MINING IN CHILE — Phelps Dodge on track at La Candelaria

Development of La Candelaria, a copper-gold mine in northern Chile, remains on schedule for startup in 1995.

Phelps Dodge (NYSE) discovered the deposit in 1987 and subsequently sold a 20% working interest to Sumitomo Metal Mining and Sumitomo Corp. in 1992 for US$40 million.

Reserves are estimated at 400 million tons grading 1.1% copper plus 0.0075 oz. gold per ton.

The Phoenix, Ariz.-based company is building a 31,000-ton-per-day mine and mill, as well as related port facilities, at a cost of about US$550 million. Construction began last year, after US$290 million in limited-recourse financing was arranged through four lenders. (The loan converts entirely to non-recourse following satisfaction of certain completion tests.) The operation is expected to employ 645 people and produce more than 100,000 tons of copper and 80,000 oz. gold annually over a 34-year mine life. Phelps estimates operating costs will be below US50 cents per lb., which would place La Candelaria among the lowest-cost copper producers in the world. The mine will be a significant boon to Phelps Dodge, boosting its copper production by about 20%. In 1993, the company produced more than 540,000 tons of the red metal.

During 1993, the average copper price on the Commodity Exchange of New York was US85 cents per lb. Nevertheless, the company succeeded in earning US$187.9 million (or US$2.66 per share), with cash flow amounting to US$385 million.