“Aussie Nickel Producer Poised to Vault by Inco” was the brash subtitle of a media advisory sent out by Australian-listed
Anaconda’s surging confidence in those days was derived from the successful startup of the first phase of its Murrin Murrin nickel-cobalt mine and metallurgical plant, 60 km east of Leonora in the North Eastern Goldfields of Western Australia.
That first phase, costing US$670 million, was completed in January 1999, just two years after the start of construction. Anaconda had fast-tracked Murrin Murrin’s development in part to outpace
Back in mid-1999, Anaconda was boasting that Murrin Murrin — owned by operator Anaconda (60%) and the Swiss commodity trader
Anaconda further predicted that its array of dry laterite projects in Australia, powered by cutting-edge pressure-acid-leach (PAL) technology, would “lead to a fundamental structural shift towards lower costs and lower prices in the world nickel industry.”
Thus Murrin Murrin became more than just another commercial mining operation; it had the potential to pose a real threat to the market shares enjoyed by established nickel producers, such as Canada’s Inco and Falconbridge, and furthermore it was a showpiece for the daring and innovation of the Australian mining industry.
Also in mid-1999, Anaconda stated that “each critical section of the plant has been commissioned and has been proven to run at design capacity” of 45,000 tonnes nickel and 3,000 tonnes cobalt annually. Anaconda further stated that it was “targeting 60% ramp-up in the fourth quarter of 1999 [and] 100% production capacity is targeted for early 2000 in line with forecasts.”
Today, more than a year after that media advisory, Anaconda remains stuck in its “poised” position and may indeed be cramping up a bit. As has been well-publicized, the ramping-up of production at Murrin Murrin has been beset with problems, and the mine has repeatedly failed to match Anaconda’s production targets. Mechanical completion was only achieved in December 1999, after 15 months of delays.
Still, while Anaconda’s credibility has suffered from the missed production targets, a site visit in September by The Northern Miner found that operational and engineering problems at Murrin Murrin are being systematically rectified by a determined workforce, and that the first stage of the project shows every sign of producing at design capacity within the next two years.
September’s output was the best ever, with the production of 1,709 tonnes nickel and 132 tonnes cobalt, or 45.6% and 52.8%, respectively, of the design capacity.
The previous months’ nickel production figures are: August, 1,650 tonnes; July, 1,260 tonnes; June, 679 tonnes; May, 1,211 tonnes; and April, 911 tonnes. Cobalt production rates have generally been above 100 tonnes per month.
Whether or not Murrin Murrin ever hits its operating-cost target of below US$1 per lb. nickel, after cobalt credits, is less clear, as Anaconda is still closely guarding its operating cost numbers. Anaconda does say that the project continues to generate negative cash flow.
“It has been a struggle, but we’re doing extremely well and getting through our initial teething problems,” says Michael Rodriguez, Anaconda’s technical services manager and Murrin Murrin’s acting plant manager. “The important thing is, we’re finally getting stable and continuous production. We’ve got past a commissioning-type mentality and now have a production mentality.”
The plant uses the
Tailings are neutralized with locally mined calcrete and pumped to a 1.6-sq.-km tailings compound, where the hot, dry outback climate ensures that residual waters are quickly evaporated.
“Even given Australia’s mining history in the outback, the construction of Murrin Murrin is still quite an achievement,” says Rodriguez. “While everyone else was talking about it, Anaconda went out and did it.”
The biggest headache during the ramp-up last year was the inadequate performance of the flash vessels associated with the plant’s four autoclaves. All four were modified to top-entry from bottom-entry, and Refrax diffusers, which easily eroded, had to be replaced with Hexoloy diffusers.
Anaconda laid the blame for the defective autoclave design squarely on the shoulders of its engineering, procurement and construction consultant, Fluor Daniel, and launched a A$300-million court action.
In August 2000, Anaconda and Glencore received a A$113-million insurance settlement. Despite the insurance payment, Anaconda says it will proceed with its claim against Fluor Daniel.
