Operating Review | Copper
Xstrata Copper produced marginally less than one million tonnes of copper during 2007, 2% lower than the previous year, while payable mined copper sales increased marginally to 968,000 tonnes for 2007. An expected surge in second half production and sales performance delivered improvements of 20% and 18% respectively, compensating for the lower performance in the first six months of the year.
Real unit cost savings of $68 million were achieved due to operational efficiencies, most markedly at Minera Alumbrera and the Australian operations, the divestment of the end of life Canadian recycling operations and synergies from the restructuring of corporate functions in Toronto and resultant cost savings at Xstrata Copper Canada. These operating cost reductions more than offset the earnings impact of lower head grades at Mount Isa and Minera Alumbrera, which in total increased costs by a total of $47 million compared to the previous year. Average cash costs (C1) remained in the second quartile at 56.9¢ per pound, compared to 56.7¢ per pound in 2006.
Financial performance was impacted by a number of external factors most notably a weaker US dollar and ongoing hyper-inflationary increases related to materials, consumables and energy. Lower production and sales volumes of by-products (zinc, molybdenum) resulted in a lower EBIT contribution compared to the prior period.
The impact of provisional price settlements on the realised copper price for 2007 was to reduce earnings by $100 million compared to the impact of provisional price settlements in 2006. As at 31 December 2007, provisionally priced sales amounted to 272,000 tonnes to be settled in 2008.
| EBIT Variances | $m |
|---|---|
| BIT 31.12.06 (pro forma) | 4,528 |
| Sales price* | 22 |
| Volumes | (108) |
| Unit cost – real | 68 |
| Unit cost – CPI inflation | (61) |
| Unit cost – mining inflation | (86) |
| Unit cost – foreign exchange | (155) |
| Corporate social involvement | (12) |
| Other income and expenses | (69) |
| Depreciation and amortisation (excluding foreign exchange) | 36 |
| EBIT 31.12.07 (statutory) | 4,163 |
| *Net of commodity price linked costs | |
Argentina
Revenue at Minera Alumbrera decreased by 4% to $1.4 billion in 2007 compared to the previous year due to reduced gold head grades and lower realised copper prices, as a result of the impact of provisional price revaluations on comparative 2006 prices. EBIT decreased by 28% to $660 million, reflecting lower revenues, higher ocean freight costs, mining cost inflation and the commencement of the first full year of 20% net proceeds profit share payments to Alumbrera’s partner Yacimientos Mineros de Agua de Dionisio (YMAD).
Copper-in-concentrate production was slightly higher than the previous year at 180,200 tonnes, while gold production was 4% lower at 615,200 ounces, affected by lower head grades.
Copper-in-concentrate sales volumes were 2% higher over the prior period, with sustained production levels further assisted by a carry-over of sales from 2006.
Australia
Revenue from the North Queensland division rose 22% in 2007 to $2 billion as a result of higher refined copper sales and strong copper prices. EBIT increased by 7% to $1 billion in 2007, due to improved sales volumes.
The North Queensland mining operations, comprising the Ernest Henry and Mount Isa mines, produced 268,400 tonnes of copper-in-concentrate, a decrease of 3% over 2006. Lower head grades at Mount Isa reduced production by 9% compared to 2006, largely offset by higher mining tonnes and improved head grades at Ernest Henry where production increased by 14% year-on-year.
The Mount Isa smelter increased output by 2% to 217,900 tonnes and the Townsville refinery saw production increase by 11% to 232,000 tonnes compared to 2006. The expansion projects to increase capacity at the smelter to 300,000 tonnes per annum were largely complete by year end and the expanded refinery capacity enabled anode from Xstrata Copper’s Altonorte metallurgical facility in Chile to be refined at Townsville during the fourth quarter.
Canada
Higher sales volumes and robust copper and gold prices increased revenues by 4% to $4.8 billion at the Canadian operations in 2007. EBIT decreased by 41% to $256 million compared to 2006 due to lower margins on custom metal purchases resulting from lower treatment, refining and price participation rates, the impact of mining sector cost inflation, lower zinc by-product sales and a stronger Canadian dollar. These unfavourable impacts were partially offset by lower total operating costs due to the sale of the end of life recycling plants, lower post acquisition corporate costs and lower mine depreciation resulting from reduced production at Kidd Mine.
