Performance
Copper
Kennecott Utah Copper (Rio Tinto: 100 per cent)
KUC operates the Bingham Canyon mine,
Copperton concentrator and Garfield smelter
and refinery complex near Salt Lake City,
Utah. KUC is a polymetallic mine, producing
copper, gold, molybdenum and silver. As the
second largest copper producer in the US based on 2008 production, KUC
supplied approximately 12 per cent of the
US's annual refined copper requirements
and employed approximately 1,900 people
at 31 December 2008. KUC is well
positioned on the industry cost curve,
benefiting from significant by-product
revenues from molybdenum, gold, and silver.
Although mining operations at Bingham
Canyon have taken place for over 100 years,
the mine continues to have extensive
optionality for future development.
Over the past three years, exploration has identified a significant molybdenum deposit beneath the Bingham Canyon open pit, additional porphyry mineralisation below the southern pit wall at depth, and multiple exploration targets with further potential both in the immediate three to four kilometre wide orbit of the Bingham pit and within 20 kilometres of the Oquirrh Range.
2008 operating performance
Ore processed at the Copperton concentrator
in 2008 was a new record. KUC's copper in
concentrate production increased to 238,000
tonnes in 2008, an increase of 12 per cent
from 2007. Copper cathode production of
200,600 tonnes was 65,000 tonnes less than
in 2007. The decrease in refined copper and
gold were primarily the result of a planned
smelter shutdown during the second half of
2008. Molybdenum concentrate production
in 2008 was 19,400 tonnes, compared to
26,600 tonnes in the previous year. The
decrease in molybdenum production was
driven by a nearly 17 per cent decrease in ore
grades compared to 2007.
Stripping of waste rock on the east side of the pit was accelerated in mid 2008. This is expected to bring deliveries of higher grade ore forward to compensate for declines in ore grades expected in 2011 and 2012. Current ore reserves and mineral resources are expected to enable open pit operations to continue until 2019 and possibly to 2036.
The Keystone project continued to evaluate open pit and underground expansion options at the mine. The timeline for development of this project is under review given the current global economic setting. Dewatering and rehabilitation of an existing mine shaft continued in 2008, and some surface infrastructure was constructed.
The bulk flotation upgrade at the KUC concentrator, which started in 2007, was largely completed in 2008. The project is expected to increase copper recovery by two per cent and concentrate grade by four per cent.
The construction of the Molybdenum Autoclave Process (MAP) facility approved during 2008 has been delayed due to falling prices.
| 2008 | 2007 | 2006 | |
|---|---|---|---|
| Rock mined ('000 tonnes) | 153,761 | 142,297 | 145,343 |
| Ore milled ('000 tonnes) | 49,134 | 47,525 | 47,857 |
| Head grades: | |||
| Copper (%) | 0.58 | 0.53 | 0.63 |
| Gold (g/t) | 0.35 | 0.38 | 0.49 |
| Silver (g/t) | 2.97 | 3.00 | 3.50 |
| Molybdenum (%) | 0.041 | 0.050 | 0.057 |
| Copper concentrates produced ('000 tonnes) | 931 | 889 | 1,019 |
| Production of metals in copper concentrates | |||
| Copper ('000 tonnes) | 238.0 | 212.2 | 265.6 |
| Gold ('000 ounces) | 368 | 397 | 523 |
| Silver ('000 ounces) | 3,414 | 3,487 | 4,214 |
| Molybdenum concentrates produced ('000 tonnes) | 19.4 | 26.6 | 30.2 |
| Contained molybdenum ('000 tonnes) | 10.6 | 14.9 | 16.8 |
| Concentrate smelted on site ('000 tonnes) | 941 | 1,103 | 918 |
| Production of refined metals | |||
| Copper ('000 tonnes) | 200.6 | 265.6 | 217.9 |
| Gold ('000 ounces) | 303 | 523 | 462 |
| Silver ('000 ounces) | 3,252 | 4,365 | 4,152 |
Escondida (Rio Tinto: 30 per cent)
The Escondida copper mine in Chile's
Atacama Desert, is the largest copper mine
in the world in terms of annual production,
and has a mine life expected to exceed 30
years. It accounted for approximately eight
per cent of global primary copper
production. BHP Billiton owns 57.5 per cent
of Escondida and is the operator and
product sales agent.
