MINING IN CHILE — Cyprus budgets US$1 billion for

An investment of US$1 billion is planned by Cyprus Amax Minerals (NYSE) for mine development of Chile’s El Abra copper project.

Chilean state mining company Codelco recently accepted Cyprus’ revamped bid of US$330 million for a 51% interest in the property.

Knight-Ridder reports that Cyprus conducted US$2 million worth of additional studies of the property because of indications that ore grades were lower than originally anticipated when Cyprus and Lac Minerals (TSE), Cyprus’ original joint-venture partner, submitted a US$404-million bid for El Abra last September. Lac subsequently dropped out of the project. A Cyprus spokesman said that the ore-grade differential was 10-15% lower than the original estimates.

As part of the original bid, the partners had pledged an additional US$151 million to cover Codelco’s equity stake in the operations.

The US$1 billion to develop the mine includes US$250 million for the effects of inflation, interest during construction, working capital and contingencies. Codelco will own 49% of the project.

As part of the agreement, Cyprus will provide a guarantee to Codelco, equivalent to one-tenth of the value of its offer, that it will go ahead with the project.

Capital requirements for expansion of the oxide production, development of the sulphide reserve and any future expansion of potential development on the additional exploration lands will be shared by Cyprus and Codelco. The project will produce 225,000 tonnes per year of refined copper, and is expected to begin in mid-1997. The current estimate of the mine’s life for oxide production is 16 years, versus a previous estimate of 20 years, with average cash costs expected at slightly below US50 cents per lb. These costs should average less than US45 cents during the first half of the mine’s life.