Copper-in-concentrate production from Kidd Mine was 8% lower than in 2006 due to lower throughput caused by difficult mining conditions, partially offset by higher head grades. Zinc-in-concentrate production was 18% lower compared to the previous year due to lower throughput and head grades. Throughput at the Kidd smelter increased by 7% compared to 2006 as a result of shorter shutdowns in 2007 and higher hourly processing rates. The Kidd copper refinery produced 127,800 tonnes of cathode, a similar result to 2006.
The Horne smelter processed 796,600 tonnes of feed in 2007, 6% less than the corresponding period in 2006 as a result of an unplanned two-week shutdown to repair the main SO2 blower drive and a reduction in output related to the strike at CCR. As a result, anode production dropped 4% to 177,300 tonnes. The volume of recycled feeds procured by Xstrata Recycling for processing at the Horne smelter was up by 26% to 120,000 tonnes. Greater supply and less competition from Asia boosted volumes.
The CCR refinery produced 319,600 tonnes of copper cathodes, 13% lower than 2006, largely due to the strike that began on 11 June and concluded on 24 July with the signing of a new labour agreement.
Chile
Collahuasi
Xstrata’s 44% share in the Collahuasi mine in northern Chile’s Tarapacá Region generated EBIT of $894 million, 22% higher than in the previous year, due to improved metal prices, higher sales volumes and a strong operating performance.
Xstrata’s share of copper production rose by 3% to 198,900 tonnes in 2007 compared to the previous year due to a 10% increase in copper head grade and a 6% increase in ore milled that offset the 46-day shutdown of Collahuasi’s main SAG mill in the first quarter to replace the stator. As a result of increased production, sales volumes attributable to Xstrata rose by 3% to 194,100 tonnes in 2007 compared to the previous period.
Altonorte and Lomas Bayas
Lower treatment charges at the Altonorte smelter and the strengthening of the Chilean peso against the US dollar impacted EBIT at the North Chilean operations, which was 21% lower than in 2006 at $278 million. Increased energy costs in northern Chile due to Argentine gas supply shortages, lower copper grades at Lomas Bayas open pit mine and mining sector inflation also impacted EBIT, offsetting higher copper prices.
Cathode production at Lomas Bayas was 5% lower than the previous year mainly due to reduced head grades and interruptions due to earthquakes in the final quarter. Despite higher throughput, custom anode production at Altonorte decreased by 3% due to lower copper grades in concentrates received.
Peru
Antamina
Xstrata’s 33.75% attributable share of Antamina's financial performance is divided between Xstrata Copper and Xstrata Zinc on the basis of sales revenue. A higher proportion of copper-zinc ores was mined at Antamina in 2007, compared to greater volumes of copper-only ores in 2006, resulting in lower overall copper and higher overall zinc production. Unplanned maintenance issues with the SAG mill’s electrical motor resulted in a total of 14 days shutdown in the fourth quarter.
As a result, Xstrata Copper’s share of Antamina revenue decreased by 11% to $885 million and EBIT declined by 19% to $555 million in 2007 compared to the previous year. Equity copper-in-concentrate production fell by 14% to 111,300 tonnes and equity molybdenum production also declined by 19% to 2,154 tonnes due to lower copper-molybdenum ore throughput and reduced recoveries, offset by slightly higher head grades. Sales volumes of both copper and molybdenum metal were consequently 15% and 13% lower respectively compared to 2006.
Concentrator throughput increased by 3% compared to the prior period as a result of enhancements to the grinding circuit and the initial benefits realised from the impact of the mine-to-mill programme which improved ore fragmentation in the harder copper-zinc feeds.
Tintaya
Revenue increased by 7% to $785 million and EBIT by 4% to $427 million in 2007 at Tintaya compared with 2006 as a result of higher commodity prices and a strong operational performance.
Higher mill and oxide plant throughputs were achieved through improvement initiatives such as the replacement of a secondary crusher in the flotation plant, and productivity improvements of the crusher circuit at the leaching plant. Total copper production increased by 4% to 119,800 tonnes and total copper sales by 3% to 117,400 tonnes compared to 2006.
Copper-in-concentrate production was 7% higher at 83,800 tonnes, partly due to a 7% increase in sulphide ore grades and improved mining rates due to additional mobile equipment purchases and pit phase optimisation.
