Antamina gets green light — But Inmet incapable of financing its full 50% interest

Partners Rio Algom (ROM-T) and Inmet Mining (IMN-T) have completed a positive feasibility study of the huge Antamina copper-zinc project in Peru.

The fast-tracked study, compiled by Bechtel International, confirms that the Antamina deposit can produce 600 million lbs. copper and 360 million lbs. zinc annually over a 20-year mine life. Cash costs, net of byproduct credits, are projected to be about US40cents per lb. copper.

Development costs are estimated to be US$1.7 billion, including escalation.

The all-in net funding requirement amounts to US$2.2 billion, including financing costs, working capital and payments to the Peruvian government.

“All the work that we’ve done so far indicates very strongly to us that Antamina is a viable, quality project,” Rio Algom President Pat James told a gathering of analysts and media in Toronto.

The Antamina deposit — a classic skarn mantling an intrusive body surrounded by limestone — is situated near the towns of San Marcos and Huari in the Cordillera Blanca, 385 km northeast of Lima, at a lofty altitude of 4,200 metres.

The partners have secured mineral rights on 11,600 ha and surface rights on 2,002 ha, and are negotiating for another 5,200 ha of surface rights.

A 271-hole, 104,000-metre drilling program completed since the property was optioned in 1996 has quadrupled the reserve base, indicating minable reserves of 500 million tonnes grading 1.2% copper, 1.0% zinc, 12 grams silver per tonne, 0.03% molybdenum and 97 parts-per-million (ppm) bismuth, using a cutoff grade of 0.7% copper equivalent. Another 500 million tonnes at similar grades is in the resource category.

The grades being mined will be slightly higher during the first 10 years of production, but this will be offset by a slightly higher stripping ratio during that period. Over 20 years, that ratio will be 2.8 to 1, including 85 million tonnes of pre-stripping. Mining cash costs will be US70cents per tonne of material mined.

There are six ore types at Antamina: copper with low (less than 25 ppm) bismuth, which comprises 38% of the total reserves, by weight; copper with high bismuth, 11%; copper-zinc with low bismuth, 15%; copper-zinc with high bismuth, 27%; copper as bornite (rather than the predominant chalcopyrite) with low zinc, 3%; and bornite with high zinc, 6%.

Ore from the pit will pass, via a tunnel, to a 70,000-tonne-per-day concentrator facility comprised of a single 40-ft. (or possibly 38-ft.), semi-autogenous-grinding mill, three 24-ft. ball mills, copper and zinc flotation cells, plus a molybdenum-bismuth circuit.

The US$775-million facility will produce six concentrates: low-bismuth copper (grading about 30% copper); high-bismuth copper (30% copper); zinc (55%); molybdenum (52%); lead-bismuth; and bornite. The recovery rates for Antamina’s copper, zinc, moly and silver will be about 93%, 77%, 45% and 75%, respectively.

The project will become one of the world’s largest concentrate producers, shipping 1 million tonnes of copper concentrate and 500,000 tonnes of zinc concentrate during each of the first 10 years of the mine’s life.

The bismuth problem (bismuth makes copper brittle) will be handled by blending the various non-bornite-bearing ores to produce a copper concentrate with a final bismuth content no greater than 200 ppm.

Ulli Rath, Rio Algom’s vice-president of corporate development and Antamina’s project coordinator, says that while there are no hard and fast rules, many smelters only penalize for bismuth contents above a minimum 250 ppm.

Rather than building a pipeline to take concentrate to the Pacific coast, as originally envisioned, the partners are opting to truck concentrate 360 km to port facilities to be constructed at Huarmey. The port will have storage space for up to 160,000 tonnes of concentrate and sufficient capacity to handle 50,000-tonne vessels.

Tailings will be impounded behind an earthquake-proof dam built from waste rock. The first dam will be 155 metres high; later additions will bring its final height to 232 metres.

The partners have prepared an environmental impact assessment for submission to the Peruvian government as part of the permitting process.

Some 5,000 people will work on the project during the construction period.

Once production starts, the project will employ between 800 and 1,000 people directly, plus another 1,000 people on an out-sourced basis.

Some of the specialized services may initially require an expatriate group numbering about 45, a figure that will be gradually reduced.

Inmet President William James praised the Peruvian government for its leadership over the last six years. “These people want to see [Antamina] go ahead, and this has top priority with the cabinet and with President [Alberto] Fujimori. They’re doing everything they can to expedite it.” James pointed out that although the Peruvians are a mining people, “they don’t have the training that a lot of them need, but they’re fast learners.

These people are interested in mining — this isn’t British Columbia.” Furthermore, he noted, “All the deals here are transparent; we have not seen one indication of graft in Peru. The deal that they make with you is the deal that you get.

“One of the great things Fujimori has done is substantially reduce terrorism in Peru. The way it was before, you couldn’t get a project like this started.”

Rio Algom and Inmet each hold a 50% interest in Minera Antamina, which owns the Antamina property.

Minera Antamina’s agreement with Peruvian state-owned firm Centromin calls for a final decision on whether to go ahead with the project by Sept. 6, 1998. Should Rio and Inmet elect to proceed, they must commit US$2.5 billion by September 2001 or pay 30% of the shortfall to the Peruvian government in lieu of further expenditures.

So far the partners have spent US$53.5 million on the feasibility study, plus another US$20 million on an option payment to the Peruvian government.

Inmet has stated that it does not have the financial capability to finance its full 50% share of Antamina’s predicted US$2.2-billion project costs, particularly after it failed to complete the US$110-million sale of the Troilus gold mine in December.

Inmet says it is actively considering a variety of alternatives, including the sale of all or part of its interest in Antamina, or the sale of the company.

The partners say that 12 international institutions have expressed an interest in helping fund Antamina.