VOLUME I: EXECUTIVE SUMMARY: TABLE OF CONTENTS
NB: si vous passez en edition word, vous aurez ce document avec des signets pour consultation rapide
1.0 INTRODUCTION
2.0 RESOURCES
3.0 MINING AND RESERVES
4.0 PROCESSING
5.0 INFRASTRUCTURE
6.0 ENVIRONMENTAL REVIEW
7.0 PROCESS ALTERNATIVES
8.0 CONCEPTUAL DEVELOPMENT PLANS:
PRODUCTION, COSTS & INVESTMENTS
9.0 VALUATION
LIST
OF FIGURES
2-1 Location of Claims, Ferrobamba, Tintaya
Metallogenic Belt 2.2
2-2 Geologic Map of Tintaya Area 2.4
3-1 Tintaya District Map 3.3
4-1 Processing Facilities Layout, Tintaya
Mine4.3
4-2 Tintaya Mine, Main Tailings Dam4.7
5-1 Tintaya Site Map 5.2
LIST
OF TABLES
2-1 Geologic
Resource 2.6
2-2 Preliminary
Ore Reserve Calculations for the Bambas Region 2.11
3-1 Mineable
Reserves as of September 1, 1993 3.4
3-2 Conceptual
Production Schedule.8
8-6 Concentrator
Costs 8.9
8-7 General,
Administrative & Marketing Costs8.10
8-8 Copper
Oxide Production & Costs8.11
8-9 Submerged
Combustion Smelting - Production & Costs8.13
9-1 Summary
of Operating Parameters for Cases 1, 2 and 3 9.3
9-2 Net
Present Value 9.4
9-3 Results of Sensitivity Analysis9.5
9-4 Comparable
Transactions 9.7
9.5 Comparable
Copper properties exchanged from 1992-19939.9
Pincock, Allen & Holt‑A Division of Hart Crowser Inc. (PAH), in association with SVS Ingenieros of Peru, undertook a complete technical review of the operations of Tintaya S.A. for the purpose of identifying areas of potential new developments and conducting an economic evaluation of the company. It was the conclusion of PAH that Tintaya represents a significant on‑going operation, with a capacity to produce more than 50 000 tonnes of fine copper annually during the next 15 years. Significant investment will be required for the development of new mining areas. However, the quantity and quality of the reserves justifies this investment.
Tintaya is, at 0.57 USD/lb , a medium cost producer and is relatively protected from price downturns, due to its mining conditions and technology. The introduction of new technologies, if technically and economically feasible, could add substantial value to the company's products and reduce its unit operating costs significantly, thereby placing Tintaya in the lower cost producers.
Acid leaching
followed by solvent extraction and electro winning of copper from oxide ores
(SX/EW), represents one development which would be profitable due to lower
costs. A second development would be the construction of a submerged combustion
smelter, near the site, to serve the interests of Tintaya and other
neighbouring properties. Such a development would enable to decrease costs more
drastically by reducing transport costs. However, this is by nature, a more
speculative opportunity due to the capital cost involved and would require
strategic decisions by the future owner, alone or in joint venture with other
interested parties, including Peruvian Government.
Based on
discounted cash flow projections using realistic costs of production and
receipts from sales of concentrates, and comparing with other transactions in
similar conditions, PAH has determined a range of market values for Tintaya
S.A. which lie between 43 and 90 Million USD, depending on
the rate of return that may be required from the venture.
This report
presents the findings of a valuation study completed by Pincock, Allen &
Holt - A Division of Hart Crowser Inc. (PAH) and SVS Ingenieros for Empresa
Minera Especial Tintaya S.A. (Tintaya). The study is to be used as the
foundation for the subsequent privatization of the company.
There are five
principal objectives of the study:
To
certify at international standards the known mineral reserves.
To
provide a full technical evaluation of the company's current and planned
operations.
To
identify potential areas of new or additional value. This includes the
development of new mining areas as well as the implementation of new
technologies for improved mineral processing.
To
ascertain the company's competitive position among the world copper producers.
To
value the company based on its current and future potential.
To achieve these objectives an
encompassing scope of work was defined. This included visits by a
multi-disciplinary team of geologists, engineers and economists to all
facilities under control of the company. Detailed reviews were accomplished
with the assistance of Tintaya counterpart personnel.
