bit, Rio revealed in its statement that the plant “will test ore from various local suppliers including Sayona, an emerging lithium producer with projects in Québec and Western Australia.”
Sayona? Well, its shares rose nearly 7% on Thursday, not because of this news but after an encouraging update earlier in the week.
The miner reported the Quebec project is progressing toward a restart. Drilling and blasting work will kick off next month. The first lithium carbonate/hydroxide production is forecast for the first quarter of 2023.
The company revealed on Tuesday it had moved closer to restarting production at its North American Lithium (NAL) operation after awarding a four-year contract to Québec mining contractor, L. Fournier & Fills.
Under the new agreement, Fournier will be responsible for the supervision of all stripping and drilling, blasting, loading and transportation of ore and waste rock, as well as the maintenance of mining roads, and all other services related to operations.
Sayona said the value of this contract was around $C200 million over the four years.
CEO Brett Lynch said in Tuesday’s statement “We are delighted to further advance NAL towards the recommencement of production in the first quarter of 2023, with the selection of a skilled and experienced mining operator being a crucial step in this process.”
Sayona has projects in Québec, Canada and Western Australia.
In Québec, Sayona’s assets comprise NAL (North American Lithium) together with the Authier Lithium Project and its emerging Tansim Lithium Project, “supported by a strategic partnership with American lithium developer Piedmont Lithium Inc. Sayona also holds a 60% stake in the Moblan Lithium Project in northern Québec.”
In WA it holds a large tenement portfolio in the Pilbara region prospective for gold and lithium. Sayona is exploring for Hemi‐style gold targets in the world‐class Pilbara region (De Grey Mining’s big discovery in the Western Pilbara), while its lithium projects are subject to an earn‐in agreement with Morella Corporation.
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Compared with Rio Tinto, China’s MMG has more ambitious plans to revitalise its huge but underperforming Las Bambas copper mine in Peru.
Peru is the world’s second largest copper producer and Las Bambas is one of the largest mines in the world but it hasn’t been producing to potential.
That means MMG will have to spend big and carryout a massive PR campaign to try and improve relations with locals whose opposition to the mine and its expansion has become a growing headache for MMG and its other Chinese partners.
Local people have been picketing and blocking roads and other protests in the area for more than a year, restricting production and exports as well as delaying the expansion plans.
Las Bambas has the capacity to produce 2% of the world’s copper, a critical mineral required for the green transition and electric future, especially in vehicles of all types.
But it has fallen short of capacity for the past three years thanks to Covid and then mining grade problems and disruptions caused by the rising level of local opposition in Peru to the mine and the expansion plans.
Continuing production and expansion problems at a mine as globally significant as Las Bambas could very well open the way for Rio and BHP to do major deals in copper in Australia in the next year.
BHP and Rio’s Escondida mine is a more significant mine globally and the Chilean operation produces more than 1.5 million tonnes of copper a year and is the world’s biggest mine.
BHP is looking to boost output in 2022-23 by up to 16% to a range of 1.62 million to 1.82 million tonnes with production from Escondida rising by up to 18% to a top estimate of 1.18 million tonnes after producing 1.004 million tonnes in the year to June 30.
Both BHP and Rio have major copper prospects in Australia. Rio has the huge low-grade Winu copper-gold prospect in the East Pilbara (near Newcrest’s Telfer mine) while BHP has a small version of its big Olympic Dam deposit in South Australia called Oak Dam.
BHP is sniffing around OZ Minerals (which if the deal happens) would add the West Musgrave project as well as the Carapateena and Prominent Hill mines, also in South Australia).
Production of copper and other minerals in Peru is still recovering from the hit taken in 2020 and 2021 from Covid which hit mining across the country.
“To sustain the current operation, we are now investing more than $US2 billion over the next five years,” according to Las Bambas general manager Edgardo Orderique who was speaking to the annual Perumin mining conference this week.
The mine has a nominal annual capacity of 51.1 million tonnes and annual production is a nominal to 240,000 tonnes of copper in copper concentrate.
But that potential hasn’t been met because of the lower ore grades and rising conflicts with locals (road blocks, protests, boycotts). That has seen production fall along with ore grades.
The new investment would cover a new pit, new tailings and the relocation of current infrastructure.
MMG wants to develop the Chalcobamba open cut pit, located approximately four kilometres northwest from the Las Bambas processing plant.
Development of the Chalcobamba pit will increase Las Bambas production to around 380,000 to 400,000 tonnes a annum of copper concentrate in the medium term.
Las Bambas opened in 2016 in the Peruvian Andes, but has been hit by repeated disruptions from local communities who say its mineral wealth has not translated into better living conditions.
Those disruptions reached a new peak earlier this year, when members of two neighbouring communities settled inside Las Bambas, forcing the company to suspend all operations for over 50 days.
“The cost of the conflict since 2016 to date is of about 528 days of interrupted operations, almost a year and a half that we have gone through this situation,” Orderique told the conference.
The disruptions forced MMG to drop guidance for 2022.
Most of the disruptions affected copper trucking, rather than the actual copper mining in the pit.
Las Bambas had been hoping the second pit would be finished to start production in the December half of this year but work has been halted due to opposition from the indigenous Huancuire community.
MMG has previously said it will not go forward with the project until it can reach an enduring agreement with the local Huancuire group of indigenous residents.
Las Bambas’ problems impacted Peru’s June half copper output which is still well below 2019 levels.
“Growth in mine output in Peru, the world’s second largest copper mine producing country, was limited to 1.3% as a consequence of an extended stoppage of two major copper mines (Cuajone and Las Bambas) due to local communities’ actions.
“Production in the first half of 2022 was 8% below that of 2019 (pre-COVID), according to the August release from the The International Copper Study Group.
In Chile, June half production “fell 6% with concentrate production falling by about 9%.”
