Australia’s Prime Minister JohnHoward attended this Thursday’s offi-cial opening of the A$1.0 billion MurrinMurrin nickel-cobalt project inWestern Australia. By far the largest ofthe new generation of Australian lat-eritic nickel projects, Murrin Murrin isa joint venture between AnacondaNickel Ltd (60%) and Swiss-basedcommodities trader, GlencoreInternational AG (40%).

The full design capacity of 45,000 t/yof nickel and 3,000 t/y of cobalt forstage one of the project is expected tobe reached by the end of the first half ofnext year, although teething problemsconcerning the flash furnace compo-nent of the project (this issue, p.82)have thus far restricted operations to25% of capacity. To date, there hasbeen a 60 t shipment of Murrin Murrinnickel to Europe and a second shipmentis scheduled early next month. Averagecash operating costs (including by-product cobalt credits) are forecast atUS$0.50/lb.

An intended second-stage develop-ment would boost annual output to115,000 t and reduce operating costs tonearer US$0.25/lb. Infrastructure ten-ders for the expansion are expected tobe awarded in the next two weeks.

Speaking at the opening ceremony,Anaconda’s managing director, AndrewForrest, said that low-cost nickel minesin Australia were poised to invigoratethe global nickel industry. Earlier, thecompany revealed that it plans to com-mission its Mount Margaret nickel pro-ject, located 100 km northwest ofMurrin Murrin, by the end of 2001.The project is costing an estimatedUS$861 million and at peak productionannual output is expected to reach100,000 t of nickel and 5,000 t of cobalt.Taking into account by-product cobaltcredits, and based on a cobalt price ofUS$10/lb, Anaconda is forecasting cashoperating costs at Mount Margaret ofUS$0.30-0.33/lb.

The combined nickel productionfrom both projects, if achieved, would

equate to approximately 20% of cur-rent global demand. Apart fromMurrin Murrin and Mount Margaret,other Western Australian lateritic nick-el projects include Preston Resources’Bulong mine, and Centaur’s Cawseoperation (MJ, June 4, p.423). ■■

Australiansdig in

Although Australia’s gold-miningindustry has a reputation for resiliencewhen times are hard, there is littledoubt that it is now facing one of itstoughest challenges ever. The price ofgold is at a 20-year low and the prospectof any significant recovery seems someway off, with actual or planned sales bycentral banks, and a proposal that theIMF should dispose of a substantialportion of its gold holdings, having hadcalamitous consequences for investorsentiment towards the precious metal.

In Western Australia, the dominantgold-producing state, at least 17 gold-processing plants have closed downthrough lack of ore, an estimated 1,800geologists are out of work and hundredsof drill rigs are reportedly standing idle.People are abandoning the miningtowns to seek work in the cities, and inthe key mining centre of Kalgoorlieretail sales have slumped by 15% overthe past year and the price of residen-tial properties has fallen by 10%.

This week, at the start of the annual‘Diggers and Dealers’ forum inKalgoorlie, those attending were givenlittle encouragement. David Keogh,CIBC Wood Gundy’s office director inthe town, warned: “it’s tough and it’sgoing to get tougher”, and one seniorindustry executive predicted that if thegold price stays down, Australia’s goldproduction could halve over the nextthree years.

JOURNALLondon,July 30, 1999Volume 333No. 8542

Established 1835ISSN 0026-5225

Mining Weekp.77 Murrin Murrin openedby PM; Australian gold minersface gloomy future; SouthAfrican mines in direcircumstances; Tsumeb findsbuyer; UK fluorspar producer toclose; US mines face millsiterestriction; Small Chinesetungsten mines targeted;Metal production’s value fallsin Canada.

Industry in Actionp.81 Billiton explores throughMaya; Rio Tinto pays for juniorexploration; Venezuelan goldconfirmed; Discovery in BurkinaFaso; Anaconda reports onWestern Australian projects;Noranda’s Magnola scheduleslips; Assmang progress;Gosowong start-up; Local supportfor Ok Tedi; Ashton finds Mt Weldpartner; Delta lowers costs;PacMin improves; Gresik outputincreasing; Oryx solves strike;Sipa alters mine plan.

Technology Todayp.84 Bigger rebuild range fromP&H; Weir supplies lateriteprojects; Navoi upgrade goes toJapanese companies; Caterpillargets mining equipment order;Mogensen launches sizer;Environmental award forconsultant; Kosovo destinationfor Ingersoll drills.

Focus andCommentp.86 Iberia: the future liesdeep; Farce and tragedy.

Mineral Marketsp.88 Sleepy summer begins atLME; Sumitomo sues CreditLyonnais; Palladium volatilityover?; Swiss admit slip; Goaniron ore industry threatened.

Mining Financep.89 Rio Tinto’s first halfresults “held up well”; Past yeargood, but future obscure forPeñoles; Rio Algom profits slumpon low prices; New directioncosts Fluor dear, sees betterfuture; Cominco loss affectsTeck; Bad news continues atInco, Noranda in the black;Pasminco divests coal assets;Euro-Franco merger approved;Aquarius Platinum to go aheadwith London listing.

A substantial hedge book is helping Sons ofGwalia to maintain strong profits despite thelow gold price. (Photograph courtesy of Sonsof Gwalia.)

Continued on p.78

Anaconda’saspirations

Personal copy; not for onward transmission

The country has an annual gold produc-tion of some 300 t and is the third largestproducer after South Africa and the US.Western Australia alone accounts forapproximately 11% of world output.

David Reed, the chairman of CIBCWorld Markets Australia Ltd, warned ofthe consequences for exploration if the goldprice fails to recover significantly. He esti-mates that Australian exploration fundingthis year looks set to decline by 40-50%from the A$500 million spent in 1998.Australia’s Prime Minister, John Howard,has agreed to meet a delegation from theAssociation of Mining and ExplorationCompanies, who will try and secure taxbreaks or tax incentives along Canadianlines as a means of attracting more invest-ment dollars. But hopes are not high.

Although the low gold price has broughtAustralian casualties and more are likely,Australian gold producers, for the mostpart, have fared better than their overseascompetitors. Many of their operations arelow-cost but, more importantly, many havehedged forward a substantial proportion oftheir output in Australian dollars at anaverage price of about A$520/oz. This com-pares with the current spot price for gold inAustralian dollars of around A$395/oz andthe US dollar price of around US$253/oz. Insome cases, the hedging programmes extendover ten years.

Thus, for example, one of the biggestAustralian gold producers, Sons of Gwalia,has recently promised to pay dividends andincrease earnings in spite of the present dif-ficult climate because, it says, the compa-ny’s strong profitability and cash flows areunderwritten by a substantial gold hedgebook. The market value of its book at June

30 was A$330 million and in the preceding12 months the company produced 450,000oz at a cash cost of around A$370/oz. Cashmargins are expected to be maintained ataround A$300/oz.

Looking ahead, Mr Reed at CIBC sug-gested at the Kalgoorlie conference that aturnaround in the price of gold will onlyoccur when hedge funds cover their shortpositions. He estimates that these positionsrepresent between 5,000 and 6,000 t of goldand contends that short selling by hedgefunds has put more pressure on the price ofgold than the potential selling by centralbanks. Gold has a unique attraction in that,under the present circumstances, it is possi-ble to borrow gold at an interest rate of only1-2%, sell it and invest in bonds in the USto achieve a 4.5-5.0% return. However, asMr Reed pointed out: “You can’t makemoney out of selling a commodity short for-ever”.

The impact of the extensive hedge salesconducted by the miners themselves tendsto be overlooked, however. London-basedGold Fields Mineral Services calculatesthat the total hedge position of the world’sgold producers is around 3,000 t. It has beenbuilt up over a period of 10-15 years andcontinues to grow. By comparison, the pro-posed IMF gold sale is for a maximum of311 t, the UK plans sales of 415 t over fiveyears and Switzerland is considering thepossibility of selling up to 1,300 t of golddeemed surplus to its requirements.According to Hester le Roux, a director ofGFMS, “gold’s fall is not about the IMFsale, it’s not even about the UK auction, it’sa bigger trend that has been around sometime”.

. . . South Africanwoes

Whatever the reasons for gold’s fall fromgrace, miners are suffering, and whilst theposition is serious in Australia it is dire inSouth Africa, where production costs arehigher and where the gold mines remain thecountry’s biggest source of foreign exchangeearnings (accounting for 17% or US$4.1 bil-lion of total merchandise exports in 1998).The unlikely alliance between managementand unions, cemented through their opposi-tion to the proposed sale of IMF gold, con-tinues to hold (MJ, July 23, p.65).

At its peak, in 1987, the South Africangold-mining industry employed a workforceof 530,000 and gold exports accounted forsome 50% of foreign exchange earnings.Since then the workforce has more thanhalved and if the gold price persists at itscurrent low level, the Chamber of Minesand the National Union of Mineworkersestimate that more than 100,000 jobs are atrisk. At a time when unemployment is run-ning at 30%, the social implications areominous.

Furthermore, the neighbouring countriesof Lesotho and Mozambique will be affect-ed significantly. They contribute about40% of South Africa’s gold-mining work-force and receive hundreds of millions ofrands in annual remittances, with a miner’ssalary supporting anything up to ten familymembers. ■■

Tsumeb sale nearcompletion

An acquisition agreement for the purchaseof the liquidated Namibian base and pre-cious metals producer Tsumeb Corp. (TCL)has been finalised by Australia’s Metals &Mining Corp. of Namibia (MMN), one oftwo interested buyers (MJ, February 19,p.114). Under the agreement, which MMNanticipates will be concluded by the end ofSeptember, MMN plans to list on theNamibian Stock Exchange (NSX), and willalso seek a secondary listing on the LondonStock Exchange, managing director PeterPrentice told Mining Journal.

A prospectus is due to be issued withinthe coming month and the flotation will beused to raise part of the funding required toexecute the deal. MMN originally offered tobuy Tsumeb’s assets for N$147 million(US$25 million) under a heads of agreementnegotiated with the provisional liquidatorsof TCL in February. The offer subsequentlylapsed as the process of supplying financialguarantees could not be completed beforeNamibia’s High Court ordered the compa-ny’s final liquidation in April. MMN is nowunderstood to have reduced its offer toN$113 million as it does not wish to pur-chase all of TCL’s assets, the balance ofwhich would be sold off individually by theliquidators to cover the N$213 million owedto creditors.

MMN intends to focus on acquiring andupgrading TCL’s core assets, first by bring-ing back into production the undergroundmines at Kombat, near the Tsumeb coppersmelter/lead refinery complex in the north-east, and the Otjihase mine east of the capi-tal, Windhoek. The company plans to use“different mining methods and new miningequipment, which will significantly reducecosts”, while modifications would also bemade to the Tsumeb copper smelter tomake it more efficient and meet environ-mental guidelines, Mr Prentice added.

The government is believed to favourMMN’s approach to revitalising TCL overthe plans of a local consortium, NamibianMining & Processing (NMP), also known asNamibia Base Metals (NBM), whichincludes several senior managers previouslyemployed by Gold Fields Namibia (GFN),the former owner. This is despite NMP’soffer to pay a higher price for TCL compris-ing N$160 million for the assets and a fur-ther N$200 million for establishing an envi-ronmental fund. ■■

78 Mining Journal, London, July 30, 1999

MINING WEEK

Australians dig in . . .Continued from p. 77

Change High- Year’son week Low Max/Min

Share Indices July 29 (%) (%)FT Ordinary 4,031 –0.4 90 4,148-2,913US Dow Jones 10,972 –0.3 94 11,187-7,742FT Gold Mines 816 0.7 20 1,278-702Australian All Mining 674 –0.3 99 676-520South African Gold 814 0.9 6 1,311-780Toronto Met/Min 3,812 1.2 96 3,868-2,596Nikkei Dow 17,580 –3.7 85 18,358-13,071Hang Seng 13,140 –2.1 85 14,257-6,859James Capel Indices July 29

(100 on 1/1/89 except*)Global Base Metal 156 0.3 93 160-93Global Diversified Mining 162 –0.4 99 163-94Global Gold Ex S Africa 63 0.2 16 93-56Global Gold 55 0.2 14 83-51Global Mining 122 –0.1 98 123-78Smaller Mining Companies 50 0.1 90 51-40†North American Base Metal 199 1.4 93 204-122North American Gold 70 –0.7 14 108-64Latin American Mining* 198 –2.2 95 203-120Latin American (Ex CVRD)* 143 2.8 89 149-90†Other Metals/Minerals 138 –0.5 99 139-91†Global Coal Mining 184 0.3 78 203-116*100 on 1.1.90†Rebased by Mining JournalCommodity Prices July 29Gold (London) $254.40 –0.2 0 $297-$254.20Copper (LME) $1,609.50 –2.1 74 $1,696-1,361Aluminium (U.S. prod.) 68.50c 11.5 96 69-55Brent Blend (dated) $19.68 5.3 100 $19.73-9.44

LEADING INDICATORS

Laporte Mineralsto close

The UK’s largest fluorspar producer,Laporte Minerals, has announced that itsmineral operations are to cease because ofthe loss of a major customer contract for itsproduct. Based in Derbyshire in the PeakDistrict National Park, Laporte Mineralsoperates the Cavendish mill and producesabout 50,000-60,000 t/y of fluorspar, plusaround 15,000 t/y of barytes. There is also asmall amount of lead concentrate producedas a by-product, estimated at less than2,000 t/y.