Copper cathode production from the SX/EW plant was 2% lower at 36,000 tonnes due to a 15% decrease in head grade compared to 2006 and difficulties in sourcing sulphuric acid during the first quarter which impacted recoveries. Gold-in-concentrate production reduced by 3% to 38,800 ounces, mainly due to lower recoveries.
| Financial and Operating Data $m |
Statutory Year ended 31.12.07 |
Pro forma** Year ended 31.12.06 |
|---|---|---|
| Revenue | 12,794 | 12,508 |
| Argentina | ||
| Alumbrera | 1,401 | 1,457 |
| Australia | ||
| North Queensland | 1,991 | 1,635 |
| Canada* | 4,755 | 4,560 |
| Chile | ||
| Collahuasi†† | 1,384 | 1,320 |
| North Chile | 1,456 | 1,780 |
| Peru | ||
| Antamina‡ | 885 | 989 |
| Tintaya | 785 | 735 |
| Marketing, trading & other | 137 | 32 |
| EBITDA | 4,987 | 5,399 |
| Argentina | ||
| Alumbrera | 756 | 1,017 |
| Australia | ||
| North Queensland | 1,203 | 1,089 |
| Canada* | 340 | 561 |
| Chile | ||
| Collahuasi†† | 1,038 | 966 |
| North Chile | 363 | 430 |
| Peru | ||
| Antamina‡ | 699 | 796 |
| Tintaya | 537 | 508 |
| Marketing, trading & other | 51 | 32 |
| Depreciation & amortisation | (824) | (871) |
| Argentina | ||
| Alumbrera | (96) | (102) |
| Australia | ||
| North Queensland | (161) | (119) |
| Canada* | (84) | (130) |
| Chile | ||
| Collahuasi†† | (144) | (234) |
| North Chile | (85) | (79) |
| Peru | ||
| Antamina‡ | (144) | (109) |
| Tintaya | (110) | (98) |
| EBIT | 4,163 | 4,528 |
| Argentina | ||
| Alumbrera | 660 | 915 |
| Australia | ||
| North Queensland | 1,042 | 970 |
| Canada* | 256 | 431 |
| Chile | ||
| Collahuasi†† | 894 | 732 |
| North Chile | 278 | 351 |
| Peru | ||
| Antamina‡ | 555 | 687 |
| Tintaya | 427 | 410 |
| Marketing, trading & other | 51 | 32 |
| Share of Group EBIT | 47.4% | 55.7% |
| Argentina | ||
| Alumbrera | 7.5% | 11.3% |
| Australia | ||
| North Queensland | 11.8% | 11.9% |
| Canada* | 2.9% | 5.3% |
| Chile | ||
| Collahuasi†† | 10.2% | 9.0% |
| North Chile | 3.2% | 4.3% |
| Peru | ||
| Antamina‡ | 6.3% | 8.5% |
| Tintaya | 4.9% | 5.0% |
| Marketing & trading | 0.6% | 0.4% |
| Capital employed*** | 14,824 | 14,349 |
| Return on capital employed† | 35.8% | 34.4% |
| Capital Expenditure | 721 | 514 |
| Argentina | 72 | 55 |
| Australia | 214 | 180 |
| Canada* | 82 | 128 |
| Chile | ||
| Collahuasi†† | 80 | 26 |
| North Chile | 167 | 88 |
| Peru | ||
| Antamina‡ | 25 | 8 |
| Tintaya and others | 81 | 29 |
| Sustaining | 425 | 257 |
| Expansionary | 296 | 257 |
| *Canada includes Xstrata Recycling that operates businesses in Canada, the United States and Asia **Pro forma including Tintaya and Falconbridge acquisitions from 01.01.06 ***Includes goodwill allocation on acquisition of Falconbridge †ROCE % based on average exchange rates for the year and excludes Falconbridge goodwill allocated ††Xstrata’s 44% share of Collahuasi ‡Xstrata Copper’s pro rata share of Xstrata’s 33.75% interest in Antamina. Xstrata Copper’s share is determined by accounting for all product revenue, excluding zinc, offset by its pro rata share of costs which is determined on the basis or revenue earned as outlined above. |
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Altonorte molybdenum plant, commissioned in December 2007
220 tonne trucks at Ernest Henry copper mine, Australia
| Sales Volumes $m |
Statutory Year ended 31.12.07 |
Pro forma** Year ended 31.12.06 |
|---|---|---|
| Argentina – Alumbrera | ||
| Copper in concentrate (t) inter-company (payable metal) | 9,636 | 11,724 |
| Copper in concentrate (t) third-parties (payable metal) | 163,590 | 158,522 |
| Total copper (t) (payable metal) | 173,226 | 170,246 |
| Gold in concentrate (oz) inter-company (payable metal) | 30,876 | 36,830 |