“When we encountered the problems with the autoclaves, that’s when the real riff between Anaconda and Fluor Daniel started,” says Rodriguez. “The autoclaves were the hardest area to commission, setting us back at least six months. But since they were fixed, we’ve never looked back.”
Earlier this year, Anaconda brought in engineering consultant Minproc to assist in clearing bottlenecks and expanding the plant, though Fluor Daniel still has about a dozen engineers on-site assisting in the ramp-up. Minproc played a major role in successfully bringing into production the smaller Cawse PAL nickel-cobalt mine, near Kalgoorlie.
In June, the Murrin Murrin plant was shut down for 14 days for de-scaling of the precipitation circuit and the installation of equipment to minimize its future impact. Rodriguez says Anaconda has not completely resolved the scaling problem, but it can now control the problem and operate for longer periods of 2-3 months between de-scaling operations.
He adds that the autoclave train has been able to run briefly at design capacity, but operations have not been sustainable at that level. The next ramp-up target is to have three autoclaves operating simultaneously for extended periods.
Other major work carried out this year at Murrin Murrin included: installation of all slurry agitators; upgrading of pre-heater pumps; installation of titanium steam vent lines; and installation of sulphide-precipitation thickener rakes.
“We’ve built up quite an expertise in a number of fields here,” says Rodriguez. “We’ve got a lot of battle scars, but we’ve certainly come out of it leading in this technology. We’re at least five years ahead of anyone else.”
He says that of the remaining distinct units: the milling portion of the plant is working at 55% design capacity, the mixed-sulphide circuits are now running at 80% capacity for the first time, the solvent-extraction circuit is running at 92% design capacity, and the back-end of the plant has been running at 80% capacity.
Anaconda now has the following ramp-up targets: 50% design capacity during the fourth quarter of 2000; 85% design capacity during the third quarter of 2001; and 100% design capacity during the second half of 2001.
The nickel being produced at Murrin Murrin is now attaining a London Metal Exchange-worthy purity level of 99.8% nickel. Still, Anaconda has yet to begin the 6-month bureaucratic process of achieving official LME-grade status. For now, Murrin Murrin nickel is being sold at a discount to official LME prices.
Despite the 99.8% purity level of Murrin Murrin cobalt, the value of the cobalt product is slightly downgraded, owing to the presence of copper and iron contamination.
Glencore, which is not involved in any operating capacity at Murrin Murrin, markets all of the mine’s nickel and cobalt production. The final product is trucked from the mine site to the nearest rail line for transport to ports, and then on to customers in Asia, Europe and North America.
Compared with running the metallurgical plant, Murrin Murrin’s mining operations have been a breeze.
Anaconda took over mining operatorship from a contractor in late 1998 and is now exploiting shallow open pits in the vicinity of the plant. At full design capacity, mining rates will be about 11,000 tonnes per day, or 4 million tonnes annually, with relatively little stripping required.
Anaconda is running higher-grade ore of about 1.4% nickel through the mill and stockpiling ore above 0.5% nickel. By comparison, Murrin Murrin’s reserves are estimated at 233 million tonnes grading 1% nickel and 0.06% cobalt, at a cutoff grade of 0.8% nickel. An additional 73 million tonnes grading 1.02% nickel and 0.078% cobalt exist at Murrin Murrin East, 45 km southeast of Murrin Murrin proper.
Anaconda ore-reserve geologist Tim Blackwell says the Murrin Murrin ore is showing excellent continuity of nickel grades, though cobalt grades are proving to be more irregular. He adds that there is a high degree of correlation between the reserve nickel grades and mined nickel grades.
Roughly 250,000 tonnes of ore is currently stockpiled into numerous categories, depending on grade, mineralogy and milling characteristics. Ores from the various stockpiles are then carefully blended as they are fed into the PAL circuit.