Reserve data was collected and assembled
in a computerized database for analysis with PAH's proprietary modelling
software MicroMODEL and PolyMAP. This allowed for a full certification of
reserves. A preliminary development plan was defined for the orderly mining of
the known areas of mineralization at the Tajo, Chabuca Este, Chabuca Sur and
Coroccohuayco. All areas that can easily provide feed for the existing
concentrator. A review of concentration facilities was completed along with the
preparation of conceptual level studies for the implementation of sulfide
smelting and oxide treatment facilities.
Additionally, promising exploration areas
outside the immediate Tintaya area were reviewed. This includes the areas know
as the Bambas, Katanga, Winococha and others.
Report Organization
This report is organized into four
volumes.
Volume
I - Executive Summary -
This volume provides a broad overview of the project and a summary of major
findings.
Volume
II - Technical Evaluation
- This volume provides a comprehensive analysis of current and potential
operation. Detailed production, cost and investment scenarios are presented for
future operations under a variety of conditions.
Volume
III - Commercial Evaluation - This volume contains an analysis of
current and projected market conditions and an evaluation of Tintaya's
competitive position.
Volume
IV - Economic/Financial Evaluation - This volume presents an analysis of the
company's recent financial performance.
It also presents the final valuation of the company based on expected
operational conditions.
Project Team
The PAH project team consisted of the
following members:
William Pincus Project
Manager
Ulrich Petersen Geologist
George Armbrust Geologist
Mark Stevens Geologist
Robert Sandefur Geostatistician
Steven Milne Mine Engineer
Donald Tschabrun Geological
Engineer
Richard Addison Process
Engineer
T. F. Izzo Process Engineer
Christopher Davie Process
Engineer
L. Pat Gochnour Environmental Specialist
Antonio Samaniego Geotechnical
Engineer
Cesar Vidal Geologist
Juan Paniagua Electrical Engineer
Miguel Verimendi Civil
Engineer
Lee Aga Draftsman
Sandy Prebynski Project Secretary
Acknowledgements
PAH would like to acknowledge the
engineers and staff of Tintaya who worked long and hard to make this a
successful project. In particular it would like to acknowledge the members of
Tintaya's Special Privatization Committee (CEPRI): Luis Moran, Francisco
Fernandez and Juan Assereto. Special
mention is also made of Oscar Calero and Pelayo Miranda. Finally, PAH would
like to acknowledge e services of its Lima representative Guillermo Alvarez-Calderon.
The Tintaya mining district is located near the
center of Tintaya-Ferrobamba "Copper Belt," a north-northeast
trending polymetallic metallogenic belt that extends at least from the vicinity
of the city of Puno through the department of Apurimac. This 500 kilometer long
belt is about 50 kilometers wide and contains a variety of copper, copper-gold,
gold, iron, and lead-zinc-silver ore deposits. Copper and copper‑gold
deposits predominate in its central part (i.e., where this belt crosses the
departments of Cuzco and Apurimac . The largest copper and copper-gold deposits
in this central region are of the skarn type.
The Tintaya ore deposits are of the skarn type and
are located in the south-eastern end of that portion of the metallogenic belt
which contains most of the copper and copper-gold ore deposits. Other mining
properties of the Peruvian Government which form part of the
"privatization package" reviewed in this report occur in the central
part (e.g., Winicocha) and in the northern end (e.g., Ferrobamba, Chalcobamba,
Charcas and Sulfobamba) of the copper-gold skarn region (Figure 2-1).
The important copper-gold and iron skarn ore deposits
of the region formed in the contact zones of the Upper Cretaceous granodiorite
and monzonite intrusions with the Middle Cretaceous Ferrobamba limestone.
The Tintaya mining district is located in a part of
the aforementioned polymetallic metallogenic belt where the Mesozoic sediments
crop out in relatively small areas that are surrounded regionally by the
overlying Tertiary and Pleistocene volcanic rocks, and by widespread alluvial
sediments. In these areas, several Cretaceous-Lower Tertiary igneous intrusions
invaded the Ferrobamba limestone and generated
Figure 2-1
skarns with copper-gold mineralization. Presently,
Tintaya is the largest, best known and most mined of these areas (Figure 2-2).
However, similar skarn mineralization has been discovered nearby at
Coroccohuayco (7.5 kilometers to the southeast), at Ccayo-Huinicunca (13 kilometers
to the west), at Ccoyme-Fito (3 kilometers to the east), at Atalaya (10
kilometers to the southwest), and at Quechuas (5 kilometers to the east‑southeast).
At the latter locality, there is also evidence of porphyry copper type
mineralization.
