Copper was one of the last metals to recover from the economic recession. But whether today’s higher prices will continue is a big question. Even so, the red metal is finally attracting some attention, and low-cost producers like Highland Valley Copper stand to benefit substantially from the improved outlook. Equally important is that steps have been taken to ensure the mine’s production costs are among the lowest in the world, says Poul Hansen, Highland Valley Copper’s affable new president. “The net result will be to place the partnership’s production costs firmly in the bottom third of the spectrum of Western world producers.” Hansen was previously a senior executive with Cominco Ltd. — a major shareholder in Highland Valley Copper, along with Lornex Mining. He believes copper’s relative strength may be short-lived (it was hovering in the $1.00-$1.25us-per-lb range in October and November). So the major expansion program underway at the Highland Valley operation will be important to the project’s long-term viability.
Hansen doesn’t regard the present recovery as “fundamental;” rather, he sees stronger prices as the result of a misinterpretation of inventories which caught many consumers off guard. As a result, mines and smelters could not react quickly enough to the increased demand precipitated by alarmed consumers wanting to restock. Hansen explains that the London Metal Exchange price is still in a “state of backwardation” so that it’s possible to buy copper at lower prices three months ahead. He expects copper prices will average between 77 cents and 80 cents to mid-1988, when there could be a correction. But he concludes that the merged Highland Valley operations of Cominco and Lornex will constitute a very profitable operation — even at much lower prices.
Average annual production from 1987 to 1991 is expected to be 379 million lb of copper, so every 1 cents increase in price would add $3.7 million(us) to the operation’s profits. But with higher prices come stiffer smelter charges which have eaten about 4 cents off this year’s increase, he confirms. Silver production will rise by 33% to 1.6 million oz; gold by 300% to 10,600 oz. But molybdenum output will decline by one half.
The average milling rate is expected to be 120,000 tons per day by 1988, with the majority of feed coming from the Valley pit. The average strip ratio over the mine’s life will be 0.7:1, and about 20% of ore production will come from the Lornex orebody over the next 20 years. Hansen says mining from two pits will give added flexibility to the operation.
Cominco and Lornex economized on their Highland Valley operations for one important reason — to survive. The merger became effective July 1, 1986. Their respective holdings were rolled into Highland Valley Copper, which is 55% owned by Cominco and 45% by Lornex. Hansen, who was with Cominco before the combination, became president and Douglas Guild was appointed vice-president and general manager at the mine site (he was previously a vice-president with Lornex). The operation of the partnership is directed by a management committee of three senior officers, each from Cominco and Lornex, who meet on a quarterly basis.
Teck Corp. also has a stake in the operation by virtue of its control position in Cominco and its 22% interest in Lornex. Rio Algom of Toronto holds a 68.1% interest in Lornex. Teck’s dormant Highmont mill may be incorporated into the combined project. Studies are under way to determine the best method and Hansen believes a “definitive agreement” will be worked out by year-end. Two options are available: run a conveyor from Lornex to Highmont or dismantle the plant and add it on to the Lornex mill.
In any event, only two mills will operate, so incorporating Highmont into the venture would mean closure of Cominco’s old Bethlehem mill, which Hansen admits is “working superbly.” It would take about a year to tie Highmont into the existing operation via a conveyor system and about one and a half years by moving the plant, he estimates.
Merging the Cominco/Lornex operations made sense for several reasons. In late 1985 Lornex was faced with a mine life of eight years based on 214 million tons of reserves grading 0.345% copper and 0.0126% molybdenum, with a 1:1 strip ratio. The company also had an ultra-modern milling complex that was processing ore from the Lornex pit at a rate of 88,000 tons per day. Despite the high production rate, operations at the time were marginally profitable and there was no room to further improve operating efficiencies.
The installation of an in-pit crushing and conveying system was considered, but geometry of the Lornex pit was poorly suited to this type of development. The combination of uncertain metal prices, limited ore reserves and poor molybdenum prices made the Lornex orebody progressively less attractive. (Molybdenum is a significant revenue-earner for the mine.)
Cominco, on the other hand, had a large copper deposit containing 758 million tons grading 0.423% copper with significant molybdenum, silver and gold values. But its aging Bethlehem concentrator could only handle 29,700 tons of ore per day and it was four miles and about 1,000 ft higher than the Valley pit. Constructing a Lornex-style operation would have cost Cominco about $600 million (1985 dollars), which simply wasn’t feasible at projected copper prices.
The Valley orebody lies just north of the Lornex orebody and mill, which is roughly equidistant from the two pits. Therefore, feeding Valley ore to the Lornex plant via a conveyor system seemed logical. After the partnership was formed, development was planned in such a way as to take advantage of their combined assets.
Ore is now being trucked from the Valley and Lornex pits to existing crushers at the Lornex and Bethlehem concentrators. But this is just a temporary arrangement until the in-pit crushing and conveying system is fully operational by the end of this month. Highland Valley Copper will realize significant savings by milling the softer, higher grade Valley ore at the Lornex concentrator.
The crushing and conveying system represents about 60% of the total $83-million development cost. But Hansen says that investment “will also yield the largest single reduction in operating costs.” Compared with trucking, costs for conveying ore from the Valley pit will be 40% lower at 37 cents (us) per ton which works out to about 3 cents (us) per lb of copper.
The major saving will result from transporting ore, entirely by conveyor, to the Lornex concentrator from the in-pit crushers. Large-scale development of the Valley pit coupled with in-pit crushing and conveying should cut by 8.6 cents the total cost of producing a pound of copper.
There will also be some reduction in trucking costs to Bethlehem because of economies of scale. The conveyor system will free up larger trucks for this haul. Alternatives for transporting ore to the Bethlehem concentrator are being considered. In the meantime truck haulage will continue.
The crushers are semi-mobile and will probably be moved every six months to a year. Moves must be performed quickly and without need of concrete or other additional structures. Each unit consists of three modules which can be disassembled easily and moved by a crawler or multi-wheeled transporter. These modules include an apron feeder, crusher and discharge belt module representing a combined weight of 1,573 tons. The crushers will be moved ever deeper into the pit as mining progresses.
A first-rate open-pit operation, Highland Valley Copper will be the second largest (behind the oil sands in northern Alberta) in terms of tonnage milled. Because of its relatively low grade, however, the mine will rank seventh in terms of copper production.
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