Copper
Developments
In recent months, Xstrata Copper management has been proactively responding to the global economic crisis and its impact on the copper industry. Operational and project reviews have resulted in significant reductions in operating and capital cost projections into 2009 and organisational reviews across the divisions have resulted in headcount reduction, including through the non-replacement of vacant positions, at a number of operations.
Argentina
Minera Alumbrera
Minera Alumbrera completed commissioning of the new molybdenum plant during 2008, producing 450 metric tonnes of molybdenum concentrate to the end of the year. A further 38 million tonnes of additional ore reserves were defined in the first half of 2008 as part of the ongoing ore delineation drilling programme in the Alumbrera pit, undertaken both within the existing ore envelope and for extensions at depth.
El Pachón
Following the publication of a Mineral Resource estimate for El Pachón in March 2008, work continued through the remainder of the year to update feasibility studies, with a particular focus on the impact of the new fiscal regime being proposed by the federal government on the project’s economics. No decision has yet been taken as to the likely timing of any final feasibility study on the El Pachón project.
Australia
North Queensland
During 2008, studies advanced into underground mass mining options for both Mount Isa and Ernest Henry mines, resulting in a 19% increase to 56 million tonnes to underground Mineral Resources at Ernest Henry and publication of an initial underground Mineral Reserve estimate of 10 million tonnes. The feasibility study into a potential large scale underground sub-level caving operation at Ernest Henry is expected to be completed in the first half of 2009.
Warren Johnson and Graham McAdam preparing a risk assessment for maintenance activities at the Townsville refinery, Australia
In August 2008, the Ernest Henry open pit had a wedge failure in the southern wall. Whilst this did not impact ore production in 2008, as part of the ongoing reassessment of ground conditions, engineering and geotechnical assessments are currently under way to determine the optimal mine plan and schedule.
The last phase of the copper smelter expansion project, namely the construction and commissioning of two new oxygen plants was completed in the fourth quarter of 2008, raising the nominal production capacity to the targeted 300,000 tonnes per annum. A feasibility study evaluating further emissions capture enhancements at the copper smelter is continuing.
Canada
In 2008, Kidd Mine received approval to extend the mining zone at Mine D from 9,100 feet to 9,500 feet, thereby allowing it to maintain a mining rate of 2.7 million tonnes per annum until 2012 and extending the operation’s life by one year to 2017.
A number of key environmental initiatives were completed during 2008, including improvements to tailing effluent quality at the Kidd Metallurgical site, and increased capture of fugitive lead emissions at Kidd smelter and fugitive arsenic emissions at the Horne smelter.
Reclamation activities continued at the closed Murdochville mine and metallurgical facility and associated town site. The soil remediation program for all private residences in the town was completed one year ahead of schedule. Soil remediation activities commenced in the area around the port operations in Gaspé and are targeted for completion in the summer of 2009.
Chile
Collahuasi
During 2008, approvals were secured to commit $183 million (100% share) for the construction of an enlarged primary crusher/conveyor system to increase the ore delivery rate from the main Rosario pit to the concentrator to 170,000 tonnes per day, as part of Collahuasi’s Phase 1 expansion strategy to increase annual copper production capacity to 600,000 tonnes from the second half of 2010. The results of the completed feasibility study into this project will be considered by Collahuasi shareholders during the first half of 2009.
In January 2008, Collahuasi announced a 28% increase in total estimated Mineral Resources to 5.1 billion tonnes.
North Chile
The Lomas Bayas expansion project to increase production by 15% to 75,000 tonnes per annum was successfully commissioned within the approved budget of $70 million in November 2008, assisting with the lowering of the cash cost profile of the operation. The timing of a commitment to the Lomas II project, which would extend the mine life to 2020, is currently under review.
Geological test-work has identified significant sulphide mineralisation directly beneath the existing mining operation at Lomas Bayas. A diamond-drilling campaign totalling 6,000 metres has been budgeted for 2009 to quantify the tonnage and grade of this resource for further technical and economic analysis.
The Altonorte phase IV expansion to 1.2 million tonnes per annum of smelter feed was successfully commissioned in October, comprising the construction of the new no. 1 acid plant that will increase annual acid capacity to 1.1 million tonnes.