It has two main mining operations,Milldam (underground) and LongstoneEdge (open-cut and underground), and alsoderives a significant ore tonnage from smalltributor operations. Laporte Mineralsemploys 115 people and there will be a 90-day consultation period before the closure isfinally implemented. There are hopes that abuyer for the operations will come forward.Fluorspar is the basic raw material for theproduction of hydrofluoric acid which goesinto the manufacture of a wide range offluorochemical derivatives. ■■

Congress upholds USmillsite constraints

Earlier this month, the US House ofRepresentatives voted to endorse a limit of5 acres (approximately 2 ha) on wastedumps at mine millsites. The 5-acre limit isincluded in the country’s 1872 Mining Law,but has not been applied consistently insome parts of the US for many years.According to the National MiningAssociation (NMA), the so-called ‘millsiteopinion’, which was issued by the USDepartment of the Interior (DOI) in 1997,“unilaterally reversed provisions of the gen-eral mining law and more than 100 years ofagency practice on the issue”.

Responding to the House vote, theNMA’s president, General Richard Lawson,said “I am very disappointed in the out-come. It results from a massive misinforma-tion campaign on the part of those in theAdministration who want to see all miningstopped in this country, regardless of theimpact on our national economy, the econo-my of the states affected and the very realand immediate impact on thousands ofAmericans who will be thrown out of work. Ican only hope the Senate will correct thismistake”, he added.

This last comment is a reference to a billpending in the Senate that would drop the5-acre limit, although one senator has saidalready that she will table an amendment toretain it. In addition to backing the 5-acrelimit, the House instructed the DOI not toapprove mining patents, operating plans or

amendments to plans unless they complywith its 1997 ruling, and the DOI’s solicitor,John Leshy, has said that it will apply thelimit to requests to open new mines or toexpand existing operations.

The NMA notes that the 1872 law allowsoperations to have as many millsites asproperly used or occupied for mining andmilling purposes, limiting each to 5 acres insize. The DOI’s 1997 re-interpretation ofthe law places a limit of one 5-acre millsiteper claim. General Lawson has pointed out,however, that the DOI’s own guidance docu-ments clearly state that there is no millsite-to-mining claim ratio, and that such a limi-tation has never been part of US law. ■■

China seeks to restricttungsten supplies

Ten years ago, China’s annual production oftungsten concentrates was running atabout 18,000 t and it was contributingaround 50% of world supply. Its state-owned mines accounted for about 40% ofproduction, the balance coming from smalllocal enterprises, mostly private. Today,China dominates world production andaccounts for 70-80% of total tungsten sup-ply. The number of private enterprises hasgrown rapidly and China’s annual capacityis now estimated at about 70,000 t althoughannual production is nearer 54,000 t. Thestate-owned sector contributes less than17,000 t.

Many of the small operators do not havean official sanction to operate but mininghas proved difficult to control as has beenthe level of exports of concentrates andtungsten products. As a consequence, theworld tungsten market is oversupplied,prices are depressed and China’s establishedproducers are finding it increasingly diffi-cult to cover their production costs.

In June this year, the China TungstenAssociation addressed the problem when itheld a two-day meeting in the southeast cityof Xiamen, ahead of a formal conference tobe held in Beijing next month. A minimumfloor price agreement was mooted and vari-ous regulations were considered that wouldpenalise those producers and trading com-panies underselling the minimum exportprices. There were also calls for the govern-ment to ban private mining.

Last week, 46 Chinese producers agreedto fix floor prices of Yu19,175 (US$2,310)for concentrate, Yu38,800 for ammoniumparatungstate (APT) and Yu45,000 fortungsten trioxide. In response, the bench-mark APT price firmed slightly, edgingabove US$50/kg, from US$47-48/kg.Traders doubt that Chinese producers willadhere to the floor prices but if they do, anAPT price above US$60/kg is deemed possi-ble. Chinese officials insist that the floorprices will not be breached and that tung-sten supplies will tighten. They also say

that the government is serious about closingdown all small tungsten mines. ■■

Canadian declineFalling world prices had a predictable effecton one of the world’s leading mineral pro-ducers. Statistics produced by NaturalResources Canada show that the overallvalue of the country’s mineral production in1998 fell by 12.3% to some C$44.3 billion.Of the four commodity categories, fuelsaccounted for 62.7% of the total value, fol-lowed by metallics (23.3%), non-metallics(7.4%) and structural materials (6.7%).

The value of metal production fell byalmost 11% to C$10.3 billion, and reflectedthe reduced demand (and lower prices) formajor metals such as copper and nickel.Thus, copper posted a 17.4% decline in val-ue to C$1.7 billion, and this was in spite of a6.3% rise in output to 688,000 t. Nickel out-put declined by 11.2% to 201,000 t, but suf-fered a 20% fall in value to C$1.4 billion.Zinc production was only 3.8% lower, butweaker prices saw the value of productionreduce by 20% to C$1.5 billion.

At C$2.3 billion, gold remained the topnon-fuel commodity by value, but there wasa 3.1% fall in production to about 166 t, andsofter prices saw its value decrease by 8.1%or C$200 million. Iron ore showed littlechange, either by value or production, atlevels of C$1.6 billion and 39 Mt respective-ly.

Natural Resources Canada identifies theperformance of non-metals and structuralmaterials as a bright spot in an otherwisepoor year for the minerals industry. Bothgroups recorded gains, reflecting strong eco-nomic conditions in the North Americanmarkets during 1998. The non-metalsgroup, which includes commodities such asasbestos, potash, salt, peat and sulphur,produced minerals valued at C$3.3 billion,or 8.3% higher than in 1997. There weredecreases for asbestos and sulphur butpotash rose in value by 9.1% to C$1.7 bil-lion and this in spite of a 2.9% fall in outputto 8.97 Mt. The group also benefited fromthe inclusion of diamond data for the firsttime, with an output of 278,000 ct worthsome C$53 million. The value of structuralmaterials rose by C$63 million to C$2.9 bil-lion.

As noted, fuel minerals made by far thebiggest contribution to 1998 mineral rev-enues but year-on-year the value was 16%down on 1997 to approximately C$27.8 bil-lion. Crude oil revenues were affected by sig-nificant price falls in world markets andslumped by 27% to just under C$13 billion.However, natural gas, which is largely unaf-fected by factors outside North America,posted a 4.4% increase in value to C$11.2billion. Canadian coal production fell by5.5% to 74 Mt and there was a 6.6% declinein value to C$1.8 billion. ■■

MINING WEEK

79Mining Journal, London, July 30, 1999

Mining Journal, London, July 30, 1999 81

INDUSTRY IN ACTION

Exploration

Billiton optionsHonduran TriunfoLondon-based Billiton plc iscontinuing its policy of backingjunior companies to do its exploring.The latest deal involves Alberta-registered Maya Gold Ltd, which isworking in Honduras. Maya owns ElTriunfo copper-gold property, whereit has defined Los Lirios as a target.Billiton has signed a letter of intentwith Maya in relation to an optionand joint-venture explorationagreement, under the terms of whichBilliton will complete a C$750,000private placement in Maya. Thefunds will be used by Maya infurthering the exploration of ElTriunfo, and the initial workprogramme will consist of a drillingprogramme on Los Lirios.

In return, Billiton will acquire anoption to earn a 51% interest in ElTriunfo by spending C$2.25 millionover three years. It can earn a further19% by financing the development ofprojects identified under theagreement.

Rio Tinto interestedin MacrominLucero Resource Corp. and SolResources report that Rio TintoMining and Exploration Ltd hasagreed to explore the Macromincopper porphyry property in Chile ina joint venture. The junior companieshave an existing agreement coveringthe property, under which Lucero canearn a 100% interest in Macrominfrom Sol. The northern portion of theproperty contains the Cerro Bayoscopper prospect, characterised by aquartz feldspar intrusive, widespreadhydrothermal alteration and astructurally-controlled quartzstockwork system. The southernportion of the property hosts theCielo porphyry prospects.

Rio Tinto has undertaken tofinance an exploration programme,principally drilling, to be conductedby Lucero and Sol. Upon completionof the programme, Rio Tinto willhave the right to earn a 60% interestin the property by spending US$13million on exploration at Macrominover a five-year period. Rio Tinto,upon earning a 60% interest, willhave the right to earn a further 10%interest by spending an additionalUS$20 million on exploration, or byfinancing the development of theproperty to a production decision bythe 12th anniversary of theagreement.

Guatemalan goldfor AquestAquest Minerals Corp. has receivedassay results for reverse-circulationdrilling completed at the Anabellagold property in Guatemala.

Anabella is the site of an oldunderground gold mine, whichworked gold mineralisation in asediment-hosted epithermal system.Aquest has planned a total of 25 drill-holes of the current programme, andthe following are better results fromthe first seven holes:

Hole Interval Au Sb(m) (g/t) (%)

A-1 84-94 3.56 0.36and 156-162 5.15 0.13

A-3 42-46 5.20 0.09A-4 154-164 3.28 0.60A-5 32-40 3.80 0.45A-6 110-120 3.53 –

The drilling programme isdesigned to test the potential of theproperty to host a gold-antimonydeposit. Anabella contains twoknown mineralisation zones, at theAnabella mine and at the LC mine.Drilling at the LC mine area, locatedabout 1 km from the Anabella minearea, has recently begun, and assaysare pending.

Chesbar confirmsnew gold zonesFurther drilling operations atChesbar Resources Inc.’s properties inthe Anacoco area of Venezuela haveconfirmed the existence of two newgold zones in addition to thepreviously identified La Salle goldzone. Chesbar intersected goldmineralisation at the Anacoco IIproperty late last month (MJ, June25, p.476), and recent drilling hasfollowed up this discovery, as well asfinding another gold mineralisationzone at La Salle Northern Extension.Better results of recent drilling are asfollows:

Hole Interval Au(m) (g/t)

99-17 38.0-43.0 3.4399-19 47.0-60.0 2.0199-12 34.0-43.0 6.4199-13 58.0-86.0 3.66

Drilling at the Anacoco II propertywas targeted at a new interpretationof mineralisation control, andintersected gold mineralisation over a250 m strike-length. The zone is stillopen in one direction. A further zoneof gold mineralisation has beenidentified at the property, but has notyet been drill-tested. Chesbar holdsabout 95 km2 of ground in the area,which it considers contains more,untested, geochemical targets. Thecompany intends to proceed carefullyin view of the present gold marketconditions, and will review andanalyse data accumulated to date.

Samex farms outDesiertoSamex Mining Corp. has signed aletter of intent with InternationalChalice Resources Inc. that allowsChalice an option to earn up to a 35%interest in El Desierto, a goldproperty on the Bolivian/Chilean

border. The majority of the groundcovered by the agreement (about 200km2) lies on the Bolivian side of theborder, located about 15 km from theCollahuasi mining district of northernChile. An exploration programme toconcentrate on delineating targets forlarge low-sulphide adularia-sericite-type epithermal gold and acid-sulphate-type gold-copper depositswill be conducted by Samex, guidedby a joint committee.

Chalice can earn its interest byspending a total of US$500,000 on theproperty over 30 months.

