Operations & financial report
Copper group projects
Resolution (Rio Tinto: 55 per cent)
The Resolution Copper project is located in the historic Pioneer Mining District
three miles east of Superior, Arizona. Exploration from 2001 to 2003 indicated
a large, world class copper resource more than 2,000 metres (7,000 feet)
below surface. The project team is currently working through a pre-feasibility
study, including dewatering the former Magma mine and sinking an exploratory
shaft to 2,000 metres below the surface, as well as preparing numerous studies
to evaluate the technical, legal and environmental issues and to prepare
the mining plan.
The key issue facing the project is progress on the passage of a land exchange bill through the US Congress to exchange 1,300 hectares of federal land above the Resolution deposit for over 2,000 hectares of land with high conservation value spread throughout Arizona. In July 2007, land exchange bills were reintroduced into the US Senate and House, followed by a House hearing in November. The next steps include mark up of the bill in the House and a hearing in the Senate which is likely to take place in the first half of 2008.
Oyu Tolgoi (Rio Tinto: 9.9 per cent interest in Ivanhoe Mines)
In October 2006 Rio Tinto purchased a stake of just under ten per cent in Ivanhoe
Mines of Canada in order to jointly develop the Oyu Tolgoi copper-gold resource
in Mongolia's south Gobi region. Rio Tinto has the ability progressively
to increase its stake to 43 per cent over the next four years at pre-determined
prices. This phased, risk managed entry into an outstanding resource secures
a valuable share of a potential average production rate of 440,000 tonnes
of copper per year with significant gold by-products.
There is extensive exploration potential in Mongolia, including ground controlled by Entrée Gold around Oyu Tolgoi. Rio Tinto is the largest single shareholder in Entrée Gold and, with Ivanhoe, owns a total equity interest of 30.6 per cent. Ivanhoe has an option for up to an 80 per cent interest in the Entrée ground over the north and south extensions of the Oyu Tolgoi trend. Exploration on the Entrée Gold joint venture by Ivanhoe has recently delineated a continuous molybdenum-rich copper and gold mineralisation up to 400 metres wide along a 1,100 metre strike length. Overall, the Oyu Tolgoi mineralised trend now has a strike length of over 20 kilometres.
Rio Tinto is actively engaged and working with the Mongolian Government to progress settlement of a long term investment agreement.
Entrée Gold (Rio Tinto: 16 per cent)
In June 2005 Rio Tinto acquired a 9.9 per cent stake via private placement
in Entrée Gold Inc, a Canadian junior mining company. Entrée Gold's main
asset includes three claims that surround the Ivanhoe Mines Oyu Tolgoi project
in Mongolia. Rio Tinto's entry into Entrée Gold was due primarily to the
prospectivity of the land package, including high grade copper and gold intercepts
in their tenement already under agreement to Ivanhoe adjacent to the Oyu
Tolgoi lease. Recent drilling by Ivanhoe identified significant high grade
intercepts of porphyry mineralisation on the Heruga concession adjacent
to the Oyu Tolgoi project. As part of the initial entry into Entrée Gold,
Rio Tinto secured a further 6.3 million A and B class warrants which were
due to expire by the end of June 2007. On the 28th June, Rio Tinto exercised
these warrants at a cost of US$16.9 million which took Rio Tinto's direct
equity in Entrée Gold to approximately 16 per cent. The combined Rio Tinto
and Ivanhoe equity position is now over 30 per cent.
La Granja (Rio Tinto: 100 per cent)
La Granja in the Cajamarca region of northern Peru is a copper project in the
pre-feasibility phase. Rio Tinto acquired the project in December 2005 for
US$22 million plus a minimum investment of US$60 million, through a public
bidding process carried out by the Peruvian Government.
As of December 2007, 41 kilometres of drilling had been completed which led to discovery of four additional porphyries in the vicinity, as well as further exploration potential. Drilling results suggest that the main areas have a possible mineralisation of four to eight billion tonnes at a copper equivalent average grade of about 0.5 per cent. Initial investigations indicate two to four times more mineralised material than was reported as mineral resources by previous owners, making La Granja the largest undeveloped copper project in Latin America. It has the potential to be a very large, long life operation. First production could occur in 2014.
Instead of looking at La Granja as a conventional milling operation producing concentrates for export, the pre-feasibility study is aimed at demonstrating the possibility of recovering copper metal using leaching of copper from whole ore, with solvent extraction and electrowinning.
There are many stakeholders with an interest in the project due to the potential positive impact on the local and national economy. At the same time, local communities have high expectations of Rio Tinto's presence in the area, where basic skills of literacy and numeracy and basic infrastructure and services are lacking. Rio Tinto is working in a participatory manner with local communities to help them develop and improve their quality of life with the engagement of local, regional and national authorities.
Pebble (Rio Tinto: 19.8 per cent interest in Northern Dynasty
Minerals)
Rio Tinto acquired a 9.9 per cent interest in Northern Dynasty Minerals during
the year and increased its interest to 19.8 per cent during February 2007.
Northern Dynasty Minerals is advancing the Pebble copper-gold-molybdenum deposit
in south western Alaska, which includes an orebody amenable to block caving.
In July 2007, Anglo American agreed to invest US$1.4 billion in stages to earn
a 50 per cent stake in the project.
The project comprises two orebodies, Pebble East and Pebble West. Drilling has shown Pebble East to be deep and higher grade, suggesting an attractive underground mining option with a smaller environmental footprint than the Pebble West deposit which would entail open pit mining. Rio Tinto will not support development unless it is conducted in a way that protects fish, wildlife and the environment.
Sulawesi Nickel (Rio Tinto: 100 per cent)
The Sulawesi Nickel project is situated on the island of Sulawesi in Indonesia
and is the result of the discovery by Rio Tinto Exploration in 2000 of a
world class laterite deposit. Because of the nature of the deposit, mining
is planned to be a shallow open cut process with continuous rehabilitation.
Initial production is planned at a rate of about 46,000 tonnes of nickel
per annum, with potential to increase to about 100,000 tonnes. The project
will involve the construction of an access highway and a new seaport on the
east coast of Sulawesi.
Upon completion of the negotiation of a Contract of Work (CoW) with the Government and ratification of the agreement by the Indonesian Parliament, it is intended to start a pre-feasibility study into development.
Eagle (Rio Tinto: 100 per cent)
Late in 2007 Rio Tinto approved the development of the Eagle nickel high grade
underground mine in Michigan, US, which is scheduled to begin operation in
2009. There are six further adjacent prospects which may give the potential
to extend the current mine life beyond 30 years at the current planned production
rates. Deeper drilling under and adjacent to the Eagle deposit reinforced
the potential for further economic nickel resources outside the current mine
plan. There are similarities to other world class magmatic nickel-sulphide
deposits. Rio Tinto has an extensive land position in the Eagle district
which is extremely prospective, including a 30 kilometre identified trend
containing multiple target intrusions.