The Tintaya area is best described by referring to
geographic designations that evolved as geological mapping, geophysical
exploration, exploratory drilling, development and mining revealed new
mineralized zones. Mining started at the site of the present open pit, referred
to as "Tajo". About 1.5 kilometers to the east is a zone of abundant
outcrops of Ferrobamba limestone that has been partly converted to skarn and
mineralized. This zone is referred to as "Chabuca." A relatively thin
band of Ferrobamba limestone and skarn outcrops known as "Chabuca
Este," connect the Tajo and Chabuca zones. Both north and south of Chabuca
there are extensive outcrops of Ferrobamba limestone with subordinate
proportions of skarn and mineralization. These zones are referred to as
"Chabuca Norte" and Chabuca Sur," respectively. To the east of
Tajo there are also evidences of limestone, skarn and mineralization, which are
known as "Zona Nueva Este." The Coroccohuayco area is located
approximately 13 kilometers by road southeast of the Tajo.
PAH developed four separate computer block models for
each of Tintaya's deposit areas, including 1) Tajo Tintaya/Inflexion/Zona
Nueva, 2) Chabuca Este, 3) Chabuca Sur, and 4) Coroccohuayco. Significant overlap occurs between the Tajo
and the Chabuca Este models, and between the Chabuca Este and Chabuca Sur
models, due
Figure 2-2
to the deposits general proximity to one another. The
Coroccohuayco model occurs 7.5 kilometers southeast of the other models.
The resource for the four Tintaya project areas
evaluated by PAH have been tabulated at total copper cutoff grades that are
similar to those used to determine the open pit and underground reserve. This
allows for direct comparison between the resource and subsequent reserve. The
geologic resource includes all material in the model at the specified cutoff
grade, without regard to mineability.
In addition, PAH has included as resources the
Chabuca area and the Oxide Stockpile, as estimated by Tintaya. The Chabuca area
has been extensively drilled and consists largely of oxide material. The oxide
stockpile includes oxide material mined from the Tajo and is located northeast
of the pit, adjacent to the processing facilities. The stockpile is separated
into three areas: 1) high grade oxide averaging 2.62% copper, 2) medium grade
oxide averaging 1.61% copper, 3) low grade oxide averaging 0.93% copper.
The sum of the sulfide resources in the Tintaya
project areas is 61,390,000 tonnes at an average grade of 2.50% copper. The sum
of the oxide resources in the Tintaya project areas is 23,542,000 tonnes at an
average grade of 2.15% copper. The resource by project area is presented in
Table 2-1.
For the Tajo area, the resource is tabulated for
mineralization that occurs below the current pit surface, as derived from the
August 30, 1993 surveyed pit points. The Tajo resource has been divided into
three subcategories, in keeping with that presented by previous Tintaya tables.
The Tajo ultimate pit resource is the resource contained within PAH's ultimate
designed pit and is equal to the reserve for this pit configuration (bottom at
3,845 meters). The Tajo resource outside the pit is the
Table 2-1
resource that occurs outside of the ultimate designed
pit above the 3,845 meter level. The Tajo resource below the pit is the
resource that occurs below the bottom level of the ultimate designed pit below
the 3,845 meter level. In addition, Tintaya reports a stockpile of oxide
material containing 9,860,110 tonnes at a 2.00% copper grade.
In order to distinguish the Tajo resource from the
Chabuca Este resource, as they are on the same mineralized zone, the 1,235,900
East coordinate was chosen as the boundary between the resource areas. To the
east, the resource has been included in the Tajo. To the west, the resource has
been included in Chabuca Este.
In preparing the resource estimate, PAH has followed
standard North American engineering practices and has used the Society for
Mining, Metallurgy, and Exploration (SME) guidelines for resource and reserve
estimation (Working Paper Number 79). On this basis, PAH reclassified Tintaya's
reserve to a resource. The following discussion reflects this reclassification.
Tintaya has previously generated resource estimates
for the Tajo, Chabuca Este, Chabuca Sur, and Coroccohuayco project areas. For
this study, PAH used an estimation methodology similar to that used by Tintaya.
PAH's estimate differs from that of Tintaya largely because PAH used different
cutoff grades for reporting purposes. Differences also occurred because of the
selection of different boundaries for resource areas. Other differences
reflected small variations in the basic estimation methodologies.
