Amerigo's copper/moly output from El Teniente tailings reaching new records

Amerigo's high tonnage El Teniente tailings retreatment project is coming up to record production levels.

LONDON - 

While most of Chile's copper and molybdenum mining is from primary sources, Canadian junior Amerigo Resources is making its way by reprocessing old and new copper/moly tailings on a very large scale from one of the world's great copper mines - Codelco's El Teniente, the world's largest underground copper mine, and one of the largest underground mines located anywhere on the globe.

Amerigo's wholly owned subsidiary, Minera Valle Central (MVC)is re-treating all the fresh tailings from El Teniente's present production and has the right to treat higher grade old tailings from a 200 million tonne in situ tailings impoundment known as Colihues  which is located next to MVC's plant. In 2008 MVC produced close to 35 million pounds of copper and approximately 769,000 pounds of molybdenum and the company's goal is to increase production on an annualised basis to somewhere between 50 and 60 million pounds of copper and 1 million pounds of molybdenum, which is higher than a number of significant primary copper mining operations. The MVC site is located 8 kilometers east of the city of Rancagua and 90 kilometers south of Santiago at 700 meters elevation. 

At the time of a Mineweb visit the operation was treating some 160,000 tonnes of material a day - 130,000 tonnes directly from the mine and around 30,000 tonnes a day from the Colihues tailings impoundment, through a very impressive open-to-the- air mineral processing plant which had been put together largely from equipment purchased on the secondhand market and, in some cases, re-engineered to suit MVC's specific high throughput, very low grade, requirement. The Colihues ‘old' tailings run at close to 0.3% copper, while the ‘new' tailings are at around 0.12%.  The plant looks to be operating extremely well.  There are eight ball mills regrinding the tailings followed by flotation to produce a copper concentrate, which also contains the molybdenum and some silver.

Additionally the tailings are treated in a series of cascades which are effectively an additional flotation stage.  The flow of the tailings through this gravity system provides natural agitation, and along with the reagents already in the tailings from their treatment in the El Teniente and MVC plants a float is achieved which is taken off and returned to the main concentration system.  This cascade system is said to be unique to MVC.

The concentrate is further treated in an additional section for the extraction of the molybdenum content, while the overflows are settled in two huge 100m diameter Delkor thickeners before being sent on their way to the current El Teniente tailings pond.

The new tailings are delivered to the plant via a 40 km tailings launder from the El Teniente mine, while the old tailings are ‘mined' using water monitors and pumps which deliver the slurry direct to the concentrator.  The General Manager, Raul Poblede reckons that copper can be produced at cash costs of around $1.30 a pound, which at current copper prices means that this very efficient operation could be highly profitable on an operating basis, now that the bulk of recent capital spending is behind it.  But last year was a tough one for the company, with the copper price plunging in the fourth quarter and sky-high power prices earlier in the year.

Indeed the power costs were such that the company purchased a used heavy fuel oil power plant which has been constructed on site, only for power prices to fall back to old levels of around 9 cents/kWh.  This means it is currently uneconomic to run the new power plant which requires a 12 cents/kWh price to compete.  But the plant serves as insurance against power shortages or extraordinarily high power
prices - and with electricity prices likely to rise again in the years ahead, the plant could well become economic sooner rather than later - and could even be a money maker in its own right through selling excess power to the Chilean electrical grid.

Overall total cost (the aggregate of cash cost, El Teniente royalty, depreciation and accretion) in Q3-2009 was $2.16/lb compared to $2.40/lb in Q3-2008. The decrease in total cost was driven by lower cash cost and reduced El Teniente royalty payment due to lower copper and molybdenum prices between the comparative periods.  So far in Q-4 plant throughput has increased with record numbers being achieved and final Q-4 figures should be even more positive.

The company hedges some of its copper production and a recent announcement disclosed that MVC has secured a minimum price of US$2.60 per pound for 800 tonnes per month of copper production for the months from December 2009 to May 2010, inclusive, representing approximately 45% of forecast copper production over that period. The facility sets a maximum price of US$3.20 per pound on this production. If the LME copper price trades between US$2.60 and US$3.20 per pound, MVC will receive the LME monthly average copper price for copper delivered under this facility. The facility includes standard provisions for a facility of this nature, including the potential requirement to provide to Enami, which smelts and refines the concentrate, additional guarantees subject to increases in the copper price.

Dr. Klaus Zeitler, President of Amerigo, stated recently "Although we are bullish on the copper price in the longer term, we believe that near term hedging is prudent risk management at this point in order to secure our short term cash requirements for servicing and repaying the debt the Company incurred as a result of the global financial crisis.  As was the case with the first hedging facility, we maintain full upside potential on greater than 50% of our production that remains unhedged."

MVC was established in 1990/1991by several former Codelco executives with the financial backing of Fe Grande S.A., a major Chilean private construction group.  The project was too small to interest Codelco, and was eventually sold to Amerigo in 2003 because it was not considered to form part of Fe Grande S.A.'s "core business".  Since taking over MVC, Amerigo has undertaken a significant expansion of the facilities, including the addition of the molybdenum plant, through the investment of approximately $100 million, with the result that Codelco now receives millions of dollars in royalties from Amerigo with no expenditures.

There are two additional major tailings impoundments at El Teniente, including the Cauquenes tailings dam which contains an estimated 500 million tonnes of additional higher-grade tailings and is adjacent to Colihues, and Barahona, which is similar in size to Colihues and located closer to the El Teniente mine.  Amerigo hopes to obtain the rights to process tailings from these additional deposits, although in Colihues alone there is sufficient material to keep the plant going at its existing scale for around another 20 years.  There is space to expand the plant if necessary and some additional spare capacity in the existing circuits, and the company has the necessary permits to increase the processing of the old, higher grade, tailings to 45,000 t/d - a target which it hopes to achieve next year - which should help further improve profitability.

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