New gold find inBurkina FasoChannel Resources Ltd hasdiscovered a new gold-bearing zoneon its Somifa exploration permit inBurkina Faso. The company recentlycompleted a soil sampling and rotaryair blast (RAB) and reverse-circulation (RC) drilling programmefunded by Placer Dome Inc. Theprogramme was designed to testpotential gold targets in theGoulagou sector, and to follow upprevious gold indications. Theprogramme found gold mineralisationat Goulagou 2, about 2.5 km fromGoulagou 1. Better results are asfollows:

Hole Intersection Au(m) (g/t)

RC-SO-124 54 1.45RC-SO-117 52 3.29

incl. 20 6.59RC-SO-116 44 2.25RC-SO-120 32 2.37

The Goulagou 2 mineralisation hasbeen identified over a 1,750 m strike-length and is characterised bystrongly-oxidised fine-grainedmetasediments cut by quartzveinlets. The Goulagou zones are sub-parallel, and are open along strike

and down dip. Channel reports thatthe Somifa permit area contains 28other prospects, and furtherexploration will start in October, afterthe rainy season. Channel owns 95%of Somifa, and Placer Dome Inc. hasthe right to earn up to 60% ofChannel’s interest over the next 3years by spending US$5 million.Placer Dome can earn a further 5%by spending US$3 million ondevelopment.

Aurora optionsTunisian zincVancouver-based Aurora Gold Corp.has entered into five optionagreements with High MarshHoldings Ltd to acquire 100%interests in five zinc properties inTunisia. The properties are locatedwithin or near the Zone des Domesdistrict of Tunisia, host to a belt ofTriassic salt domes and diapirsintruding carbonate rocks.Breakwater Resources Ltd’sBougrine zinc-lead mine is locatedwithin the belt (MJ, November 14,1997, p.414). Aurora will be lookingfor replacement-style deposits ofgalena and sphalerite, accompaniedby baryte and fluorite. Aurora reportsthat an “extensive collection” of dataexists in the archives of the OfficeNational des Mines, includingmapping, geochemistry, geophysicsand drill hole records.

Aurora has not released the detailsof the option agreements.

Madison to increaseMt Kare shareVancouver-based MadisonEnterprises Corp. has agreed withCarpenter Pacific Resources NL, itserstwhile partner in the Mt Kare goldjoint venture in Papua New Guinea,to acquire from Carpenter all ofCarpenter’s 25% indirect interest in

12

INDUSTRY IN ACTION

82 Mining Journal, London, July 30, 1999

the jv. The transaction will result inMadison owning 90% of the jv, withthe remaining 10% being held in trustby Madison for the Mt Karelandowners. Madison will issueCarpenter 10 million Madison sharesand 3.17 million options.

AGC to regainToodoggoneownershipAmericas Gold Corp. (AGC) hasagreed with Antares MiningExploration Corp. to regain title to100% of the Toodoggone goldproperty in north central BritishColumbia from Antares. Toodoggonewas the subject of a joint-ventureagreement signed in 1997, andAntares had been earning a 55%interest by spending C$5 million onexploration. Antares had earned a47% interest in the property. AGCcan purchase the 47% interest bypaying Antares C$150,000.

DevelopmentQuality fine, outputstruggling at MurrinMurrin . . .Anaconda Nickel Ltd reports that,despite “mechanical challengesexperienced during thecommissioning”, the products fromits Murrin Murrin laterite nickel-cobalt project in Western Australiaare about 99.8% nickel and over 99%cobalt. However, the company isabout to start an all-out push toachieve 60% of design capacity, whichwill entail a number of rectificationsof process problems.

The main alteration is theconversion of flash vessels frombottom-entry design to top-entry, andthree of the four production trains areundergoing conversion. Train 1 willbe completed this month, with trains2 and 3 in September and October,respectively. The fourth and finaltrain is to be the subject of anexperiment by Fluor Daniel, but newflash vessels are being procured forthis train.

The 100-day push to hit 60%capacity, which began on July 1, willalso require modifications to slurryfeed tanks and the addition of asecond classification screen.

. . . new magnesiumproject potentialAnaconda also reports that it isinvestigating the development of aA$1 billion magnesium project inWestern Australia. The project wouldbe based at its Leonora and Lavertontenements, and the company hasappointed IFC Kaiser InternationalInc. to conduct a scoping study intothe project’s process and economics.Anaconda stresses that thedevelopment of a gas pipeline from

Geraldton to Mount Margaret wouldbe crucial to the scheme, as it wouldcut transportation costs by at least25%. It has applied for a licence toconstruct a pipeline in alliance withan Australian energy company.

New plant forAneka Tambang Indonesian metals producer, PTAneka Tambang, reports that it willbegin building its third ferronickelplant, to be named FeNi III, by theend of the year. The 13,000 t/y facilityis expected to be operational by 2002.

Magnola behindscheduleNoranda Inc. reports that thedevelopment of its 80%-ownedMagnola magnesium project atAsbestos in Quebec is about onemonth behind schedule. The companyis confident, however, of maintainingits start-up target of the middle ofnext year. Magnola is designed to use250 Mt of tailings from formerasbestos operations to feed the C$733million plant.

The 63,000 t/y capacity project’sconstruction is 40% complete,although Noranda’s chief operatingofficer, David Goldman, says that theprocess is catching up with theoriginal schedule. The balance of theproject is held by Société Générale deFinancement.

Assmangdevelopments Associated Manganese Mines ofSouth Africa Ltd (Assmang), jointlycontrolled by Anglovaal Mining Ltdand Assore Ltd, is to invest almost R1billion in its chrome and manganeseoperations. The company is toestablish an open-pit chrome mineand beneficiation plant at itsDwarsrivier property inMpumalanga (MJ, October 16, 1998,p.298). The mine is expected to have a1 Mt/y ore throughput capacity, andis scheduled to begin operation byOctober 2000. The output will be usedby Assmang’s subsidiary, Feralloys,which is to upgrade three furnaces atits ferrochrome facility atMachadodorp to increase capacityfrom 150,000 t/y to 175,000 t/y. Thecost of the mine and furnace upgradesis estimated at R190 million. Inaddition, Feralloys is to conduct afeasibility study into a pelletisingplant for fine ores, and an additionalfurnace, at Machadodorp. The plant’scapacity would increase to 275,000t/y by mid-2003.

At Assmang’s manganeseoperations, expenditure of R500million has been approved for thedevelopment of a new shaft system atthe Nchwaning manganese mine inNorth West Province. Pending theapproval of a mining-leaseapplication by the Department ofMineral and Energy, work will beginin August, and the shaft is scheduledto be commissioned in late 2003.

Newcrest pours firstbar at Gosowong Newcrest Mining Ltd’s 82.5%-ownedGosowong gold-silver project inIndonesia has produced its first goldoutput, with the gold pour takingplace on July 25. Newcrest expectsthe projected five-year operation toreach full output of 154,000 oz/y ofgold and 169,000 oz/y of silver by theend of September, processing 200,000t/y of ore from an open pit. Thecompany reports that theconstruction and start-up ofGosowong took place on time andwithin budget. The balance ofownership of Gosowong is held byjoint venture partner PT AnekaTambang.

Chirano resourceincrease The recent drilling programme byRed Back Mining NL at the Chiranogold property in Ghana (MJ, June 11,p.436) provided the data for ResourceService Group to calculate anincreased resource estimate for theObra and Sariehu prospects. At Obra,the indicated and inferred resource isestimated at 7.8 Mt at a grade of 2 g/tAu, using a 1.25 g/t cut-off. Theresource encompasses a strike lengthof 700 m to a maximum depth of 200m below surface, and 80% is sulphidemineralisation. Drilling density issufficient at Sariehu to calculate onlyan inferred resource, of 1.8 Mt at agrade of 2 g/t Au, with a 1.5 g/t cut-off.

A geochemical soil-samplingprogramme is continuing on an 800 mx 100 m grid. Airborne geophysicalsurveys over the area have beenprocessed, and further surveys areplanned for the September quarter, aswell as a third programme of reverse-circulation drilling.

Ok Tedi landownersback mine Local landowners in the vicinity ofthe Ok Tedi copper-gold mine inPapua New Guinea have backed thecontinued operation of the mine,despite the growing concern overenvironmental damage. Theoperating company, Ok Tedi MiningLtd, has met with locals to discuss thepreliminary results of a study into theeffects of the mine’s operations on thesurrounding countryside (MJ, June11, p.433).

The final report will be submittedto the government within the next fewweeks, and management at OTMLregards the closure of the mine as oneof several options. Ok Tedi is 52.6%-owned by BHP, 30% by the PNGGovernment, and 17.4% by InmetMining Corp.

Kinross takesGeorge Lake option Kinross Gold Corp. has entered intoan option agreement with KitResources Ltd to earn a 70% interest

in Kit’s George Lake gold project inCanada’s Nunavut Territory. A goldresource at George Lake of 6.6 Mt at agrade of 8.76 g/t Au, at a 5 g/t cut-offwas defined in 1998 by MRDICanada. George Lake is located nearBathurst Inlet. Mineralisation isassociated with an iron formationthat, according to Kit’s geologists, issimilar to that at Echo Bay Mines’Lupin gold mine.

Kit’s chairman and chief executive,Ian McDonald, says that thecompany really “has no other way ofadvancing a large project like GeorgeLake in these times”, although henoted that “the magnitude of thisdeal in this gold market is a tribute tothe quality of the George Lake asset”.Kinross has indicated to Kit that itsgoal is to double the gold resource toabout 3 Moz, and it expects to beginwork at the project shortly.

Kinross can earn a 70% interest inGeorge Lake by spending C$20million on the property by November30, 2004. The company must spend atleast C$2 million by November 30,2000, and must spend the entire C$20million before acquiring its interest.

Mt Weld feasibilitydeal Ashton Mining Ltd has signed aheads of agreement with Lynas GoldNL to complete a bankable feasibilitystudy of the Mt Weld rare earths andtantalum projects in WesternAustralia. Mt Weld hosts a resourceof 1.3 Mt at 23.6% rare earth oxides(MJ, May 21, p.376). Lynas Gold canearn an initial 35% interest in theproject by funding Stages 2 and 3 ofthe feasibility study, expected to costabout A$3.2 million. The study isscheduled to be completed byNovember 2000 and, should Mt Weldbe taken to a development stage,Lynas can earn a further 25% bypaying Ashton an unspecifiedamount. The development of the MtWeld project is expected to require acapital investment of A$75 millionand have a life of 30 years.

Lithium plantdevelopment Lithium Metal Technologies Inc./Lithos Corp. is to build a 750 t/ylithium carbonate plant in theindustrial park of Shawinigan,Quebec. Construction of the three-line plant is to start within a few

GLOBAL EMERGINGMARKETS

London Conference PostponedFlorida-based InternationalInvestment Conferences haspostponed the GlobalEmerging Markets conferencewhich was scheduled to be heldin London on September 14-15.The organisers hope toreschedule the event once thegold market has stabilisedfollowing the bullion sales bythe Bank of England.

Mining Journal, London, July 30, 1999 83

months, at a cost of C$1.6 million,and output will be phased. The first,50 t/y phase will be in operation bythe end of 1999, a second, 200 t/yphase by March/April next year, andthe final, 500 t/y phase by late 2000.

Production

Delta’s costs “lowestin Australia”Delta Gold NL’s managing directorand chief executive, Terry Burgess,lays claim to the title of lowest-costAustralian gold producer after thecompany achieved record annualoutput for the 1998/99 year of 420,302oz at a cash cost of A$199/oz. Hence,Delta’s production target of 400,000oz by 2000 has been achieved a yearahead of schedule. Mr Burgess alsosays that the resource at the Wallabydeposit of the Granny Smith mine inWestern Australia, discovered about ayear ago (MJ, July 31, 1998, p.78),has increased from 2.3 Moz to 3.8Moz, contained within 41.7 Mt at 2.8g/t Au. Delta owns a 40% interest inthe Granny Smith mine.

Centaur’s downsizingplanCentaur Mining and Exploration Ltdis to close a number of small open pitsat its Mt Pleasant gold mine inWestern Australia by the end ofSeptember. The operation will thenconcentrate on the Quarters pit, withadditional mill feed being taken fromlow-grade stockpile material. Theaction is part of Centaur’s overallstrategy of reducing production andimproving profitability, and willresult in a “number of redundancies”at the mine. The company has alsorestructured its hedge book, realisingA$30 million.

PacMin’s recordoutputPacific Mining Corp. Ltd (PacMin)has followed its good news at CarosueDam last week (MJ, July 23, p.57)with record production for the Junequarter from its Tarmoola gold minein Western Australia. Tarmoolaproduced 53,549 oz of gold, a rise of9% over the previous record. TheJune quarter contributed to a recordfull year output of 195,903 oz of gold,and the company reduced operatingcosts at the mine for the eighthconsecutive quarter to A$299/oz.