Molybdenum roasting operations were suspended in October 2008 due to insufficient feedstock and poor market conditions following the global economic downturn. Mine off-take contractual commitments for 2009 will be assigned to a third-party during a strategic review of molybdenum operations following the completion of the Altonorte leaching and roasting expansion study.
Energia Austral
In 2008, engineering and environmental impact studies progressed on the proposed 1,100MW hydropower project, comprising three generating facilities and a transmission line in southern Chile’s Aysén region. An Environmental Impact Study for the Rio Cuervo generating facility is expected to be submitted to the relevant authorities in the first quarter of 2009.
El Morro
A final Feasibility Study and an Environmental Impact Study (EIS) for El Morro were completed in 2008. The EIS was submitted to the authorities for approval in November 2008 and is currently undergoing the official public consultation phase, which ends on 2 March 2009.
A decision on whether to progress the project is expected by the end of 2009, subject to obtaining the necessary community and regulatory support and to market conditions.
Peru
Antamina
In mid-2008 the pebble crushing circuit was successfully commissioned for a total investment of $42.7 million, resulting in improved throughput productivities at the concentrator.
In November, Antamina announced a 77% increase to estimated Mineral Reserves, equivalent to an additional 325 million tonnes of ore, taking proven and probable reserves to 745 million tonnes at a copper grade of 1.06%. The increased reserves incorporate data obtained from over 105,000 metres of drilling carried out from late 2006 through September 2007 and indicate the potential for further expansion.
In 2008, Antamina completed 115,000 metres of resource definition drilling, less than the 132,000 metres originally planned as capital expenditure was reduced in view of the difficult global financial environment in the latter half of the year.
Antamina is progressing with a feasibility study into an expansion of the processing capacity of the concentrator, supported by the significant increase in the mineral resource base. Results of the feasibility study are expected to be available for Antamina shareholder consideration during the first half of 2009.
Southern Peru
In March 2008, Xstrata Copper announced a total Mineral Resource of over 1.6 billion tonnes of copper mineralisation in southern Peru, including the Tintaya mine and the Antapaccay, Coroccohuayco and Las Bambas development projects. During 2008, feasibility studies commenced at Antapaccay and Las Bambas projects, including a number of studies to examine synergies between these sites as part of an overall integrated regional strategy, including operational, port and transport infrastructure and power supply. A 20,000 metre in-fill drilling programme was successfully completed at Antapaccay in 2008 and the feasibility study remains on target for completion in the third quarter of 2009.
At the Las Bambas project, 67,000 metres of infill drilling were completed to progress feasibility studies, with encouraging results from metallurgical test work. A proposed resettlement programme was presented to the Fuerabamba community and discussions are progressing.
Some 20 kilometres of geophysical surveys were completed in the Coroccohuayco area, 10 kilometres south east of Tintaya, where surface oxide ores have been identified as well as important sulphide anomalies.
Philippines
At the Tampakan project, work on the Extended Pre-Feasibility Study (XPFS) continued throughout 2008, and included some 9,000 metres of drilling. The results of the pre-feasibility study were delivered to the Sagittarius Mines Inc. (SMI) shareholders in late December. In view of the preliminary outcomes of the study and current market conditions, SMI management will further review the detailed engineering, processing requirements and scope of the potential operation during the first half of 2009. This review is intended to produce a viable development proposition which will be considered by the partners in SMI before any decision is made to move to a final feasibility study stage.
Papua New Guinea
A scoping study for the Frieda River project completed in early 2008 showed encouraging technical and commercial results and in excess of 20,000 metres of drilling was completed in 2008. Xstrata Copper’s first Mineral Resource estimate for the Frieda River project of 51 million tonnes for the Nena high grade deposit and 840 million tonnes for the Horse-Ivaal-Trukai porphyry deposit will be published in the Group’s new Reserves and Resources statement. Approval has been given to start pre-feasibility work.