| Gold in concentrate (oz) third-parties (payable metal) | 487,624 | 502,235 |
| Gold in doré (oz) third-parties (payable metal) | 73,845 | 80,114 |
| Total gold (oz) (payable metal) | 592,345 | 619,179 |
| Australia – North Queensland | ||
| Refined copper – mined copper (t) | 220,166 | 208,859 |
| Refined copper – third party sourced (t) | 11,105 | – |
| Copper in concentrate (t) (payable metal) | 37,377 | 37,057 |
| Other products (t) (payable metal) | 8,868 | 5,870 |
| Total copper (t) (payable metal) | 277,516 | 251,786 |
| Gold in concentrate and slimes (oz) (payable metal) | 136,790 | 82,714 |
| Canada | ||
| Refined copper – mined copper (t) | 45,953 | 47,517 |
| Refined copper – inter-company sourced (t) | 136,094 | 165,437 |
| Refined copper – third party sourced (t) | 264,653 | 273,596 |
| Other products inter-company (t) (payable metal) | 28,294 | 13,516 |
| Other products third-parties (t) (payable metal) | 34,706 | 3,412 |
| Total copper (t) (payable metal) | 509,700 | 503,478 |
| Zinc in concentrate (t) third-parties (payable metal) | 60,440 | 70,812 |
| Gold in concentrate and slimes (oz) (payable metal) | 839,435 | 774,000 |
| Chile – Collahuasi* | ||
| Copper in concentrate (t) inter-company (payable metal) | 36,303 | 40,184 |
| Copper in concentrate (t) third-parties (payable metal) | 131,921 | 121,585 |
| Copper cathode (t) (payable metal) | 25,904 | 26,995 |
| Total copper (t) (payable metal) | 194,128 | 188,764 |
| Chile – Lomas Bayas and Altonorte | ||
| Copper cathode (t) (payable metal) | 64,644 | 61,931 |
| Copper anode – inter-company (payable metal) | 119,096 | 79,620 |
| Copper anode – third-parties (payable metal) | 154,790 | 215,590 |
| Total copper (t) (payable metal) | 338,530 | 357,141 |
| Gold in anodes (oz) (payable metal) | 34,472 | 23,263 |
| Peru – Antamina Copper‡ | ||
| Copper in concentrate (t) inter-company (payable metal) | 27,001 | 32,575 |
| Copper in concentrate (t) third-parties (payable metal) | 79,351 | 92,714 |
| Total copper (t) (payable metal) | 106,352 | 125,289 |
| Peru – Tintaya | ||
| Copper in concentrate (t) third-parties (payable metal) | 81,418 | 77,040 |
| Copper cathode (t) (payable metal) | 36,023 | 37,446 |
| Total copper (t) (payable metal) | 117,441 | 114,486 |
| Gold in concentrate and slimes (oz) (payable metal) | 32,881 | 35,763 |
| Mined copper sales (t) (payable metal) | 968,155 | 960,019 |
| Custom copper sales (t) (payable metal) | 748,738 | 751,171 |
| Inter-company copper sales (t) (payable metal) | (220,330) | (177,619) |
| Total copper sales (t) (payable metal) | 1,496,563 | 1,533,571 |
| Total gold sales (oz) (payable metal) | 1,605,047 | 1,498,089 |
| Average LME copper cash price ($/tonne) | 7,139 | 6,740 |
| Average LBM gold price ($/oz) | 697 | 599 |
| *Xstrata’s 44% share of Collahuas **Pro forma including Tintaya and Falconbridge acquisitions from 01.01.06 †100% consolidated figures ‡Xstrata Copper’s pro rata share of Xstrata’s 33.75% interest in Antamina |
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Developments
Project Development
In December 2007 Xstrata Copper and mining consultants Bechtel signed an innovative long-term strategic alliance under which Bechtel will provide engineering, procurement and construction services for the development of Xstrata Copper’s pipeline of copper projects for the next ten years. The alliance also involves the design of a replicable copper concentrator and other facilities that will be applied to Xstrata Copper’s major individual projects.
Argentina
Alumbrera
Construction of the new molybdenum plant was completed in the fourth quarter of 2007 at a cost of $16 million. First molybdenum concentrate production occurred in the first quarter of 2008.