The Escondida district hosts two of the largest porphyry copper deposit systems in the world, Escondida and Escondida Norte, located five kilometres from Escondida.
2008 operating performance
Escondida's copper in concentrate production
was 992,000 tonnes, 255,000 tonnes less than
in 2007. Copper in cathode production of
258,000 tonnes was 20,000 tonnes more than
in 2007.
Early in 2008, production was impacted by lower grades and a deficit of prestripping in the Norte pit which restricted access to ore. The pre-stripping deficit was due to longer than anticipated haul cycles to the sulphide leach pad. Additional mining equipment was introduced to rectify this issue. Escondida production during August and September 2008 was adversely impacted by three shutdowns of the SAG mill on the Laguna Seca concentrator plant, resulting in ten days of lost production. The interruptions resulted from problems with the mill's electric motor. Following these interruptions, the SAG mill has operated at a reduced rate to limit the risk of additional failures occurring. The group currently expects that repairs will be completed in the second quarter of 2009.
| 2008 | 2007 | 2006 | |
|---|---|---|---|
| Rock mined ('000 tonnes) | 405,738 | 345,377 | 338,583 |
| Ore milled ('000 tonnes) | 89,451 | 90,697 | 84,158 |
| Head grade: | |||
| Copper (%) | 1.37 | 1.64 | 1.59 |
| Production of contained metals | |||
| Copper ('000 tonnes) | 992 | 1,247 | 1,122 |
| Gold ('000 ounces) | 144 | 187 | 170 |
| Silver ('000 ounces) | 6,167 | 7,870 | 6,646 |
| Copper cathode ('000 tonnes) | 258 | 238.4 | 134.4 |
In previous years, electrical power for Escondida was generated by gas fired power stations with gas sourced from Bolivia via Argentina. High Argentine demand for gas, and an ongoing territorial dispute between Bolivia and Chile, has led to curtailment of gas supply to Chile. Chilean power generators have been forced to move towards diesel power generation and the majority of the resulting cost increase has been passed on to customers such as Escondida.
During 2008, Escondida filed Environmental Impact Assessments for the Phase 5 expansion and a new desalination plant. In light of current economic conditions these investments have been reviewed and will be delayed.
Future growth options at Escondida are driven by current brownfield exploration activities. There is a significant exploration drilling programme on a number of potential deposits around the Escondida lease area, with positive results already announced at Pampa Escondida.
Grasberg joint venture (Rio Tinto: 40 per cent)
Grasberg, located in the province of Papua in
Indonesia, is one of the world's largest copper
and gold mines in terms of reserves and
production. It is owned and operated by
Freeport Indonesia (PTFI), the principal and
91 per cent owned subsidiary of the US based
Freeport-McMoRan Copper & Gold Inc. (FCX).
The Government of Indonesia owns the
remaining nine per cent of PTFI. The joint
venture gives Rio Tinto a 40 per cent share of
production above specified levels until 2021
and 40 per cent of all production after 2021,
as well as representation on operating and
technical committees.
The joint venture operates under an agreement with the Government of Indonesia, which allows the joint venture to conduct exploration, mining and production activities in a 10,000 hectare area (Block A). Exploration activities are also conducted in an approximate 200,000 hectare area (Block B). All of the proved and probable ore reserves and current mining operations are located in Block A. Rio Tinto and PTFI also have joint ventures in other entities which have exploration rights in areas covering 690,000 hectares in addition to Blocks A and B. Rio Tinto has the right to 40 per cent of the exploration potential in all areas outside of Block A.
To meet the mine's social obligations to local communities, at least one per cent of Grasberg's net sales revenues are committed to support village based programmes. In addition, two trust funds were established in 2001 in recognition of the traditional land rights of the local Amungme and Komoro tribes. In 2008, PTFI contributed US$34 million (net of Rio Tinto portion) and Rio Tinto US$0.5 million in total to the funds.