Western Metalsoutput improvingAt its Mt Gordon copper mine innorthern Queensland, WesternMetals Ltd managed to achieve a69% production increase in the Junequarter compared with the Marchquarter, as its “difficult”commissioning was successfullycompleted. Western Metals acquired

the mine, formerly called Gunpowder,in its takeover of Aberfoyle Ltd lastyear (MJ, September 25, 1998,p.235), and is using new technology toprocess the ore. The second stage ofan international patent applicationhas recently been completed.

On the Lennard Shelf, zinc and leadproduction from Western Metals’operations increased by 22% and45% respectively. At the Hellyer zincand lead mine in Tasmania,production is decreasing in advance ofthe anticipated exhaustion of themine’s principal orebody next year.Proposals to retreat tailings at themine are being examined, with afeasibility study outline to becompleted in the coming months.

Additionally, Western Metals hasexercised an option to acquire 100%of the Eucalyptus Bore laterite nickeltenements in Western Australia,previously owned by AnacondaNickel.

Pasminco outputrises Australian base metals producerPasminco Ltd reports that output forthe year to the end of June 1999 roseby 11% compared with the previous12 months. Total zinc and leadproduction came to 1.35 Mt, andoutput increased by 33% in the lastquarter of the fiscal year, compared tothe June 1998 quarter. The expansionof capacity at the Port Pirie leadsmelter to 250,000 t/y contributed tothe increase (MJ, September 25,1998, p.231).

Pasminco also reports that theconstruction of the Century zinc minein Queensland is 85% complete, andon schedule for completion bySeptember (MJ, January 29, p.58).

Gresik at 70%capacityMitsubishi Materials Corp., 75%-owner of the Gresik copper smelter inIndonesia, reports that the facility isoperating at over 70% of its 200,000t/y of cathode. Gresik produced itsfirst cathode earlier this year (MJ,March 12, p.174), and is scheduled toproduce 150,000 t of copper this year.The balance of the smelter is ownedby Freeport McMoRan Copper andGold Inc., which uses it to process theconcentrate from the newly-expandedGrasberg copper-gold mine (MJ,October 16, 1998, p.295).

Rio Tinto production Rio Tinto reports that production ofmost principal commodities washigher in the June quarter of this yearcompared with the same period lastyear. Iron ore output climbed by 12%to 12,932 t, although the output forthe first six months of this year is10% less than for the first half of1998. Coal production rose by 48% inthe June quarter, and the companyattributes this to the acquisition ofJacob’s Ranch last year (MJ, June12, 1998, p.453), its increased stake in

Blair Athol in Australia (MJ,December 25, 1998, p.502), andhigher production at otheroperations. Expansion at the 30%-owned Escondida copper mine inChile contributed to a 3% increase incopper output for the group, and goldproduction also rose, by 13%.

ERPM gets reprieveEast Rand Proprietary Mines Ltd,which applied for liquidation recently(MJ, July 9, p.31), has won a two-week stay of execution as liquidatorslook for investors. The 4,500 workersat the mine will be kept on for anothertwo weeks as several parties haveexpressed interest in the mine.

Cannington outputforecastBHP expects to produce 24 Moz ofsilver from its Cannington silver-lead-zinc mine in Queensland in the1999/2000 fiscal year, according toMark Adams, the mine’s president.Cannington produced 21 Moz in theyear to May 31, 1999, its first fullyear of production, and is scheduledto achieve 25 Moz/y at full capacity(MJ, November 13, 1998, p.387).

The mine began operation almosttwo years ago (MJ, October 24, 1997,p.337), and has recently donatedmore than 1 t of silver to the SydneyOlympic Games organisers, to makethe runner-up medals for the event.

Korean zincimports climbThe amount of refined zinc importedby South Korea from China andNorth Korea rose by 65% in the firsthalf of the year, from 33,600 t in thefirst six months of 1998, to 55,600 t.The largest zinc refiner in SouthKorea, Korea Zinc reports thatimports seem to have increased tolevels seen before the Asian financialcrisis affected the region.

Avisma to boostmagnesium outputRussia’s Interfax news service reportsthat the Avisma titanium andmagnesium plant, in Russia’s Permregion, intends to raise its magnesiumproduction to 40,000 t/y by 2001.This would be a 170% increasecompared with the 1998 output.Nikolai Shundikov says that theworld market trends for magnesiumfavour the boost, which will beachieved by using carnallite(KMgCl3.6H2O) as a new rawmaterial.

Oryx strike to end As Mining Journal went to press,4,000 workers at Gold Fields Ltd ofSouth Africa’s Oryx gold mine werescheduled to return to work aftertaking industrial action on July 15.An agreement was reached betweenthe National Union of Mineworkersand management at Oryx on July 27.

The company is to seek alternativesto retrenchment of employees, and re-examine the existing retrenchmentagreement.

The miners had taken action inprotest at the compensation to bepaid to employees to be maderedundant in the face of the currentlow gold price. The company hadtried to have the strike declaredillegal by South Africa’s LabourCourt, but failed last week.

Paraburdoo problemsfor SipaPoor head grade and recovery, linkedwith higher-than-expected cash costsat its 65%-owned Paraburdoo goldproject in Western Australia, has ledSipa Resources NL to raise the cut-offgrade at the operation. The increasefrom 0.9 g/t Au to 1.4 g/t is expectedto counter the 10-12% shortfall inrecovered grade and gold production,as well as 10-12% higher cash costs.

Sipa reports that the new mineplan should generate surplus cash ofA$10 million, which it will use in anew exploration joint venture withAlfred Eggo, who worked on RioTinto’s databases for 17 years, in ajoint venture to explore for base andprecious metals in Australia. Mr Eggohas an option agreement with RioTinto for the right to negotiate to usethe databases under a licence.

Publications

RAM 1999/2000 Resource Information Unit haspublished its new edition of the‘Register of Australian Mining’(RAM). The 1999/2000 issue is the20th RAM, and the 650-page bookincludes detailed information oncompanies, mines, projects andexploration areas throughoutAustralia. Details include companymanagement structure, contactnames and numbers, addresses, andcorporate and financial histories.Projects are listed according tocommodity, and include geologicaldetail, as well as brief overviews of thesalient points, both technical andfinancial. Each commodity is given aneditorial summation, with anindustry overview at the start of thevolume.

Industry and governmentorganisations are listed, as aredirectors of Australian mining andmineral exploration companies, andthe RAM contains a glossary oftechnical terms for the uninitiated.‘RAM 1999/2000’ is available fromCity of London PR Group in the UK,price £165. A CD-ROM is availableat £430 (including delivery and a freecopy of the book). Nicole Simons,City of London PR Group, MercuryHouse, Triton Court, 14 FinsburySq., London EC2A 1BR, UK. Tel:(+44 171) 628 5518. Fax: 628 8555. E-mail: citylonpr@mining-investor.com

INDUSTRY IN ACTION

TECHNOLOGY TODAY

P&H Mining Equipment’s sales,service and distribution arm, P&HMinePro Services, has increased theselection and services that can beoffered by the remanufacturedcomponent part of its business.According to the company, P&H’sENCORE® programme will savesurface-mine operators considerabletime and money for repairs andrebuilds. The programme offers arange of remanufactured parts fordraglines, electric and hydraulicshovels and rotary blasthole drills.These include dc electric motors;transmissions; hydraulic motors,cylinders and pumps; electroniccircuit boards; and P&H’s SnubRite®hydraulic snubber for shovel dipperdoors.

P&H says that all of theENCORE® components areremanufactured to original P&Hspecifications and the parts arebacked with the same warranty asnew parts. The company alsoincorporates its latest designimprovements into theremanufactured components.According to Mike Hardwick, vicepresident and general manager ofP&H MinePro Services AmericasNorth, the ENCORE® programme isdesigned to cut costs by 50% whencompared with traditional repair andreplacement costs, and in additionreduce downtime.

P&H Mining Equipment, PO Box310, Milwaukee, WI 53201, US. Tel:(+1 414) 671 4400. Fax: 671 7494.E-mail: lher@hii.com

Weir improvesmaintenancecontractsIn a move to reduce downtime andtotal costs of pumping, the WeirGroup plc of the UK is providing theMurrin Murrin and Bulong nickeloperations with comprehensive pumpmaintenance and developmentservices. The services to the twoWestern Australian mines are part ofseparate contracts that commencedwhen the company’s Australiansubsidiary, Weir Engineering Pty(formerly Warman International),supplied six GEHO ZPM 900 high-temperature, drop-leg design,positive displacement piston-diaphragm pumps to MurrinMurrin’s processing plant (MJ, May10, 1998, p.341) and two pumps of the

same design to Bulong. In both cases,the pumps are used to feed nickel-bearing laterite slurry, at atemperature of 200oC, to high-pressure acid leach autoclaves. Inaddition to the high temperaturesand the abrasive slurries, Bulong’spumps have to cope with highly salineprocess water.

The scope of work for bothmaintenance contracts was jointlydeveloped by Weir and the respectivemine managements, with theincorporation of key performanceindicators ensuring that all partieswork towards the goal of reducingtotal pumping costs. At MurrinMurrin, Weir personnel are on site 24hours a day, 365 days a year. AtBulong, Weir provides scheduledmaintenance support to theoperation’s own maintenancepersonnel, as well as managing sparesinventory and providing on-goingdevelopment services.

The Weir Group plc. Tel: (+44 141)637 7111. Fax: 637 2221.Web: www.weir.co.uk

Japanesecompanies toupgrade Navoi . . . Mitsubishi Materials Corp. andMarubeni Corp. of Japan have signeda US$70 million contract to upgradethe transport system at NavoiMining and Metallurgical’sMuruntau gold mine in Uzbekistan.The US$70 million contract forms thefirst stage of a project to restructurethe transport systems at the mine andinstall a major new conveyor. Thefirst stage of the project is scheduledfor completion within 39 months ofthe start of construction. The second,US$50 million, stage will involve theconstruction of another majorconveyor.

. . . Caterpillar tosupply NavoiphosphateprojectAt another Navoi Mining andMetallurgical operation, the KyzylKum phosphate project, Caterpillaris to supply US$28 million worth ofequipment. According to the Interfax

news agency some 15 excavators andhaul trucks will be purchased.According to Yevgeny Tolstov,Navoi’s chief engineer, stage one ofthe project is set to produce some300,000 t of phosphate rock annually.This may be expanded to 600,000 t/ywhich would yield 400,000 t ofphosphate concentrates. Germany’sKrupp will supply the operation withits milling equipment and the outputfrom the plant will be used as feed bythe Kodan superphosphate plant,the Samarkand Chemicals plantand the Ammofos fertiliserproducers.

According to Uzbekistan’s StateCommittee for Geology, thephosphate is based on 432.6 Mt of orecontaining 81.1 Mt of phosphates.

New andimprovedS3056Mogensen Raw Materials Handlinghas relaunched an improved versionof its S 3056 sizer. The 3 m wide sizeris fully dustproofed, has improvedanti-blinding and has electric deck-mesh heating facilities. It can also befitted with the company’s pneumaticmesh cleaning system. The unit ispowered by two Type BL/60-105/6rotary electric vibrators. TheseInvicta motors, says Mogensen, offerenhanced reliability.

The sizer has a feed capacity of upto 1,000 t/h depending on screeningduty. Each of the five decks is madeup of two 1.5 m mesh panels placedside by side against a central dividingwall. This facilitates the quick andeasy changing of mesh and meansthan the panels are interchangeablewith the company’s 1.5 m sizers andscreens, which reduces the spare partsholding for users who operate bothmachines.

Mogensen Raw MaterialsHandling, Harlaxton Road,Grantham, NG31 7SF, UK. Tel: (+441476) 566 301. Fax: 590 145. E-mail:sales@mogensen.co.uk Web:www.mogensen.co.uk

IMC awardedIEAMmembershipUK-based IMC ConsultingEngineers has been awardedconsultancy (Associate Member)membership of IEAM Ltd. IEAMwas formed by the merger of theInstitute of EnvironmentalAssessment (IEA) and theEnvironmental AuditorsRegistration Association (EARA).

The IEA was established topromote best-practice standards inenvironmental assessment andauditing and the EARA is dedicatedto raising standards of professionalcompetence in the environmentalauditing field and providing aninternational register ofenvironmental audit practitioners.

