Less than a year after it announced plans to divest itself of base metal assets,
Placer shelled out US$251 million cash for Outokumpu Base Metals’ 50% interest in Compania Minera Zaldivar (CMZ), a Chilean subsidiary that owns the mine and related water rights.
The agreement comes less than nine months after
The price of copper has since risen about 19% and Zaldivar is expected to generate about US$90 million in cash for Placer in 1999. Nonetheless, Placer spokesman Brenda Radies says the recent purchase was made in order to “simplify ownership” of the mine and that the major is not ruling out selling it in the future.
When the US$600-million mine was under construction in 1993, Placer agreed to loan Outokumpu money to complete the project. The Finnish steel company’s remaining US$160-million debt continues to be financed through cash flow from the mine.
Says Placer President Jay Taylor: “This [purchase] does not represent a change in our strategy to focus on gold but will further our aims of increasing value for our shareholders.”
In selling its interest in Zaldivar, Outokumpu moves closer to its goal of becoming more focused on refining and less active in mining and metallurgy.
Situated 175 km southeast of Antofagasta, the property hosts a large Tertiary porphyry-copper system in the West Fissure structure. The deposit is centred on a porphyritic granodiorite that intrudes andesites and rhyolites, with associated breccias and a large hydrothermal alteration zone. Copper mineralization occurs as enrichment blankets of both oxides and secondary copper sulphides.
Cathode copper is produced by means of heap leaching and solvent extraction-electrowinning. Commercial production began in November 1995, following construction expenditures of $574 million. The mine reached full production in December 1997 and is expected to produce 275 million lbs. copper annually over the next 10 years at a cash cost of US50 cents per lb.
Reserves at the end of 1998 were estimated at 55 million tonnes of oxide ore grading 0.93% copper and 125 million tonnes of sulphide ore grading 1.1% copper. There is an additional resource of 309 million tonnes grading 0.52% copper.
During the first 10 months of this year, the mine produced a record 275 million lbs. copper at a cash cost of US38 cents per lb. — well below the current spot price of US78 cents.
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