For comparison purposes, PAH tabulated their
resources at the same cutoff grades as Tintaya. The results showed that for
sulfide material Tintaya was quite close to the PAH estimate, with PAH
estimating four% more total pounds of copper resource. For oxide material, the
Tintaya estimates were somewhat higher than PAH's reflecting some differences
in the rock model geology.
PAH conducted a reconciliation of the PAH polygonal
model for the Tajo area with the total production to date as provided by
Tintaya production reports. The results indicated that relative to reported
production this modelling methodology tends to underestimate tonnage and
overestimate grade. However, total production in terms of in-place pounds of
copper is quite close. On the basis of this reconciliation, PAH believes that
the modelling methodology is suitable for further mine planning.
The history of exploration in the Tintaya area has
shown that the sequence of systematic geological mapping and interpretation,
sampling, geophysical and geochemical surveys and drilling has found amounts of
ore well beyond those surmised initially on the basis of surface indications.
In addition to following the obvious strategy of continuing to enlarge the
reserve in the known ore bodies by drilling their "open ends," there
appear to be several other exploration objectives, as discussed below.
One target is the area south of Chabuca Este. Tintaya
recently completed a diamond drilling program consisting of 11 holes for a
cumulative length of 1,418 meters at a drill hole spacing of 100 to 200 meters.
The drilling program defined a broad syncline with diorite in the core
overlying limestone, and skarn mineralization developed at the contact between
the two rock types. The mineralized intervals are 3 to 17 meters thick, and
contain 0.4 to 3.1% total copper. Tintaya estimates a potential for
approximately 9 million tonnes of mineralized material in this area. The depth
to this mineralized horizon is 50 to 150 meters.
Another target is the area northwest of Chabuca Este,
approximately 1,500 meters west of the Tintaya pit. Tintaya recently completed
a five-hole drilling program for a cumulative length of 1,318 meters. The area
is considered to lie in a synclinal basin with a monzonite core overlying
limestone. Two orebodies have been identified; the East Body at Chabuca Norte,
and the West Sector at Chabuca Este. The drilling indicates that copper
mineralization extends to depth of at least 350 meters near the edge of the
basin, but holes were not deep enough to intercept the monzonite-limestone
contact in the central part of the basin. Intervals of skarn mineralization
were encountered within the monzonite. Tintaya estimates a potential for 9
million tonnes of mineralized material from the recent drilling. Additional
deeper drilling is needed to test the monzonite-limestone contact.
Additional potential occurs at depth in the Tajo
area. The current model has an artificial bottom at the 3,845 elevation, as
this was the lowest level of the Tintaya's digitized geology. Below this level
the data does not define the skarn body and, as a result, grade values were not
assigned in the model. Some drilling does continue below this level and
indicates the presence of skarn mineralization with ore grade copper values.
This mineralization will add to the resource base and needs to be further
defined.
The Coroccohuayco deposit limits have not been
adequately defined and will require further drilling. As a result, the deposit
limits may be extended as a result thereby increasing the contained resource.
In order to make exploration more efficient, one may
attempt to use the existing analytical base of copper, molybdenum, gold and
silver analyses to make element abundance and element ratio studies of the
Tintaya ores that might reveal ore distribution and zoning patterns useful for
guiding mineral exploration, thus reducing detailed exploration and development
costs.
The Huancarama Sur, Ccayo-Huinicunca and Ccoyme-Fito
prospects are not of the copper-gold skarn type. Hence, they most likely would
require different process circuits to be integrated into the Tintaya
operations, but would have to stand on their own. The most attractive of these
prospects is Ccoyme-Fito, which merits further study.
The Bambas zone represents an important geologic
resource area which is currently in an early stage of development. Although
prospecting and minor development has taken place for most of this century,
there has been no significant production. PAH believes that this zone offers
good potential for discovery of new deposits and expansion of existing resources.
The Bambas area is located in the northwestern end of
the 250 kilometers long belt of major copper-gold skarn deposits that stretches
from Tintaya to the city of Abancay. It is called "Bambas" because
the best known ore deposits in this area are named Ferrobamba, Chalcobamba and
Sulfobamba, all part of the privatization package reviewed in this report.
However, these are only three out of eleven copper-gold skarn deposits
occurring in close proximity in the department of Apurimac. The others are Charcas
(also a subject of this privatization package), Pallanja (= Antillano),
Paraíso, Colca, Yuringa, Yanaminas, Antamarca and Buena Fé.