Kevin Onions, Head ofGeotechnical and EnvironmentalUnit, IMC Consulting EngineersLtd, PO Box 18, Common Road,Huthwaite, Sutton in Ashfield,Nottinghamshire, NG17 2NS, UK.

Ingersollsupplies drills forKosovoIngersoll-Rand’s UK unit hassupplied the Ministry of Defencewith drills and compressors for use inKosovo. The order comprises twoCM695D self-contained downholedrills, two CM345 pneumatic crawlerdrills with VL140 drifters and two9/255 (17.1 m3/min) portablecompressors. The drills andcompressors will be used by armyengineers to supply aggregate forinfrastructure projects in Kosovo.

Ingersoll-Rand, London House,271 King Street, Hammersmith,London W6 9LZ, UK. Tel: (+44 181)741 9828. Fax: 741 9508.

Mogensen’s S3056E sizer.

P&H ENCOREprogammecuts costs

84 Mining Journal, London, July 30, 1999

FOCUS AND COMMENT

Few areas of the world can have hadsuch an influence on society throughthe ages as the Pyrite Belt of the

southern Iberian peninsula. Even today,the belt hosts the single highest concentra-tion of base and precious metals operationsin Europe. As Luis Rodrigues da Costa not-ed at the opening of the 78th InternationalOrganising Committee meeting of theWorld Mining Congress (WMC) in Lisbonlast year, production from the IberianPyrite Belt (IPB) represents 65% ofEuropean Union copper concentrates, 69%of its tin, 28% of its zinc, 8% of its lead,14% of its gold and 28% of its silver.

While the mineral riches of the regionwere already well known 2,000 years ago(MJ, April 2, p.246), modern developmentbegan in the middle of the 18th Centurywith the commencement of re-working atRio Tinto. Since then, the region has had itsgood times as well as lean years and, as Mrda Costa, chairman of the WMC’sPortuguese organising committee added,the past 20 years have seen profoundchanges. Mines have closed or restructured,he said, with corresponding social impacts,although there have also been some remark-able discoveries.

The IPB stretches a distance of some 250km from the Atlantic Coast of Portugal toSeville in southern Spain. The earliestworkings date from around 2000 BC, somining was well established by the time thePhoenicians and Romans began recoveringprecious metals from the extensive gossansthat overlie the pyrite bodies. The IPBbecame one end of a major trans-Mediterranean trade network, which fellinto disuse with the collapse of Romaninfluence.

Production reverted to being purely alocal occupation for the following 1,500years or so, until renewed interest in theBelt’s copper content brought the new ageof re-working. By the end of the 19thCentury, up to 60 mines were in operation,exploiting secondary-enriched copper oresas well as underlying primary chalcopyritedeposits.

During the first half of the 20th Century,however, copper mining faded away, to bereplaced by the recovery of pyrite as a feed-stock for sulphuric acid manufacture. Thislasted until the 1950s, when alternative,economically more attractive sources of sul-phur took over much of this market. Theresult was the closure of much of the exist-ing capacity, but the application of new geo-physical surveying techniques, togetherwith an improved understanding of themetallogenic processes that control the dis-tribution of mineralisation throughout theBelt, led to a number of discoveries of majorsignificance throughout the period from the1960s to the 1980s.

The geological settingThe IPB’s volcanogenic massive sulphide(VMS) deposits are of Upper Devonian andLower Carboniferous age, being depositedduring submarine felsic volcanism. Clustersof deposits occur around individual vol-canic centres, the ore lying in zones withinvolcanic and sedimentary host-rocksequences. These in turn are underlain byphyllites and quartzites but, more impor-tantly from the point of view of explo-ration, are overlain by a continental flyschgroup that can be up to 5 km thick.

Zones of stratabound mineralisation canbe up to 4-5 km long, 1.5 km wide and 80-100 m thick. The largest individual depositlocated to date, Rio Tinto, is estimated tohave held an original resource of some 500Mt, a significant proportion of the 1,725 Mt

total current resource estimated for theBelt as a whole on the basis of the 90 or soknown sulphide deposits. Current resources– allowing for previous production – areestimated at around 1,100 Mt.

According to Delfim de Carvalho of thePortuguese Empresa de DesenvolvimentoMineiro, this alone puts the Belt into a rarecategory in world terms, for its resourcesexceed by far those of the other major accu-mulations of VMS deposits elsewhere. TheSuperior Province in Ontario, while hostinga comparable number of deposits, containsaround 700 Mt of resources, a figure more orless matched by the combined resources ofthe Abitibi, Rouyn-Noranda and Val d’Ordistricts in eastern Canada.

As Dr de Carvalho pointed out in his pre-sentation on exploration strategies for theBelt, the ore-forming processes in Iberiawere highly efficient, generating the world’slargest concentration of giant polymetallicsulphide deposits. In addition, he said, thefact that some of them contain very highcopper and tin grades makes them unique inrespect of VMS occurrences in other partsof the world.

However, he added, in today’s economicclimate, where companies are seeking eitherhigh-grade or large-volume, low-costdeposits, VMS deposits have become veryvulnerable to competition from otherdeposit types, such as copper-bearing por-phyries, as major exploration targets. Thisis particularly true of the IPB, he said,where most of the shallow deposits havealready been discovered and worked, leav-ing only potential at greater, and hencemore costly, depths. Nonetheless, the factthat companies are still prepared to devoteexploration budgets to the deeper parts ofthe Belt, even in today’s metal price regime,suggests that some retain an appreciationof the riches that can result from a success-ful strike. What is perhaps educational inthis context is the fact that several morerecent discoveries are now being developedas ‘add-on’ tonnage, with existing millingand recovery facilities being used as ameans of reducing development costs.

Exploration success rateThe discovery of Neves-Corvo in 1977 pro-vided a spur for renewed exploration activi-ty in the IPB. Seven new deposits wereidentified in the Spanish sector of the Beltduring the 1980s, with resources totallingover 300 Mt. Over the longer term, explo-ration in the Spanish sector resulted in thediscovery of 19 deposits between 1950 and1998, while Portuguese-sector discoveriestotalled 11 during this period.

The other benefit that has flowed fromthe Neves-Corvo discovery is that compa-nies are now exploring to much greaterdepths than was previously the case. Theore zones at Neves-Corvo lie at depths of

86 Mining Journal, London, July 30, 1999

Iberia: thefuture lies

deep

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FOCUS AND COMMENT

Mining Journal, London, July 30, 1999 87

The saga of bad judgement and bad for-tune that has dogged Zambia’sattempts to privatise Zambia

Consolidated Copper Mines (ZCCM) hasresembled a soap opera. Every few months,for the past three years, the government hasannounced a deadline set, a critical agree-ment achieved and a fresh round of negotia-tions confidently started. Then the nextepisode sees the deadlines missed, theagreement repudiated, the negotiations col-lapse, followed by a fresh set of excitingdevelopments.

The whole series is held together by theactivities of three or four principal charac-ters led by Zambia’s President, FrederickChiluba, who came to power in 1991 on aplatform that endorsed the privatisation ofthe mines. His actions and pronouncements(sometimes enigmatic) have kept expectan-cy high throughout the production.

The plot, such as it is, centres around theselling of the family silver, or copper, by anation that has fallen (but through no faultof its own) on hard times. The stream of buy-ers are almost invariably foreigners, various-ly grasping, deceitful, inept or, sometimes,perhaps the right sort (good soaps do notmake the identification of heroes and vil-lains easy for their viewers).

This brings in another main character,Anglo American Corp. In the earlierepisodes, efforts were directed at keepingthis group out; it already had a 26% residualshareholding after its forced buy-out by thegovernment in 1969, and was characterisedas a villain, with a base in South Africawhich was only just emerging fromapartheid. It was seen as using the privati-sation process to recover its previous domi-nance. With this in mind, ZCCM was offeredas nine separate packages, when bids wereinvited in November 1996.

Then there is Francis Kaunda. A formermanaging director of ZCCM, his appoint-ment as chairman of the ZCCM negotiatingteam in 1997 introduced a new element oftension into the story. Other actors in theprivatisation process included the succes-sive Ministers of Mines and of Finance.

Indeed, some bidders complained that theywere having to deal with not one but threenegotiating teams. However, FrancisKaunda has unquestionably been the key fig-ure on the government side for the past twoyears. It has been surmised that he was giv-en the job because if the undertaking failedhe would be politically expendable, and if itsucceeded he would become a faithful ser-vant of the government’s wishes.

The government was right. At a time offalling copper prices, he managed to drawout the negotiating process with the princi-pal group, the blue-chip Kafue Consortium,for nearly 18 months. The latter had madean offer for the core of the Copperbelt, themines associated with the towns of Kitweand Chingola, bringing about 60% of the val-ue of ZCCM’s output into its control. As themonths dragged on, consortium members(which included Avmin, Noranda Inc., PhelpsDodge Corp. and the CommonwealthDevelopment Corp.) began to fall away andeventually the diminished consortium with-drew its bid and substituted it with a lowerone, which was indignantly refused.

Now a fresh, exciting instalment has beenreached. Anglo, after much hesitation, putin a far lower bid for roughly the same keyoperations but it needs to find a ‘substantialmining partner’. After some scratchingaround, the state-owned Chilean coppergiant Codelco is being courted, along withthe International Finance Corporation.However, the union leader at Codelco,Raimundo Espinoza, who also sits on theBoard, has been quoted as saying that“there are possibilities within our ownDivisions that show more profitability thanassociating with South African operators inZambia”.

Don’t switch off yet. President Chiluba’slatest intervention was to announce (in aspeech read on his behalf at the CopperbeltAgricultural Show in June) that the end ofJuly is the deadline for the sale of the mines.

Since then the Mines Ministry has saidthat the completion of the sale of the Kitweand Chingola mines is not expected untilSeptember.

Farce and tragedy between 250 m and 1,000 m, representingthe largest ‘blind’ deposit found to date inthe IPB.

The most significant deposits to havebeen discovered since Neves-Corvo are LosFrailes, Migollas, Aguas Teñidas Este,Lagoa Salgada and Las Cruces. Los Frailes,scene of the tailings release last year, cameon stream in 1997. Boliden discovered thedeposit close to its existing Aznalcollarmine, where the concentrator was rebuilt totake ore from the new open pit. Millingrestarted at Los Frailes at the end of lastmonth, where planned production is125,000 t/y of zinc and 2.9 Moz/y of silver(MJ, July 2, p.7).

Recent developmentsNavan Resources’ exploration at Aguas

Teñidas Este has continued to suggest thatthe deposit is both larger and higher-gradethan was originally thought. Navan boughtthe existing Almagrera-Sotiel operations,21 km from Aguas Teñidas, with the aim ofusing the existing processing facilities forthe new operation, noting that “it is cheap-er and faster to accept the short-term lossesfrom Almagrera than to build a separateprocessing facility for Aguas Teñidas”.

The short-term future for Las Cruces,meanwhile, may not be so optimistic. RioTinto’s discovery five years ago of LasCruces, another completely blind deposit,located just 15 km from Seville, extendedthe IPB further east than had previouslybeen the case. The company, which hadbeen contemplating a 60,000 t/y output ofSX-EW copper from a 15 Mt high-gradecopper resource, has now confirmed thatdiscussions are taking place for its disposal.

The IPB holds a unique and highly sig-nificant place in world mining history.Although past production has largely beenbased on near-surface resources, it seemsthat the Belt’s future will lie in deeperdeposits that will cost more to find and tobring into production. Gravity surveyshave provided a key tool in recent majordiscoveries, and the challenge is now setfor companies to locate the next Neves-Corvo.

Mining MagazineJohn Chadwick B.Sc.Des Clifford B.Sc.

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Mining JournalEditorRoger Ellis B.Sc., C.Eng.Deputy EditorRichard Morgan M.Sc., DIC, C.Eng.Assistant EditorsAndrew Thomas M.Sc., DICDominic Mercer M.Sc., DIC, FGSProductionSusan RobertsEditorial DirectorChris Hinde Ph.D., C.Eng.

Mining Journal, published weekly, is available only aspart of a subscription with Mining Magazine and MiningAnnual Review.

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LME lullsets in

As the traditional summer lull has set in onthe London Metal Exchange, price move-ments have become erratic, with funds andbanks playing the major role as producersand consumers take a break. Most metalshave slipped back from their recent highs,and analysts say that this represents a peri-od of consolidation and base building fromwhich prices will be able to move higher,although in the short term, technical factorsmay drive prices lower.