In November 2007, the first stage of a planned flotation upgrade was completed, with the commissioning of six flotation columns that will improve metallurgical recoveries.
An ongoing ore delineation drilling programme in the Alumbrera pit, undertaken both within the existing ore envelope and for extensions at depth, confirmed a further 20 million tonnes of additional ore reserves during the first half of 2007. The mine plan was re-optimised based on this new geological model with additional mineralisation, and together with improved final pit slope angles resulted in an increase in contained metal reserves of more than 3%.
El Pachón
During the 2006-07 summer drilling programme, 19,800 metres of drilling were completed, including resource estimation, geotechnical, hydro-geological and geo-metallurgical holes. During the year, a draft pre-feasibility study was completed and baseline work is under way in both Argentina and Chile for the environmental impact assessment. This work built on the feasibility study completed in 1998 by El Pachón’s previous owners. Community involvement and stakeholder consultation programmes were initiated in the relevant areas of Argentina and Chile.
Following a full review of existing information and the 2006-07 summer drilling programme, the first Mineral Resource estimate for El Pachón has been included in the Group’s reserves and resources statement, totalling 980 million tonnes at grades of 0.58% copper, 2.4 grams per tonne silver and 0.016% molybdenum in the measured, indicated and inferred categories, using a 0.3% copper cut-off grade.
In the first quarter of 2008 approximately 30,000 metres of drilling and environmental baseline work is being completed during the summer work programme. Xstrata Copper will make a decision whether to scale up activities and proceed into an updated feasibility study during the first half of 2008 after completing a review of the overall economics of the project.
Australia
North Queensland
In 2007, mining studies progressed on underground mass mining options for both Mount Isa and Ernest Henry mines, as part of an overall operational strategy to sustain current copper production capacities in North Queensland. The mass mining studies aim to progressively increase the Isa mine hoisting and milling rates to 7 million tonnes per annum and to extend the mine lives at both Isa and Ernest Henry mines sites. Positive pre-feasibility results at Ernest Henry led to the approval of investment of AUD26 million to construct the first stage of an underground decline that will facilitate early access to underground ore and improve the continuity between the open cut and underground mines. Construction of the underground decline began in February 2008 and is expected to be complete in early 2009. A feasibility study to assess the viability of full scale underground mining operations began in early 2008 and is running in parallel with the development of the first stage of the decline.
At Mount Isa, a pre-feasibility diamond drilling programme on the 500 orebody enabled a significant upgrade to the previous Inferred Mineral Resource estimate. A total of 25 million tonnes of resource has been converted to an indicated status from an inferred category. Drilling is continuing to further increase confidence and upgrade Mineral Resource categorisation. The pre-feasibility study into underground mass mining options is expected to be completed by the end of 2008 with a full scale feasibility study planned for 2009.
The Townsville refinery expansion project to 300,000 tonnes per year was completed in October. The refinery was running at full capacity in the fourth quarter due to the purchase and processing of anode from Xstrata Copper’s Altonorte smelter in Chile.
The smelter expansion to 300,000 tonnes per year will be completed in the first quarter of 2008 with the delayed commissioning of the new Pressure Swing Absorption (PSA) oxygen plants. The new slag crushing and screening plant was completed in June 2007 and has operated effectively for the balance of the year.
Canada
The end-of-life electronic recycling assets, comprising three shredding and de-manufacturing facilities in the US and Canada, were sold in March 2007. The output from these plants continues to be processed at Xstrata smelters under offtake agreements. Noranda Recycling was renamed Xstrata Recycling in July 2007.
The mining zone at Kidd Mine was extended from 8,800 feet to 9,100 feet, enabling scheduled processing rates to be maintained at 2.7 million tonnes per year for 2008 and 2009. The feasibility study into extending mining zones to 9,900 feet is currently under way and will be completed during 2008.
The reclamation of the Murdochville minesite and associated townsite started in 2007. Processing facilities were demolished and private residential properties identified as having higher than acceptable levels of contaminants in surface soils were fully remediated.
Chile
Collahuasi
In the first half of 2007, a full business strategic review was conducted by the shareholders with Collahuasi management. This led to the development of an agreed business strategy to more than double production to 1 million tonnes a year through two major expansions.
Feasibility studies into the first expansion to approximately 650,000 tonnes per annum of copper in 2010 are scheduled for completion in the second half of 2008. This initial stage would involve a concentrator throughput increase to 170,000 tonnes a day and an increase to current cathode production levels.