2008 operating performance
Grasberg's copper production in 2008 was
521,300 tonnes, 48,100 tonnes less than in
2007. On 10 September 2008 Freeport
announced that a small scale open pit failure
encompassing approximately 75,000 tonnes
of material occurred at Grasberg. As a result,
Rio Tinto's share of copper and gold from
2008 production was greatly reduced as the
production levels were just above the
minimum thresholds set out in the joint
venture agreement.
The expansion of the currently producing Deep Ore Zone (DOZ) mine to 50,000 tonnes per day was completed with third quarter rates averaging 61,000 tonnes per day. A further expansion to 80,000 tonnes per day is under way with completion targeted for 2010.
| 2008 | 2007 | 2006 | |
|---|---|---|---|
| Ore milled ('000 tonnes) | 70,595 | 77,593 | 83,716 |
| Head grades: | |||
| Copper (%) | 0.83 | 0.82 | 0.85 |
| Gold (g/t) | 0.66 | 1.24 | 0.85 |
| Silver (g/t) | 3.21 | 3.53 | 3.84 |
| Production of metals in concentrates | |||
| Copper ('000 tonnes) | 521.3 | 569.4 | 610.8 |
| Gold ('000 ounces) | 1,199 | 2,689 | 1,880 |
| Silver ('000 ounces) | 4,707 | 5,238 | 5,609 |
Palabora (Rio Tinto: 57.7 per cent)
Palabora Mining Company is a publicly
listed company on the Johannesburg Stock
Exchange and operates a mine and smelter
complex in South Africa.
Palabora supplies most of South Africa's copper needs and exports the balance. It employed approximately 2,100 people at 31 December 2008. For the first time, three year wage agreements were entered into with organised labour covering the period ending in February 2011.
During 2008, the Palabora Value Proposition was introduced, outlining the benefits available to employees and adding retention bonuses for key skills. The result of this initiative has been a 50 per cent reduction in resignations, particularly in the scarce skill area of certified artisans.
Palabora achieved a 41 per cent rate of employing historically disadvantaged South Africans in management positions. This key milestone is a crucial step in securing New Order Mineral Rights in terms of the Mining Charter.
The Minerals and Petroleum Resource Development Act (MPRDA) requires mines in South Africa to be at least 15 per cent owned by historically disadvantaged South Africans by April 2009. This requirement will increase to 26 per cent by 2014. Palabora has entered into discussions regarding a potential broad based black economic empowerment transaction. The structure of the envisioned transaction is being finalised for presentation to the existing shareholders and will be presented to the South African Department of Minerals and Energy for their consideration during the first quarter of 2009.
2008 operating performance
Copper concentrate production from
Palabora was 286,500 tonnes in 2008,
47,300 tonnes more than in 2007. The
concentrator at Palabora kept pace with the
rate of underground production. In addition,
the reclaiming of low grade concentrate
from pond storage facilities and the reprocessed
smelter secondary material
facilitated a 19 per cent increase in
contained copper production. The majority
of higher grade surface stockpiles have now
been fully processed and a toll treating
contract with Foskor at 24,000 tonnes per
day has been re-instituted.
The smelter and refinery complex experienced several unplanned outages and as a result anode production averaged 6,300 tonnes per month in 2008. Copper was sold as concentrate during the periods of low smelter availability. Small quantities of purchased blister copper were also introduced into the casting furnace on a trial basis.
Palabora has suspended two expansion projects for 2009, the Western Extension and Phase 2 of the magnetite rail loader. These actions are in response to the overall deterioration of market conditions. The Western Extension will expand the existing underground mine and ultimately is expected to add two years to the copper mine life. Phase 2 of the magnetite rail loader is expected to increase capacity to load magnetite for rail shipment. These expansion projects will be reviewed when market conditions improve.
| 2008 | 2007 | 2006 | |
|---|---|---|---|
| Ore milled ('000 tonnes) | 12,454 | 12,915 | 10,730 |
| Head grade: | |||
| Copper (%) | 0.69 | 0.70 | 0.71 |
| Copper concentrates produced ('000 tonnes) | 286.5 | 239.2 | 208.9 |
| Contained copper ('000 tonnes) | 85.1 | 71.4 | 61.5 |
| New concentrates smelted on site ('000 tonnes) | 261.3 | 295.8 | 288.5 |
| Refined copper produced ('000 tonnes) | 75.9 | 91.7 | 81.2 |
| Magnetite concentrate ('000 tonnes) | 1,951 | 1,306 | 1,127 |
Northparkes Mines (Rio Tinto: 80 per cent)
Northparkes is a joint venture with the
Sumitomo Group (20 per cent).