After retreating from the US$1,700/tmark last week, three-months copper hasspent much of this week in a relatively nar-row price range around US$1,650/t,although on Monday it fell as low asUS$1,615/t, when fund selling triggeredsell-stops. Speaking at today’s presentationof its half yearly results (this issue, p.89),Rio Tinto’s chairman, Robert Wilson, saidthat the company did not expect any fur-ther major curtailments in global copperproduction, but those that have alreadytaken place, together with a few more small-er cuts, should ensure that the copper mar-ket is balanced at the start of next year orshowing only a small surplus.

After dropping as low as US$5,570/t atthe end of last week, three-months nickelhas traded in a range around US$5,800/t. Itdid touch US$5,645/t after AnacondaNickel announced its expansion plans (thisissue, p.77), but has subsequently recov-ered. Dealers say that the price is receivingfundamental support from the improvedoutlook for stainless steel and the expectedrestocking by consumers in anticipation ofY2K problems. Analysts note that the nick-el price is starting to move into backwarda-tion from September onwards.

Zinc is also being supported by Y2K wor-ries, with interest in borrowing metal beforethe end of 1999 and lending in the first quar-ter of 2000. This week, prices managed tobreach US$1,100/t on several occasions butfund selling and profit taking pushed themback lower each time.

Sumitomo filesfresh lawsuit

Japanese trading giant Sumitomo Corp. iscertainly keeping its lawyers busy. In its lat-est attempt to recoup some of the US$2.6billion it lost as a result of the activities ofits former head of copper trading YasukoHamanaka (MJ, June 21, 1999, p.488) ithas filed a suit in London against a unit ofthe French bank Credit Lyonnais. The suitalleges that the derivatives trading arm of

the bank, Credit Lyonnais Rouse, assistedMr Hamanaka in a breach of fiduciary andcontractual duties and is seeking damagesof US$308 million. In a statement releasedin New York, Sumitomo said that it has notruled out taking further legal action againstother third parties involved in theHamanaka affair. Credit Lyonnais hasrejected the allegations and says it will vig-orously contest Sumitomo’s claims. In astatement the company said that it consid-ered “the business relationship between thetwo organisations to have been conductedproperly and openly in all aspects.”

Sumitomo’s suit against Credit Lyonnaisis the third that it has filed against majorinvestment houses in recent months. InJuly, the company made similar allegationsin Tokyo and New York against UBS AGand Chase Manhattan, and is seeking atotal of US$789 million in damages (MJ,June 11, p.444).

Separately in April this year, CreditLyonnais was added to the list of defen-dants in a class action suit originally filed inJune 1996 by various copper market partici-pants, that is seeking compensation for MrHamanaka’s alleged manipulation of thecopper market. Sumitomo, Global Minerals& Metals, Morgan Guaranty and MerrillLynch have all agreed to settle the suit, onlyCredit Lyonnais and J. P. Morgan have notsettled the case.

Russians team up . . . This week there was a glimmer of hope thatthe volatility besetting the palladium mar-ket for the past three years may beapproaching its end. The world’s largestproducer, Russia’s Norilsk Nikel,announced that it has reached an agree-ment with the Russian central bank co-ordi-nating trade policy on palladium sales witha view to ensuring an uninterrupted flow ofpalladium into world markets.

However, doubts as to the effectiveness ofthe agreement must be raised as a Norilskspokesman told Reuters that the agreementwas an informal deal on common principlesrather than a specific written documentsigned on a specific date. The spokesmansaid that the company had taken the deci-sion to make public its agreement with thecentral bank after recent press reportsclaimed that Russia’s central bank hadplaced large amounts of palladium withGerman banks as collateral for a loan.Norilsk’s chairman, Yuri Kotlyar, said thatthe company’s statement was issued tocounter media reports which were “know-ingly false” that Russia could not guaranteestable deliveries of palladium. Norilsk hasrecently been granted a 10-year export quo-ta which should allow it to plan its palladi-um exports more carefully.

Oleg Timchenko, a metals analysts withthe United Financial Group in Moscow, said

that the agreement should prevent the cen-tral bank acting independently and disrupt-ing the market.

. . . Swiss mistakeThe rumours that the Russian central bankhad used a significant amount of palladiumas collateral for a loan from German bankswere given credence last week becauseSwitzerland’s federal customs office showedthat imports of semi-finished palladium inJune had jumped to 33 t from 64 kg, with 32t coming into the country from Germany(last year global palladium supply was 261t). The market was unsure how to react tothis massive shipment; speculation was rifeand analysts said that the implications forthe price would depend on what happenedto the metal. However, this week the truereason for the surge in imports emerged –Swiss customs admitted that they hadmade a mistake and said that Germanimports had totalled 104 kg instead of32,008 kg. An official said the error was theresult of “stupid mistakes in gatheringinformation, and in one case, it was possiblya wrong declaration to customs.”

Iron ore: Goa feelsthe pinch

While the global economy seems to be grad-ually recovering from the turmoil of thepast couple of years, the recovery has yet tomake itself felt in the global steel industry.According to Macquarie Equities, althoughthe declines in crude steel and pig iron out-put have slowed, Western world year-on-year production is still down by 7.1% and8.1% respectively. This, says Macquarie,indicates that in the first six months of1999, real consumption of iron ore was 13Mt lower than in the first six months of1998. This is bad news for global iron oreproducers, not least those in India, many ofwhom are ill prepared to face falls indemand and prices.

The problems are particularly acute inthe small western coastal state of Goa. Lastyear, Goan exports of iron ore fines fell by17% to 15.3 Mt and export earningsdropped to US$208 million. The slump inglobal steel production has forced con-sumers of Goa’s iron-ore fines to scale downimports, and Japanese steel mills cut theirorders by 7% to 8.8 Mt. The decline of theGoan iron ore industry looks set to contin-ue, with infrastructural bottlenecks andrecalcitrant unions making it increasinglydifficult for producers to compete in theglobal market place. Sesa Goa Ltd, thestate’s largest iron-ore producer, is a goodexample. Last year, the company’s iron oreproduction fell by 20% to about 4 Mt, andthis year output could reduce by a further1 Mt.

MINERAL MARKETS

88 Mining Journal, London, July 30, 1999

MINING FINANCE

Mining Journal, London, July 30 1999 89

Compared with the first six months of 1998,Rio Tinto has reported an 8% decrease in1999 first half net earnings and a 4% declinein group sales revenues, to US$509 millionand US$4.46 billion respectively. However,given the substantially lower average pricesfor many commodities during the 1999 firsthalf, the company considers that its earn-ings have held up well. The average quotedcopper price was 17% lower, aluminium wasdown 11% and gold down 6%. Prices forunquoted commodities such as iron ore andcoal were also significantly lower. Overall,earnings were reduced by US$160 million asa result of lower selling prices.

Against this, higher sales volume, notablyfrom some of the company’s US coal opera-tions, contributed US$40 million to earn-ings, and changes in exchange rates added afurther US$21 million compared with the1998 first half. The company reports thatcontinuing efficiency improvements wereachieved in almost all business units andthat this enabled further savings in cashcosts, thereby adding US$102 million toearnings.

Commenting on the results, Rio Tinto’schairman, Robert Wilson, said that “persis-tent emphasis on efficient operations isserving us well”, noting that margins havebeen maintained despite the very steepprice declines. Mr Wilson said he is encour-aged to see some indication of a better pric-ing environment for certain commodities,and believes the company is in “great shapeto benefit from the prospective improve-ment in market conditions”. The company,he says, is coming out of the current eco-nomic downturn with an enhanced assetportfolio, increased production capabilityand a substantially lower cost structure.

Since the economic downturn began twoyears ago, Rio Tinto has not fought shy ofmaking investments and has committedmore than US$3 billion in new projects andexpansions. According to chief executiveLeon Davies, during the first half of 1999some of the recent projects either reached orexceeded their design capacities earlier thanexpected. He cited the new Yandicooginairon ore mine in Western Australia whereproduction this year is expected to reach 10Mt, plus the expansions at the Escondidacopper mine in Chile and at the QIT titani-um feedstock plant in Canada, both ofwhich are now running at design capacity.Further significant developments in handinclude the Palabora underground projectand a fifth mining plant at Richards BayMinerals, both in South Africa. Elsewhere,

work continues at the Diavik diamond pro-ject in Canada, and in Australia, Comalcohas begun the feasibility study into itsGladstone alumina refinery project.

For the future, Mr Davies noted thatthere are further, major low-cost expansionopportunities for iron ore and bauxite min-ing in Australia, for copper at Escondidaand at Grasberg in Indonesia, and for thecompany’s coal operations in the US,Indonesia and Australia. ■■

Peñoles: good resultsbut a testing future?

The Mexican precious and base metals pro-ducer, Industrias Peñoles, has reported netprofits of US$115.9 million for 1998, basedon net sales revenues of US$876.5 million,the company’s highest during the past tenyears. Although the ratio between net prof-its and net sales was slightly down on the1997 figure, at 13.2%, it was substantiallybetter than the dismal 1.1% Peñolesachieved in 1994. Production of gold, silver,zinc and bismuth was at record levels,together with the company’s output of sul-phuric acid and sulphur dioxide.

Results for this year are unlikely to be asstrong, however, following the company’sproblems at its Torreón lead smelter (MJ,June 25, p.479). The restrictions imposed onit by the Mexican environmental agencywill mean that the plant’s output will besubstantially reduced until there is remedi-ation of the lead contamination that firstgave rise to the concerns. Peñoles hasalready said that silver and lead exports willbe 10% down (MJ, June 11, p.438).

Returning to last year’s results, the com-pany’s mining division set a new ore millingrecord of 5.4 Mt, 9.9% higher than in 1997.The increase resulted both from higher pro-ductivity at existing operations and fromexpansion projects that came on stream atits Tizapa and Sabinas mines. With an out-put of 21.2 Moz, Fresnillo remained theworld’s leading primary silver producer, andcommenced zinc production.

The troubled Met-Mex Peñoles smeltercomplex at Torreón also retained its posi-tion as the world’s leading producer ofrefined silver, with an output of 68.9 Moz,to which were added 1,030 t of bismuth,172,000 t of lead, 128,000 t of zinc and380,000 oz of gold. A new zinc recoveryplant is scheduled for commissioning atTorreón this year, with the aim of increasingproduction capacity to 220,000 t/y.

Rio Tinto in“great shape”

LONDON PRICES

Metals July 28Aluminium (US producer) 68.00-69.00 c/lb d/dAntimony $1,180-$1,230/t cifArsenic (Rotterdam 99%) $0.35-$0.45/lbBismuth Bismuth $3.30-$3.50/lb cifCadmium (99.99%) $0.16-$0.21/lb cif

.. (99.95%) $0.14-$0.18/lb cifChrome (UK 99%) $9.50-$10.50/lbCobalt (99.8%) $22.00-$23.00/lb net

.. (99.3%) $20.00-$21.00/lb netGermanium $780-$800/kgGold £159.01 ($254.50)/oz Indium $160-$180/kgIridium (J Matthey price) $415/ozMagnesium (Norsk Hydro Euro. prod.) e2.86/kg*

.. (US Free mkt, 99.8%) $2,100-$2,350/t*Manganese

metal (99.7%) $970-$1,050/tMercury (99.99%) $125-$135/flaskNickel $2.62-$2.63/lbOsmium $400-$450/ozPalladium (J Matthey price) $344.00/oz

.. (Free market) $338.00-$343.00/ozPlatinum (J Matthey price) $346.00/oz

.. (Free market) $345.00-$347.00/ozRhodium (J Matthey price) $930/ozRuthenium (J Matthey price) $39/ozSelenium $2.20-$2.80/lb cifSilver $5.25/ozTellurium (UK lump & powder

99.95%) $4.00-$6.00/lb netTin (Kuala Lumpur) RM19.56/kg

Ore & Oxides July 28Antimony (60%) $8.50-$9.00/t unit, cif nom*Beryl (10% BeO) $75-$80/s ton unit BeO cif*Chrome (Transvaal, Friable 40%) $63-$68/t, fob*

.. (Turkish, concs 48%) $75-$85/t fob*Columbite (min. 65% comb. oxides) $2.80-$3.20/lb cif*Ilmenite (54% TiO2) A$95-A$110/t fobLithium ores (Petalite 4.2% Li2O) $250/t fob*