The plant operates round the clock on a partial fly-in/fly-out basis from Perth, with workers being housed in accommodations capable of handling up to 1,200 people. Some workers, particularly contractors, drive up from Kalgoorlie, while some aboriginals live in nearby villages.
About 90 aboriginals work at Murrin Murrin, representing 20% of the workforce, making Anaconda the largest private-sector employer of aboriginals in Australia.
At the mine site, Anaconda has established the John Forrest Vocational Education & Training Centre, named after an ancestor of current Chief Executive Andrew Forrest, who was one of the first whites to venture deep into the Western Australian outback in the mid-19th century. The centre has so far provided career training for some 36 aboriginal people.
Anaconda received an award from the National Aborigines and Islanders’ Day of Observance Committee in recognition of the company’s contribution to indigenous employment.
Anaconda will soon be making a decision on the design and purchase of a fifth autoclave, which will be added alongside the existing four autoclaves. The addition will likely have a capacity of 16,000 tonnes per year of nickel production, compared with the 12,000-tonne capacity of each the first four autoclaves, bringing Murrin Murrin’s annual production capacity up to 60,000 tonnes nickel and 4,000 tonnes cobalt.
The addition of the fifth autoclave will be a major step in the rolling expansion of Murrin Murrin to an annual production capacity of 100,000 tonnes nickel and 8,000 tonnes cobalt — an expansion strategy that has replaced a previous plan to build a second, stand-alone operation of roughly equal size beside the existing operations.
Design studies have already been completed for the rolling expansion of the calcrete mining operations, the mixed-sulphides circuit, power/ steam generation, water treatment and neutralization.
Murrin Murrin’s improving performance has been reflected in Anaconda’s share price, which has risen steadily over the past six months, up from below A$2.10 in April to A$3.85 at presstime.
While part of the rise is attributed to Australia’s sinking dollar (which has dropped from US66 in January to US55 at present), more pertinent is the fact that three of Anaconda’s major shareholders — Glencore, Sherritt International and
Glencore boosted its shareholding by almost 6 million shares to 76.4 million shares, for a 20.9% interest. Sherritt increased its holdings, first acquired in May 1999, by 21.6 million shares to 34.5 million shares, for a 9.4% interest. Anglo increased its stake to 94.3 million shares, for a 25.7% interest.
In a watershed moment for Anaconda, back in August 1999, the company received a big boost in cash and credibility by placing, with Anglo, a total of 77.3 million shares priced at A$3.15 per share. Included in that deal was an agreement that if Anaconda shares ever traded above an average price of A$4.15 per share for 60 days at any time within three years, and assuming that there has not been a third-party bid, then Anglo would pay an additional A$1 per share.
That 1999 cash infusion from Anglo, combined with the recent insurance payment, means that Anaconda remains on a firm financial footing, despite the slow ramp-up. As of June 30, 2000, Anaconda had A$136 million in cash, plus the A$68-million insurance receivable.
Still hanging over Anaconda’s head are two U.S. bond issues: one US$340-million note at a 9.4% fixed rate, maturing in 2007; and a US$80-million floating-rate note, maturing in 2005.
In its most recent publicly filed report, for the year ended June 30, 2000, Anaconda shows no sales revenues and an after-tax operating loss of A$5.8 million.
The unexpectedly long ramp-up period for Murrin Murrin has not prevented Anaconda from thinking big. The company has recently defined a renewed vision for its future, dubbed the “Three Provinces Strategy.”
Each of the three Anaconda-controlled provinces — named Northern, Central and Southern — is capable of hosting integrated PAL nickel-processing facilities, with each of the Northern and Central provinces capable of producing in excess of 100,000 tonnes nickel and 6,000 tonnes cobalt per year, and the Southern province capable of producing 50,000 tonnes nickel and 2,500 tonnes cobalt annually.