A scoping study has also been initiated into a second expansion to 1 million tonnes per annum of copper from 2013 that would increase concentrator throughput to 260,000 tonnes a day and involve the construction of a major SX-EW oxide operation to service the proposed development of the Rosario Oeste deposit.
Following the 2007 drill programme, Collahuasi published an updated Mineral Resource in January 2008 of 5.19 billion tonnes at an average grade of 0.83% copper, an increase of 28% in tonnage compared to the previously published Mineral Resource. The upgraded Mineral Resource includes for the first time 746 million tonnes at a grade of 1.06% from the Rosario Oeste deposit.
North Chile
In June 2007, Xstrata Copper approved the expansion of Lomas Bayas by 15% to 75,000 tonnes per annum of copper cathode at a capital cost of $70 million. This project is scheduled to be completed in the second half of 2008. In addition, the Lomas Bayas mine life was extended by seven years to 2020 following the integration of the nearby Lomas II deposit into the operation’s mining and processing plans.
In July 2007, construction started on the phase IV expansion of the Altonorte smelter, following the receipt of environmental approvals. The project will increase production capacity by almost one third to 380,000 tonnes a year and is due to be complete by the end of 2008. Sulphuric acid production will increase from 800,000 tonnes to 1.1 million tonnes per annum and sulphur dioxide emissions capture will increase from 93% to 95.5%. Estimated capital costs for the expansion have increased to $89 million due to the weakening US dollar and increased labour costs.
In November 2007, Altonorte began a feasibility study to double molybdenum processing capacity to 28,000 tonnes a year. The project’s environmental impact study was presented to Chile’s environmental authorities for approval in January 2008. Following the commissioning of a dust treatment plant at Altonorte in January 2008, further incremental investments will also be made in various projects to enhance the smelter’s environmental performance.
El Morro
During 2007, 14,600 metres of drilling were completed for resource estimation and metallurgical sampling, geotechnical and hydro-geological studies and water definition. The exploration tunnel advanced to the final depth of 442 metres and four metallurgical bulk samples were obtained for pilot plant testing. An extensive programme of meetings and presentations of the project to stakeholders, including representatives of local communities and authorities, was undertaken during the year and a comprehensive community social involvement programme initiated.
The final feasibility study report was published in January 2008. The feasibility study outlined initial capital investment of $2.5 billion to construct an operation that would produce 195,000 tonnes of copper and 355,000 ounces of gold per annum over the first five years. The study outcomes are currently being considered by Xstrata Copper and its Joint Venture partners Metallica Resources.
Energía Austral
In May 2007, Chile's environmental authorities Conama returned the environmental impact study (EIS) of the Río Cuervo hydropower project to Energía Austral noting that there was insufficient information to evaluate the project. In July 2007 the Energía Austral project team was restructured to focus on technical studies to complete a feasibility study and to enhance local stakeholder engagement.
In the second half of 2007, a new EIS commenced under the guidance of international consultants Knight Piesold and consultations commenced with national and regional authorities, communities and neighbourhood associations. The revised EIS is expected to be submitted in the second half of 2008. A social baseline study was undertaken during the year to provide the framework to implement a community involvement programme consistent with Xstrata’s standards.
Peru
Antamina
An incremental expansion to the Antamina concentrator was approved in November 2006 to increase concentrator throughput capacity by 10%. The first part of this work, involving coarse ore conveying enhancements and new pulp lifters in the SAG mill, was completed in the first half of 2007. The remainder of the project, involving the installation of a pebble crushing circuit, is currently under way and is scheduled for commissioning in March 2008. A substantial resource definition drilling campaign with the objective of augmenting the ore reserve base was also initiated with 101,000 metres of drilling conducted in 2007 and a further 132,000 metres planned in 2008. An updated Mineral Resource statement is expected at the end of the first half of 2008.
Southern Peru
In November 2007, Xstrata Copper announced the creation of the Southern Peru Division, headquartered out of the city of Arequipa. The new division is responsible for the management of the Tintaya mining operation, the Las Bambas and Antapaccay development projects, regional exploration and the development and implementation of the Company’s growth strategy in southern Peru. This division will also further support Xstrata Copper´s interests and involvement in Antamina.
Tintaya and district
An upgraded secondary crushing circuit was successfully commissioned during the third quarter of 2007 within the budget of $8 million. This new circuit successfully increased throughput by at least 11% as planned.