(Spodumene>7.25% Li2O) $385-$395/t fob*Manganese ore (48-50% Mn,

max. 0.1% P) $1.81-$1.90/t unit fob*Molybdenum

oxide (conc 55-57%) $2.65-$2.75/lbRutile (Aust. 95-97%

TiO2) A$675-A$750/t fob (bulk)Tantalum oxide (60% cif N. Euro port) $26-$32/lbUranium (Nuexco unrestricted/restricted

U3O8) $8.20/$10.20/lbVanadium (98% V2O5) $1.95-$2.10/lb cifWolframite (65%) $40-$45/t unitZircon sand (std 66-67% ZrO2) A$500-A$600/t fob (bulk)

* Source: Metal Bulletin

LME PRICES & STOCKS

Prices (a.m.) July 28 July 21Tonne basis Buyers Sellers Buyers SellersCOPPER Grade ACash....................... $1,599 $1,600 $1,603 $1,604Three months ......... $1,629 $1,630 $1,634.5 $1,635TINCash....................... $5,189 $5,190 $5,165 $5,170Three months ......... $5,235 $5,240 $5,215 $5,220LEADCash....................... $491 $492 $490 $490.5Three months ......... $502 $503 $501.5 $502ZINC Special high gradeCash....................... $1,060.5 $1,061.5 $1,077 $1,078Three months ......... $1,080 $1,080.5 $1,095 $1,095.5ALUMINIUM Higher gradeCash....................... $1,399 $1,400 $1,404 $1,405Three months ......... $1,419 $1,420 $1,427.5 $1,428AlloyCash....................... $1,205 $1,210 $1,237 $1,238Three months ......... $1,241 $1,245 $1,268 $1,271 NICKELCash....................... $5,765 $5,770 $5,525 $5,530Three months ......... $5,810 $5,815 $5,595 $5,600SILVERCash* ..................... n/a n/a n/a n/aThree months ......... $5.30 $5.35 $5.13 $5.18

LME warehouse stocks on July 28Stocks Stocks

(t) (July 21)

COPPER Grade A cathodes 769,675 763,775

TIN 9,625 9,855

LEAD 137,075 137,250

ZINC SHG 289,825 292,550

ALUMINIUM HG 739,125 739,325Alloy 60,860 61,080

NICKEL 50,472 51,048

*Trading of cash contracts begins on August 6.

MINING FINANCE

Mining Journal, London, July 30 1999 91

The company’s investment in explorationis continuing both in Mexico and elsewherein Latin America. In Mexico, in addition toits Mezcala gold project with NewmontGold and the Franciso I Madero lead-zinc-silver property, currently being evaluated,ten prospects were being drilled last year.Peñoles also achieved “encouraging” resultsat its Concession 131 prospect in Peru, andcontinued a third season of drilling at theJagüelito prospect in the ArgentineAndes. ■■

Low copper price hitsRio Algom

A 14% decline to US$0.70/lb in the averageselling price that it received for copper wasthe main reason cited by Toronto-based RioAlgom Ltd for a slump in second quarterprofits. For the three months to June 30, netearnings were C$4 million, only one-thirdthe amount earned in the comparable peri-od of 1998. In terms of earnings per share,which takes into account ‘accretion’ on con-vertible debentures and dividends on pre-ferred securities, there was a loss of C$0.02compared with earnings of C$0.16 in the1998 second quarter. Operating profit wasC$20 million, down from C$35 million ayear earlier, with lower prices for stainlesssteel and aluminium, as well as for copper,accounting for the decline.

Revenues, at C$492 million, were aboutC$20 million lower and, not for the firsttime, it was the company’s metals distribu-tion business that contributed the lion’s

share – C$411 million against C$408 millionpreviously. The improvement reflectedhigher aluminium volumes following theacquisition in 1998 of Ideal Metal Inc.,which more than offset lower selling pricesfor aluminium and stainless steel.

For the 1999 first half, net earnings wereC$5 million (C$21 million in the 1998 firsthalf) on revenues of C$1,003 million (C$959million), with operating profits amountingto C$34 million (C$62 million).

Rio Algom’s chief executive, Pat James, isnot too perturbed by the fall in second quar-ter earnings, noting that at a time of lowmetal prices the company has fared rela-tively well compared with some of its NorthAmerican peers. There have also been sever-al positive developments. At the operatinglevel, these include a 17% increase in copperproduction compared with the 1998 secondquarter, to 98 Mlb (44,500 t) , plus an 18%decline, to US$0.47/lb, in the average cashcost to produce it. In Argentina, theAlumbrera copper-gold mine (25% inter-est) exceeded its targets for mill through-put, concentrate output and gold recovery.Rio Algom’s share amounted to 29 Mlb ofcopper and 48,000 oz of gold.

The company’s wholly-owned CerroColorado mine in Chile contributed 55 Mlbto second quarter copper output, whilst inBritish Columbia, Highland Valley Copper(33.6% interest) contributed 14 Mlb.Operations were suspended at HighlandValley on May 15, pending an improvementin global copper prices and/or structuralcost reductions that would ensure themine’s profitability down to a price of

US$0.60/lb. An arrangement is beingsought whereby power and compensationcosts would be linked to the price of copper,but agreement with the mine’s union on thisproposal has yet to be reached. Care-and-maintenance costs during the shutdown areexpected to cost the company about C$2.5million per quarter.

Rio Algom’s non-copper mining interestsinclude US uranium operations, a 25% roy-alty interest in the Polaris zinc-lead mine inArctic Canada and a 29.1% interest in theBullmoose coal mine in British Columbia.Second-quarter revenues from these inter-ests fell from C$25 million to C$8 million asa result of lower prices and volumes of coaland reduced uranium sales.

Undoubtedly the best-publicised event ofthe June quarter was the US$1.32 billionproject financing for the Antamina copper-zinc project in Peru (MJ, July 3, p.1),described as the largest ever financing for agreenfield mining project. More recently,Rio Algom has closed a financing for initialproceeds of C$160 million concerning a five-year securitisation of its metal distributionbusiness. Earlier this month, it alsoannounced a one-third increase in resourcesand two-thirds increase in potential outputat its wholly-owned Spence copper depositin northern Chile (MJ, July 9, p.21). Thein-pit resource at Spence is now estimatedat 400 Mt averaging 1% Cu, and an annualproduction rate of 500 Mlb (227,000 t) isunder consideration. Total developmentcosts would be of the order of US$1.0 bil-lion. ■■

Fluor encouraged asmargins improve

The California-based engineering and con-struction company, Fluor Corp., has report-ed a net loss of US$21.8 million for the firstsix months of its fiscal year (ended April30), compared with net earnings ofUS$109.1 million for the first half of fiscal1998. At US$6.48 billion, revenues weresome US$200 million lower than in the pre-vious period, and the situation was nothelped by a special provision of US$136.5million made to cover personnel, facilitiesand asset impairment costs incurred whilethe company implements its new strategicdirection.

Fluor’s engineering and constructionbusiness segment incurred an operating lossof US$20 million during the six months(1988: US$111 million profit) although,without the special restructuring provision,its profits would have been US$116.7 mil-lion. Its second-quarter operating resultsalso contained a US$20 million provision forproject-related losses on Fluor’s involve-ment in the Murrin Murrin nickel-cobaltproject in Western Australia.

New engineering and constructionawards during the six months totalled

Alcan Aluminium (C$) ..... 00.00 0.0 00.00 00Alcoa ($) .......................... 00.00 0.0 00.00 00Alusuisse (SF) .................. 00.00 0.0 00.00 00Anglo Amer. plc. (R)......... 00.00 0.0 00.00 00Anglo Amer. Plat (R)........ 00.00 0.0 00.00 00Anglovaal Mining (R) ...... 00.00 0.0 00.00 00Asarco ($) ........................ 00.00 0.0 00.00 00ASA ($) ........................... 00.00 0.0 00.00 00Ashanti Goldfields (£)......Ashton (A$) ..................... 00.00 0.0 00.00 00Barrick Gold (C$) ............ 00.00 0.0 00.00 00Battle Mt Gold ($) ........... 00.00 0.0 00.00 00Broken Hill Pty (A$) ........ 00.00 0.0 00.00 00Cleveland-Cliffs ($) .......... 00.00 0.0 00.00 00Comalco (A$)................... 00.00 0.0 00.00 00Cominco (C$) .................. 00.00 0.0 00.00 00Cyprus-Amax ($) ............. 00.00 0.0 00.00 00De Beers Centenary (R) ... 00.00 0.0 00.00 00Delta Gold (A$) ...............Echo Bay Mines (C$) ....... 00.00 0.0 00.00 00Falconbridge (C$) ............ 00.00 0.0 00.00 00Freeport Mc C&G ($)....... 00.00 0.0 00.00 00Gencor (R)....................... 00.00 0.0 00.00 00GFSA (R) ........................ 00.00 0.0 00.00 00Homestake ($) ................. 00.00 0.0 00.00 00Impala (R)....................... 00.00 0.0 00.00 00Inco (C$) ......................... 00.00 0.0 00.00 00JCI Gold (R).................... 00.00 0.0 00.00 00Kerr McGee ($)................ 00.00 0.0 00.00 00Kidston Gold Mines (A$) . 00.00 0.0 00.00 00Lonmin plc (£) ................. 00.00 0.0 00.00 00Metallgesellschaft (e)...... 00.00 0.0 00.00 00MIM Holdings (A$)......... 00.00 0.0 00.00 00Newmont Mining ($)........ 00.00 0.0 00.00 00Noranda (C$)................... 00.00 0.0 00.00 00Nord Resources ($)........... 00.00 0.0 00.00 00North (A$)....................... 00.00 0.0 00.00 00Outokumpu (e) ............... 00.00 0.0 00.00 00Pasminco (A$) ................. 00.00 0.0 00.00 00Phelps Dodge ($).............. 00.00 0.0 00.00 00Placer Dome (C$) ............ 00.00 0.0 00.00 00

Reynolds Metals ($) ......... 00.00 0.0 00.00 00Rio Algom (C$)................ 00.00 0.0 00.00 00Rio Tinto Ltd (A$)........... 00.00 0.0 00.00 00Rio Tinto plc (£) ............. 00.00 0.0 00.00 00Teck (C$)......................... 00.00 0.0 00.00 00Trelleborg (SK)................ 00.00 0.0 00.00 00WMC (A$) ...................... 00.00 0.0 00.00 00

Share prices and exchange rates, as at close of business onTuesday. 100 in the high/low column indicates that the shareis trading at a high in US$ terms, 0 that it is at a low. Figuresare based on dollar prices over the past 52 weeks.

Currencies July 27Value of £ $(US)$ (US) ................................................... 0.057 —$ (Australian)........................................ 0.00 0.00$ (Canadian) ......................................... 0.00 0.00Ringgit (Malaysian) Fixed official rate ..Franc (Swiss) ........................................ 0.00 0.00Krona (Swedish) ................................... 0.00 0.00Yen ....................................................... 0.00 0.00Rand (SA) ............................................ 0.00 0.00e (Euro) ............................................... 0.00 0.00Markka (Finnish) ................................. 0.00 0.00Franc (French)...................................... 0.00 0.00Deutschmark ........................................ 0.00 0.00

SHARE PRICES AND EXCHANGE RATES

July 27 Change on $ Company Local week % Dollar hi-lo

July 27 Change on $ Company Local week % Dollar hi-lo

46.6560.62

1767.00308.00149.40

39.0017.6315.38

3.620.65

27.001.94

17.5532.38

7.7424.9012.63

154.802.151.89

21.6017.5020.1012.85

7.81199.94

25.404.99

50.000.370.63

21.801.26

18.0620.10

0.503.30

10.751.68

57.6915.30

–1.80.3

–2.71.30.9

–5.0–2.10.8

–1.6–3.05.53.7

–6.0–5.0–2.4–2.7–4.31.7

10.42.21.61.85.80.44.21.30.04.0

–4.5–7.55.0

–6.8–3.15.9

–1.00.0

–7.0–8.7–6.1–9.89.3

31.0060.62

1181.9450.2024.35

6.3617.6315.38

5.740.42

17.941.94

11.3632.38

5.0116.5412.6325.23

1.391.26

14.3517.50

3.282.097.81

32.5916.88

0.8150.00

0.241.00

23.220.82

18.0613.36

0.502.14

11.451.09

57.6910.17

85877495

1008552

40

2657

284

09291539840

19797

100n/m

5100

817

8412

100919327

n/m8

7259696622

59.0021.9027.0010.9611.6068.50

6.85

0.3–0.7–3.3–2.1–4.1–2.1–7.1

59.0014.5517.4817.37

7.718.284.43

79949285442184

1.592.452.396.022.37

13.11185.07

9.721.49

–1.551.513.801.508.27

116.776.140.94

e1=Mk5.94573e1=FF6.55957e1=DM1.95583

92 Mining Journal, London, July 30, 1999

US$3.3 billion (1998: US$5.4 billion) whilethe company’s backlog at the end of theperiod was US$10.2 billion (1998: US$13.9billion). However, Fluor notes that marginson new awards continued to improve, withan anticipated gross margin of 8.1% on newbusiness compared with 6.0% last year.