The Northern province, 100 km northwest of Murrin Murrin, centres on Anaconda’s undeveloped Mt. Margaret project, where resources are estimated at 418 million tonnes grading 0.67% nickel and 0.039% cobalt, at a cutoff grade of 0.5% nickel. Anaconda hopes to have a feasibility study completed in the fourth quarter of 2000, though capital costs are already estimated at US$1.2 billion.
The Central province simply comprises Murrin Murrin and the upcoming expansion.
The Southern province includes
The current operating plant at Cawse — now referred to by Anaconda as “stage I” — has a design capacity of 9,000 tonnes nickel per year. The mine has been a technical success, but the operation is widely seen as being too small ever to be economically robust.
Last November, Anaconda and Centaur entered into an alliance whereby Anaconda agreed to complete a feasibility study for the expansion of Cawse, earning a 60% interest in the operation if total nickel production exceeds 50,000 tonnes per year. Anaconda will manage the financing, construction, commissioning and operation of the expanded Cawse plant and will market the production from the expansion.
The stage II expansion of Cawse is currently at the prefeasibility stage, but it is estimated that the expansion capital cost will be US$700 million. A feasibility study of the expansion is expected to be completed by September 2001.
In August, Anaconda entered into an agreement with Joseph Gutnick, Centaur’s chairman, to buy 6.3 million Centaur shares for A$1.35 each. Gutnick also agreed to procure the sale of another 1.6 million Centaur shares for Anaconda at the same price. If both deals are completed, Anaconda will own a 15% stake in Centaur and add three people to Centaur’s board.
Anaconda signed an agreement similar to the Cawse deal with Australia’s third PAL producer, Preston Resources, to expand the latter’s small-scale Bulong nickel project, near Kalgoorlie. However, Preston is weighed down with a crushing US$212-million debt that bears interest at 12.5%, and it seems likely that Bulong will be shut down sooner rather than later.
With these agreements, Anaconda’s total attributable resource base now stands at 1.3 billion tonnes grading 0.75% nickel and 0.045% cobalt, or 9.6 million tonnes contained nickel and 578,000 tonnes contained cobalt.
If all three nickel provinces were developed as envisaged, nickel production would be between 250,000 and 350,000 tonnes annually, at last launching Anaconda into the big leagues of global nickel producers.
In another recent deal, Anaconda has agreed to let Australia’s
Key to any further development under Anaconda’s Three Provinces strategy is the construction of rail lines, gas pipelines, and water pipelines into the remote region.
Anaconda has already deposited a A$800-million infrastructure proposal with the state and federal governments, and expects an initial response within several weeks.
Murrin Murrin is currently supplied with water from a series of paleochannels that are limited in extent and must be drawn from in a rotating manner. These paleochannels are elevated in salt content, which affects operating costs, maintenance costs and process selection.
Anaconda has been exploring an alternative water source to the northeast, named the Officer Basin. Individual holes drilled to date in the Officer Basin are yielding flow rates of 1-2 million litres per day, with near-potable salinities in the range of 1,600-2,100 ppm. The proposed water pipeline would originate in the centre of the Officer Basin and extend to Murrin Murrin, Mt. Margaret and Cawse.
Anaconda is in the process of choosing a water utility company and having it study the feasibility of pumping 250 million litres a day from the Officer Basin into existing and new industries in Western Australia.
Anaconda Chief Executive Andrew Forrest says drilling results in the Officer Basin “open the door to enormous potential opportunities for the region and the state.”
As part of its Three Provinces strategy, Anaconda is narrowing its focus to nickel and cobalt assets by moving its magnesium, fertilizer and rare-metals assets into another company, named Anaconda Industries. Shares of Anaconda Industries will likely be distributed to existing Anaconda Nickel shareholders as a dividend.
Anaconda has also agreed to pay Glencore US$8 million not to invest in any nickel-cobalt projects in Australia except for portfolio investments in listed companies. The payment is to be made on or before year-end 2005, or 21 months after project completion.
Be the first to comment on "Anaconda ramps up at Murrin Murrin"