Olympic Dam shows more cracks

Production at WMC Resources‘ (WMC-N) troubled Olympic Dam copper smelter in Southern Australia has been suspended after the recent failure of a heat exchanger in the sulphuric acid plant.

The company is working to find a replacement unit, but says a switch-out might take up to three weeks. The suspension will see lost production of around 600 tonnes of copper and 12 tonnes of uranium oxide each day. At that rate, WMC figures the impact on pre-tax profit at around A$1.5 million per day, with replacement and installation costs of around A$3 million.

WMC says the likely cause of the incident was the failure of a cooling tube, which led to severe corrosion in the heat exchanger. The cause of the tube failure is being investigated.

The acid plant at Olympic Dam converts sulphur dioxide gas produced during copper smelting into sulphuric acid, which is then utilized in other parts of the operation.

While the smelter and associated surface plants are idle, mining continues at full steam with ore being stockpiled. The smelter was in the midst of a month-long ramp-up period following a major overhaul to its hearth.

The company will revise its 2003 production targets following replacement and commissioning. It doesn’t expect 2004 production to be impacted.

The latest hiccough follows a fire last year that necessitated a rebuild of a solvent extraction plant, the cost of which ballooned to $375 million from initial estimates of around A$200 million. The same area was the site of a fire two years earlier.

In recent years, the company has also had to twice repair a cooling jacket on the operation’s furnace, resulting in about 17,000 tonnes of lost copper production. The operation has also suffered several low-level uranium spills.

In light of the latest setback, WMC Resources’ chief executive Andrew Michelmore has brought in outsider Dick Pettigrew to head up an operational review at Olympic Dam. The review will focus on plant reliability and improvements required to ensure consistent production. Pettigrew was formerly a senior executive at U.S.-based chemical company Rohm & Haas.

“To operate consistently at full rates, we need to know we’ll get a clearer run out of the plant than we have experienced in 2003,” said Michelmore in a prepared statement. “These interruptions have hurt our credibility and more importantly, they overshadow the underlying improvements occurring across our operations. That includes some major operating improvements at Olympic Dam.”

“Sustained production performance depends on improved levels of plant reliability. We aren’t there yet and I am determined to turn this around,” said Michelmore.

Despite the latest incident, WMC still expects to complete the rebuild at Olympic Dam next month; commissioning is slated for early in the New Year. The rebuild is designed to boost the smelters annual capacity to 235,000 tonnes of copper and 4,500 tonnes of uranium oxide.

Concentrate feed to the furnace at Olympic Dam resumed on October 9 following a recently completed maintenance program, which involved the replacement of damaged bricks in the smelter’s hearth. In all, about a third of the hearth was replaced.

The longer-than-expected (plus 40 days) maintenance shutdown will likely cost the company 5,000 to 7,000 tonnes of lost copper cathode production.