Fluor’s low-sulphur coal mining sub-sidiary, A.T. Massey, reported operatingprofits of US$70 million for the period,down from US$77 million last year on a low-er proportion of higher-margin metallurgi-cal coal sold out of total shipments. BothUS domestic and export markets have beenaffected by unfavourable exchange ratesand lower demand for US coking coal. ■■

Cominco loss . . .For the three months to June 30, theCanadian base metals producer, ComincoLtd, has announced an unaudited net loss ofC$8 million on revenues of C$310 million.In the equivalent period of 1998, revenueswere C$362 million and there was a similarloss of C$8 million, but this was before anafter-tax gain of C$11 million on the sale ofshares in Global Stone. The Vancouver-based company attributes the 1999 secondquarter loss to lower earnings from opera-tions at Trail in British Columbia and from

its two copper operations, as well as to sea-sonally low sales volumes from its two zinc-lead mines – Red Dog in Alaska and Polarisin Arctic Canada.

Operating profits at Trail were down byC$7 million compared with the 1998 secondquarter. A 17-day shut-down of the oxygenplant incurred maintenance costs of C$5million, and Trail also suffered as a result oflower prices for its fertiliser products.However, the Kivcet smelter operated at74% of design capacity (or at 91% if itsshutdown period is excluded) comparedwith just 44% last year. Refined productionamounted to 71,700 t of zinc and 15,300 t oflead. Zinc output at the Cajamarquillarefinery in Peru was 26,800 t. At the twoArctic mines, second quarter zinc concen-trate sales were down by 36%.

In the copper sector, Cominco’s share ofproduction at 50%-owned Highland ValleyCopper in British Columbia was halved tojust 10,000 t of copper in concentrates,owing to the closure of the mine on May 15.This, combined with lower prices, resultedin operating profits from copper, which alsoincludes income from the 47.25%-ownedQuebrada Blanca operation in Chile, being15% less than in the 1998 second quarter.

. . . and Teck followsCominco’s losses have had a knock-on effecton Teck Corp., which has a 40% holding inCominco. Reporting a second-quarter lossof C$2.3 million, Teck noted that thisincluded an equity loss of C$3.1 millionfrom its Cominco holding, without which itwould have been able to post operatingearnings of C$1.2 million. By comparison,its second-quarter 1998 profits were C$3million.

Teck’s revenue during the quarter wasC$145.3 million, markedly lower than theC$176.9 million it earned in the comparableperiod in 1998. The company reported thatboth earnings and cashflow were signifi-cantly affected by low prices for all of itsmajor products, as well as by low coal salesvolumes.

Meanwhile, Steven Dean, president andchief executive officer of the company’s golddivision, has said that he aims to bringTeckGold to the market as a separately list-ed entity “when the time is right”. Teck hasa 73% holding in Australian gold producer,PacMin Mining Corp., which should con-tribute 200,000 oz this year to TeckGold’sforecast 500,000 oz output. ■■

More losses for Inco . . .Inco Ltd has reported a loss for the quarterended June 30 of US$1 million, bringingcumulative losses for the first half of theyear to US$17 million. This compares witha loss of US$39 million in the first six

months of 1998, which included a US$32million after-tax charge associated with thecompany’s restructuring. Revenues for thequarter were marginally higher at US$501million (1998: US$494 million), althoughhalf-year sales were fractionally lower atUS$939 million (1998: US$994 million).

The company has identified cost savingsequivalent to US$35 million per year inaddition to the US$215 million alreadyachieved under its restructuring pro-gramme. According to Inco’s chairman,Mike Sopko, “the US$250 million total willbe a permanent reduction that will drive ournickel unit production costs even lower andput us in a strong position to leverage ourearnings and cash flows as nickel and copperprices improve”. Nonetheless, much stilldepends on the company’s ability to over-come the current impasse with theNewfoundland provincial government overthe development of Voisey’s Bay.

. . . but profits forNoranda

Meanwhile Noranda, which disposed of itsforestry and energy assets last year as partof its restructuring, has reported a profit ofC$34 million for the June quarter, C$6 mil-lion higher than the C$28 million recordedin the same period last year. The companyhas attributed its improved performance tothe benefits of its cost-cutting programmeand to the start-up of the Collahuasi coppermine in Chile, in which its 49.9%-held affili-ate, Falconbridge, has a 44% stake.

Noranda notes that its cost-cutting pro-gramme was on course to deliver C$142 mil-lion in annual pre-tax savings as of June 30,and has predicted that its profit marginswill improve during the second half of 1999in line with increased metals demand inAsia, Latin America and elsewhere. ■■

Market newsAustralian mining group, Pasminco, hassold the coal assets that it acquired throughits take-over of Savage Resources Ltd tointerests associated with GlencoreInternational AG for A$69 million in cash.The assets include interests in the Liddell,Glendell and Foybrook joint ventures inNew South Wales’ Hunter Valley, and theTogara North joint venture in Queensland.■ Following the announcement of its halfyear results (MJ, July 23, p.69), AlcanAluminium Ltd has declared a quarterly div-idend of US$0.15 per common share.■ Lihir Gold Ltd has reported a net loss ofUS$6.65 million for the six months to theend of June. This compares with a net profitof US$4.07 million for the comparable peri-od in 1998. The company produced 270,959oz of gold in the half-year, with cash costs ofUS$278/oz during the second quarter.

MINING FINANCE

■ The boards of directors of Franco-NevadaMining Corp. and Euro-Nevada MiningCorp., the world’s largest public preciousmetals royalties companies, have givenapproval to proceed with their amalgama-tion by way of a plan of arrangement.Existing shareholders will receive one com-mon share in the amalgamated company foreach Franco-Nevada common share, and0.77 of a common share for each Euro-Nevada common share. Special sharehold-ers’ meetings have been scheduled forSeptember 8 to approve the arrangement.■ El Callao Mining Corp. is to issue five mil-lion common shares at a deemed price ofUS$0.15 per share to Bema Gold Corp., itslargest shareholder. The issue is in repay-ment of a US$500,000 debt owed by ElCallao to Bema Gold.■ US silver producer, Sunshine Mining andRefining Co., is implementing a one-for-eight reverse stock split, after which it willhave 34.6 million shares outstanding. Themove comes in compliance with newrequirements for continued listing on theNew York Stock Exchange, which stipulatea minimum stock price of US$1.00.■ Johnson Matthey plc has announced thesale, subject to shareholder and US anti-trust legislation approval, of its electronicsmaterials division to AlliedSignal. The saleof what Johnson Matthey now considers tobe a non-core business will raise US$655million, although conditions relating to col-lective bargaining agreements at the com-pany’s two plants in the US may reduce thefinal price by US$22 million until a satisfac-tory outcome is reached.■ Australian gold producer, AcaciaResources, has reported that it is reviewingall of its operations and expects to makesome write-downs on a number of assets.The company produced 116,746 oz of goldduring the June quarter at a cash cost ofA$346/oz, up from A$322/oz in the preced-ing three months, and expects to produce

over 500,000 oz during 1999, with lowercosts during the second half resulting fromthe upgrade of its Sunrise Dam plant.■ Second quarter earnings of NorthAmerica’s third largest producer of alumini-um, Reynolds Metals Co., did not fall assharply as many analysts had expected.The company reports that its profits ofUS$35 million in the three months to June30, 1999, compared with U$73 million forthe same period in 1998. In that year,charges associated with restructuring anddebt retirement resulted in a quarterly netloss of US$126 million. Reynolds’ chiefexecutive, Jeremiah Sheenan, said that,when compared to the second quarter of1998, the company’s earnings had been hurtby lower realised aluminium prices and lossof income from operations that it had sold.However, compared with the first quarter of1999, Mr Sheenan said that the companyhad achieved a US$45 million improvementin net income owing to higher primary alu-minium prices, further cost cutting andincreased sales volumes. Total revenues forthe second quarter of 1999 were US$1.16billion with aluminium shipments of340,000 t compared with US$1.58 billionand 378,000 t in the same period in 1998.According to the company, if the effects ofthe sold operations are excluded, revenuesrose by 4% and aluminium shipmentsincreased by 24%.■ Metorex Ltd, the southern African sub-sidiary of Toronto-listed Crew DevelopmentCorp., has begun discussions aimed atrestructuring Metorex’s various assets. Thecompany plans to create a single listeddiversified mining company includingMetorex’s holdings in ConsolidatedMurchison, Maranda, Vergenoeg MiningCo., Wakefield Investments, O’okiepCopper Co., Chilumba Mines and Metmin.Where possible, minority interests would beincorporated into the new company. Crewexpects to make a detailed announcementof the restructuring by the end of August. ■ Aquarius Platinum Ltd has announcedthat it is ready to proceed to the next stageof its proposed restructuring and subse-quent listing on the AIM of the LondonStock Exchange. The company believesthat this will give it better access to UK andEuropean capital markets to progress itsMarikana project. Under the restructuringscheme, Aquarius will become a whollyowned subsidiary of Strategic PlatinumMines Ltd, incorporated in Bermuda.Strategic Platinum will be renamedAquarius Platinum on completion of thescheme, and will apply for AIM andAustralian Stock Exchange listings.■ The Spanish zinc producer, Asturiana deZinc SA, has received a Baa3 issuer ratingfrom Moody’s Investor Services. The ratingis based on the low-cost position of the com-pany’s smelter capacity, its establisheddomestic market position and the expecta-tion that recent operational and financial

progress will be maintained. It also, howev-er, recognises Asturiana’s lack of diversitycompared to some of its competitors and themanagement challenges posed by itssmelter capacity expansion programme. ■■

PeopleIan Bayer has retired as president and chiefexecutive officer of Battle Mountain Gold forhealth reasons. He will remain a member ofthe company’s board of directors. BattleMountain Gold’s chairman, Karl Elers, willassume the additional role of chief executiveuntil a permanent replacement is appoint-ed. The company has named John Keyes aspresident and chief operating officer.■ Emgold Mining Corp. has appointedWilliam J. (Bill) Witte as executive vice-president. Mr Witte will be responsible forthe company’s day-to-day operations, thedevelopment of the Idaho-Maryland mine,and the evaluation of new properties.■ South Korea’s LG Group has appointedKim Seon-dong as president and chief exec-utive officer of LG-Nikko Copper Inc., itsUS$240 million copper smelting joint ven-ture with a Japanese consortium. SatoKeiichi has been named as the new compa-ny’s senior executive vice-president.■ James L. Madson, executive vice-presi-dent of Phelps Dodge Mining Co., is to retireat the end of September. He began his careerwith the company in 1965. Recent corpo-rate appointments at Phelps Dodge Mininginclude that of Dennis M. Bartlett to theposition of vice-president for NorthAmerican developments, Harry M. (Red)Conger as vice-president of the companywhile retaining his position as president ofits Morenci operations, and David H.Thornton as vice-president of its NewMexico operations. David C. Naccarati suc-ceeds Mr Thornton as president of PhelpsDodge Candelaria Inc., while A. JohnBroderick has been named president ofPhelps Dodge Tyrone Inc.■ Kerr-McGee Corp. has appointed LyndaD. Garcia as its director of human resourcesinformation systems and payroll. MsGarcia, who joined the company in 1985,was previously manager of accounting sys-tems and procedures in its finance division.■ The uranium producer, Energy Resourcesof Australia (ERA), has appointed RobertCleary as chief executive officer. Mr Clearyreplaces Phillip Shirvington, who has joinedERA’s parent, North Ltd, as executivegeneral manager of new business.■ Dennis Franks has resigned as financedirector of West Australian-based GoldMines of Sardinia. His move follows thecompany’s decision to move its core finan-cial and administrative functions fromPerth to the Furtei mine site in Sardinia.Mr Franks, an executive director of thecompany since its formation in 1987, will beretained as a consultant. ■■

94 Mining Journal, London, July 30, 1999

MINING FINANCE