A feasibility study into molybdenum concentrate production at Tintaya was completed at the end of 2007 estimating an investment of $10.5 million to build a plant with capacity to produce 1,500 tonnes of molybdenum concentrate per annum. If approved, construction will commence mid 2008 with full production expected in 2009.
A positive pre-feasibility study into the stand-alone development of the Antapaccay project, located less than 10 kilometres from Tintaya, was completed in 2007. The pre-feasibility work, which included 40,000 metres of infill drilling, confirmed an updated Mineral Resource estimate for Antapaccay of 520 million tonnes at a grade of 0.72% copper and minor gold values, using a 0.4% copper cut-off grade. This represents an increase of 10% in tonnage over the previously published Mineral Resource. It is planned to complete a final feasibility study by the end of 2008 into the development of this significant project, including the incorporation of additional drilling information which indicates further extensions to this mineral deposit.
A full review of the information on the Coroccohuayco deposit, approximately 10 kilometres southeast of Tintaya, was performed. As a result Xstrata Copper has been able to publish a JORC compliant Mineral Resource showing an estimate of 90 million tonnes at a grade of 3.10% copper and 0.30 grams per tonne gold, using a 1.5% copper cut-off grade.
Las Bambas
In 2007, 85,000 metres of resource drilling were completed at Las Bambas, focused on expanding the resources at Ferrobamba and Chalcobamba deposits.
To date, an accumulated total of 241,000 metres of resource drilling has been completed on the project. Including 2007 drilling results, Mineral Resources increased by 19% and now stands at 860 million tonnes at a grade of 0.93% copper and 0.02% molybdenum, using a 0.4% copper cut-off grade. An additional 67,000 metres of drilling is programmed for 2008 to take the initial five-year mine plan resource to the measured category. Additional exploration drilling is also planned to test nearby geophysical targets.
During the year a conceptual study was completed that indicates a robust project based on a conventional 80,000 tonnes per day flotation process. A pre-feasibility study is targeted for completion by the end of 2008.
Philippines
Tampakan
On 30 March 2007, Xstrata Copper assumed management control of the Tampakan Project through its Philippine-based affiliate Sagittarius Mines, Inc (SMI) after exercising its option in December 2006 to acquire 62.5% of the controlling interest in the project.
Activities in 2007 focused on integrating SMI into the Xstrata Copper organisation, the strengthening of community development and stakeholder engagement programmes and completion of additional technical studies to supplement the pre-feasibility work undertaken by Indophil Resources, including 24,700 metres of drilling. In December 2007 Xstrata Copper published a new Measured, Indicated and Inferred Resource estimate for Tampakan of 2.2 billion tonnes at a grade of 0.6% copper, 0.2 grams per tonne gold and 0.007% of molybdenum using a 0.3% copper cut-off grade. The current Mineral Resource represents an increase of over 10% in tonnes and contained copper compared to the previous estimate. The feasibility study remains on target to begin in the second half of 2008.
Papua New Guinea
Frieda River
In January 2007, Xstrata Copper exercised an option to obtain a 73.7% interest in the Frieda River project in a joint venture with Highlands Pacific Limited (16.4%) and Japan’s OMRD (9.9%). It subsequently assumed management control and conducted scoping study work during the year, including metallurgical studies, infrastructure definition and exploration. In total, 1,423 metres of drilling to collect metallurgical samples and 6,135 metres of exploration drilling were completed.
Environmental baseline surveys commenced with a focus on water quality. Key stakeholders were identified and strategies are being developed to engage with communities. Following the completion of the scoping study in January 2008, the current work programme includes approximately 20,000 metres of drilling to improve the confidence categories in the resource inventory, and critical path permitting and engineering studies to allow the project schedule to accelerate, if appropriate.
| Summary Production Data |
Statutory Year ended 31.12.07 |
Pro forma** Year ended 31.12.06 |
|---|---|---|
| Total mined copper (t) (contained metal) | 986,663 | 1,011,295 |
| Total mined gold (oz) (contained metal) | 777,257 | 786,813 |
| Total copper cathode (t) | 802,271 | 832,768 |
| Consolidated C1 cash cost – post by-product credits (US¢/lb) | 56.9 | 56.7 |
Darryl Booth conducts an underground survey at Kidd mine, Canada
Environmental advisers Jason Alexander and Patrick Windsor conduct field studies at Ernest Henry mine, Australia