| Sales volumes | ||
|---|---|---|
| Year ended 31.12.08 | Year ended 31.12.07 | |
| Argentina – Alumbrera† | ||
| Copper in concentrate (t) inter-company (payable metal) | 10,267 | 9,636 |
| Copper in concentrate (t) third-parties (payable metal) | 141,053 | 163,590 |
| Total copper (t) (payable metal) | 151,320 | 173,226 |
| Gold in concentrate (oz) inter-company (payable metal) | 28,013 | 30,876 |
| Gold in concentrate (oz) third-parties (payable metal) | 402,980 | 487,624 |
| Gold in doré (oz) (payable metal) | 59,559 | 73,845 |
| Total gold (oz) (payable metal) | 490,552 | 592,345 |
| Australia – North Queensland | ||
| Refined copper – mined copper (t) | 231,283 | 220,166 |
| Refined copper – inter-company and third-party sourced (t) | 34,502 | 11,105 |
| Copper in concentrate (t) (payable metal) | 12,404 | 37,377 |
| Other products (payable metal) | 1,218 | 8,868 |
| Total copper (t) (payable metal) | 279,407 | 277,516 |
| Gold in concentrate and slimes (oz) (payable metal) | 121,391 | 136,790 |
| Canada | ||
| Refined copper – mined copper (t) | 27,286 | 45,953 |
| Refined copper – inter-company sourced (t) | 232,643 | 136,094 |
| Refined copper – third-party sourced (t) | 176,834 | 264,653 |
| Other products inter-company (t) (payable metal) | 17,670 | 28,294 |
| Other products third-parties (t) (payable metal) | 25,445 | 34,706 |
| Total copper (t) (payable metal) | 479,878 | 509,700 |
| Total zinc in concentrate (t) (payable metal) | 73,966 | 60,440 |
| Gold in concentrate and slimes (oz) (payable metal) | 856,118 | 839,435 |
| Chile – Collahuasi†† | ||
| Copper in concentrate (t) inter-company (payable metal) | 33,005 | 36,303 |
| Copper in concentrate (t) third-parties (payable metal) | 142,556 | 131,921 |
| Copper cathode (t) (payable metal) | 21,839 | 25,904 |
| Total copper (t) (payable metal) | 197,400 | 194,128 |
| Chile – Lomas Bayas and Altonorte | ||
| Copper cathode (t) (payable metal) | 59,475 | 64,644 |
| Copper anode – inter-company (payable metal) | 124,999 | 119,096 |
| Copper anode – third-parties (payable metal) | 122,587 | 154,790 |
| Total copper (t) (payable metal) | 307,061 | 338,530 |
| Gold in concentrate and slimes (oz) (payable metal) | 24,177 | 34,472 |
| Peru – Antamina‡ | ||
| Copper in concentrate (t) inter-company (payable metal) | 22,908 | 27,001 |
| Copper in concentrate (t) third-parties (payable metal) | 87,065 | 79,351 |
| Total copper (t) (payable metal) | 109,973 | 106,352 |
| Peru Tintaya | ||
| Copper in concentrate (t) inter-company (payable metal) | 8,804 | – |
| Copper in concentrate (t) third-parties (payable metal) | 63,312 | 81,418 |
| Copper cathode (t) (payable metal) | 25,455 | 36,023 |
| Total copper (t) (payable metal) | 97,571 | 117,441 |
| Gold in concentrate (oz) (payable metal) | 23,841 | 32,881 |
| Mined copper sales (t) (payable metal) | 887,930 | 968,155 |
| Custom copper sales (t) (payable metal) | 734,680 | 748,738 |
| Inter-company copper sales (t) (payable metal) | (217,653) | (220,330) |
| Total copper sales (t) (payable metal) | 1,404,957 | 1,496,563 |
| Total gold sales (oz) (payable metal) | 1,488,066 | 1,605,047 |
| Average LME copper cash price ($/t) | 6,956 | 7,139 |
| Average LBM gold price ($/oz) | 872 | 697 |
- †100% consolidated figures
- ‡Including Xstrata Copper’s pro rata share of Xstrata’s 33.75% interest in Antamina
Charlie Sartain
Chief Executive
Xstrata Copper
Contribution to Group Revenue in 2008
Contribution to Group EBIT in 2008
Relevant links
For more information visit www.xstratacopper.com