In November 2006, the joint venture partners approved the development of the E48 block cave project, which was expected to cost US$160 million (Rio Tinto share: US$127 million) and extend the mine's life to 2016. As a response to current economic conditions however, the completion of the E48 project has been deferred. Northparkes has also initiated a review of working capital that will focus on contractor management, inventory lead-time management, obsolete stock and accounts payable. Other initiatives include optimising both underground and open cut mining programmes. Northparkes employed approximately 220 people at 31 December 2008.
2008 operating performance
Copper production at Northparkes was
24,800 tonnes, 18,000 less than production
in 2007. Underground production was
constrained throughout 2008 as a result of
the early closure of the E26 Lift 2 block cave
in 2007 due to the ingress of clay in the
underground draw points. Surface stockpiles
were used to maintain full mill capacity
whilst additional underground and open cut
ore sources were brought into production.
Construction of the Lift 2 North extension
was completed in early 2008 and was
ramped up to full production in mid-2008.
The E22 pit was re-opened and began
producing ore from July 2008. As a result, the
grade of ore processed steadily increased
during 2008. Ore processed during 2008 was
lower as harder open cut and stockpiled ore
impacted on mill throughput rates.
The next stage of the E48 block cave underground project, which is 75 per cent complete, was suspended in early 2009. Ore will be sourced from Lift 2 North and the E22 open pit. At 31 December 2008 the E48 project was ahead of schedule and within budget.
Exploration drilling has identified mineralisation beneath the E48 project with the potential to sustain larger scale underground mining.
| 2008 | 2007 | 2006 | |
|---|---|---|---|
| Ore milled ('000 tonnes) | 5,244 | 5,297 | 5,789 |
| Head grade: | |||
| Copper (%) | 0.54 | 0.91 | 1.53 |
| Gold (g/t) | 0.26 | 0.62 | 0.64 |
| Production of contained metals | |||
| Copper ('000 tonnes) | 24.8 | 43.1 | 83.3 |
| Gold ('000 ounces) | 32.3 | 78.8 | 94.7 |
Kennecott Minerals (Rio Tinto: 100 per cent)
Kennecott Minerals sold its two principal US
operating mines in early 2008. Kennecott
Greens Creek Mining Company and
Kennecott Juneau Mining Company, which
held a 70.3 per cent interest and managed
the Greens Creek Joint Venture, were sold to
Hecla Mining Company, the joint venture
partner, on 16 April 2008. Sales proceeds
were US$750 million (US$700 million in
cash and US$50 million in Hecla stock),
resulting in a net after tax gain of US$376
million. The 40 per cent interest in the
Cortez Joint Venture was sold to its 60 per
cent joint venture partner Barrick Gold on
5 March 2008, for US$1.7 billion cash,
resulting in a net after tax gain of US$1.0
billion. In addition, Rio Tinto will benefit
from a deferred bonus payment in the event
of a significant discovery of additional
reserves and resources at the Cortez gold
mine and will also retain a contingent royalty
interest in the future production of the
property. After tax cash flow of US$1.6 billion
was generated from the sale of the two
mining operations.
Kennecott Minerals believes that it has a record of successful mine closures and reclamation which has demonstrated protection of the environment and responsible post mining land use. The Flambeau mine in Wisconsin became a community nature park with walking and equestrian trails. Ridgeway in South Carolina has two fresh water pit lakes and wetland for ecological studies. The Nevada Copper reclaimed tailings area supports cattle ranching and agricultural production.
2008 operating performance
Net earnings of US$31 million (excluding
gain on property sales) reflect the fact that
Rio Tinto only owned Greens Creek and
Cortez during the first few months of 2008.
This compares to 2007 underlying earnings
of US$106 million.
