Erdenet mining copper under Lenin’s gaze (September 19, 2006)

A giant painting of Lenin’s head still looks down over the sprawling copper and molybdenum project known as Erdenet in northern Mongolia. But as copper prices bring in big profits and an American joint venture project takes hold onsite, it’s clear that the father of Russian Communism has lost his grip.

The mine situated 400 km northwest of the Mongolian capital Ulaanbaatar — was first discovered by Czech and Russian geologists back in the 1960s. By 1973 the Mongolian government had cut a deal with the Russian government to mine it, and by 1978 ore was being processed from its Northwestern pit — a pit so robust that some 28 years later it still has a mine life of another 35 years.

That 1973 deal between Russia and Mongolia is manifested today in the Erdenet Mining Corporation, a private company in which the Mongolian government holds a 51% stake and the Russian government holds a 49% share.

And although both governments have equal representation on the 14 member board, the workforce is decidedly slanted in Mongolia’s favour. Roughly 85% of the 6,000 strong workforce is Mongolian, with most of them living in the neighbouring city of Erdenet.

While it might be difficult for some onlookers to conceive of a company with roots so firmly entrenched in a socialist past making its way in a capitalist world, the high price of copper and the bounty of the deposit have helped Erdenet reap some decent profits.

Erdenet’s senior engineer, B. Sergelen, admits times were tough at the mine with the low copper prices between 1998 and 2002, but the company has clearly turned the corner since then — reporting profits of nearly US$200 million in 2005; up roughly US$50 million from 2004.

Such profits are being made inspite of some signs of inefficiency noted during a Northern Miner site visit (several dump trucks idled inactively in the pit for too long — a situation rarely seen at open pit mines run the western way).

But with 500 million tonnes of ore containing 2 million tonnes of copper with an average grade of 0.79%, Erdenet has a bit of a cushion. The pit also contains an average grade of 0.02% molybdenum. The copper cutoff grade used is 0.35%.

Ore is processed on site at a mill built in Communist times but updated throughout the 90s and into the new millennium. Erdenet says recovery of copper is 85.5% with molybdenum recovery coming in at 25%.

After initially coming out of the mill in a mixed concentrate, copper and molybdenum are separated and exported to Switzerland, Holland Korea and the USA.

In 2005 the company shipped 510,000 tonnes of concentrate containing 24% copper and, and 3,000 tonnes of molybdenum concentrate containing 47% molybdenum.

The cost of copper production came in at $2,300 per tonne.

But Erdenet isn’t sitting on such numbers. In an effort to maximize production the company is planning to bring large scale heap leach and electrowinning (SX/EW) technology to the site. The project is slated to be finished by 2008 or 2009 and is anticipated to produce 40,000 tonnes of copper cathode per year.

Currently a smaller, “experimental”, SX/EW plant is being used to extract copper from waste rock left over from the pits copper-rich cap.

The waste rock is being leached on site by a Mongolian and U.S. joint venture company called Erdmin. Erdenet has a 25% stake in Erdmin. And while the factory once had to rely on foreign expertise largely in the form of Americans and Australians now, like Erdenet, Erdmin has made the transition to a predominantly Mongolian workforce.

Originally Erdmin was expected to produce 10,000 tonnes of copper cathode, but skepticism from Erdenet’s administration resulted in the reduction of the project to 3,000 tonnes when it began production in 1997. Currently the operation is producing 3,000 tonnes of copper cathode and 2,000 tonnes of copper rod per year. The product is exported to Korea.

In those eight years since commissioning, Erdmin has proven that Erdenet’s reservations about using heap leach technology during Mongolia’s fierce winters was largely misplaced. In the winter the company puts holes deep into the waste rock and then inserts sulfuric acid to prevent freezing. Production continues at the small plant year round.

Geology

The Erdenet site is composed of four porphyry deposits hosted in granite diorite and formed in the Jurassic period somewhere between 200 and 240 million years ago. The deposits are spread across a 5 km long strike length, and all three of the known pits share a similar cone shape which decreases in width and grade as it descends.

To the south of the Northwestern pit lies the Central deposit. The deposit has an estimated resource of 90 million tonnes containing 369,000 tonnes copper grading 0.41% and 0.015% molybdenum.

To the south of the Central deposit lies the Oyut deposit a body containing 157 million tonnes of ore, with 770,000 tonnes of copper grading 0.43% and 0.002% molybdenum.

The final Southeastern pit does not yet have a resource estimate, but exploration drilling there and in the other areas surrounding the deposits are ongoing.