The Ferrobamba, Chalcobamba, Sulfobamba and Charcas
deposits are alike and similar to the Tintaya ore deposits in being copper-gold
skarns resulting from the metasomatism of the Ferrobamba formation by dioritic
and monzonitic intrusives.
The four deposits under consideration have been
evaluated on the basis of surface geological mapping and sampling, limited
tunneling, geophysical surveys in all four deposits, at least six churn drill
holes in Ferrobamba and six diamond drill holes in Chalcobamba.
The sparce information available has been compiled at
various times to arrive at ore estimates of variable reliability (Table 2-2),
but which give at least an idea of the tonnages and grades one may expect in
this group of deposits.
It is PAH's opinion that the Bambas area has
excellent potential for the discovery of significant resources at a grade in
the range of two to three% copper. Widespread copper-gold mineralization is
exposed at the surface, but drilling to date has consisted of only 12 holes. A
considerable amount of additional drilling is needed to evaluate the true
potential of the Bambas area.
The Winicocha disseminated prospect is located about
halfway between the Tintaya and Bambas areas (68 kilometers NW of Tintaya, 80
kilometers ESE of the Bambas, and 20 kilometers ENE of the Katanga district
described below). The prospect was mapped geologically and sampled (227
samples), revealing stockwork type mineralization in an intrusive within a
3.8-kilometer long and 750-meter wide area. This mineralization consists mainly
of quartz and gold-bearing pyrite, with subordinate amounts of galena and
chalcopyrite.
In addition, within this stockwork there are some
veins up to 250 meters long and widths between 0.2 and 4 meters, estimated to
contain about 4.7 million tons of 0.24 grams Au per ton. Outside of the
stockwork there are up to nine veins with lengths between 200 and 1,100 meters
and widths between 1 and 20 meters, adding up to about 4.9 million tons with
grades between 0.21 and 0.84 grams Au per ton. Within
Table 2-2
this total the bulk consists of 3.0 million tons with
0.23 grams Au per ton and 1.3 million tons of 0.56 grams Au per ton.
PAH emphasizes that these are preliminary resource
estimates only.
The Coporaque prospect is located about 15 kilometers
due west of Tintaya. It consists of a number of veins in diorite and
quartz-monzonite intrusives. The mineralization consists of quartz, pyrite,
gold, galena, chalcopyrite, boulangerite, luzonite, tetrahedrite and
galenobimutite. The main structure is the Tambonate vein, which crops out over
a distance of 450 meters and has an average width of 1.6 meters (although
underground it appears to be 1.8 to 2.3 meters wide). Its northern ore- shoot
is estimated to contain 25,000 tons with an average grade of 10.8 grams Au per
ton, 2.7 ounces Ag per ton, 0.9% Cu and 1% Pb.
The Tintaya area
consists of several deposits with significant development drilling completed
and one open pit referred to as Tajo. Tajo, which is the primary ore production
unit, has been in operation since 1985. A site location map is shown in Figure
3-1.
The deposits are
referred to as Tajo (remaining ultimate pit), Inflexion, Chabuca Este, Chabuca
Sur and Coroccohuayco. The Inflexion and Chabuca Este deposits are primarily a
continuation of the east-west trending mineralization from Tajo. In terms of
mine planning, the Inflexion deposit has not been separated as a distinct
mining zone due to its close proximity to the existing open pit. In fact, the
Inflexion mineralization is what helped push the ultimate pit of Tajo to the
south and west, as will be discussed later.
In order to
develop a mine plan, the deposits must be evaluated in terms of their open pit
versus underground potential. Since a clear decision cannot be made early in
the evaluation stage of which mining method is more economic, PAH evaluated all
the deposits in terms of both an underground and open pit scenario. The
resulting estimates (mine reserves, capital and operating costs) were compared
using the net present value method to guide the valuation study. The analysis
serves as a guide for determining the development scenario. The results
indicate that an open pit at Chabuca Este might have significant economic
advantage.
Not only is the
evaluation concerned with maximizing present value, but meeting mill production
requirements as well. With this in mind, PAH selected a scenario which consists
of mining the remainder of Tajo as an open pit, excavating portions from the
Figure 3-1
ultimate pit
walls and beneath the pit floor (3845 level) via underground methods, mining
Chabuca Sur as an open pit mine, and extracting ore from Chabuca Este and
Corroccohuayco as an round operation.
Even though PAH
has selected this particular scenario, it behooves the operator to further
evaluate, in more detail, the Chabuca Este and Corroccohuayco deposits in terms
of open pit and/or underground optimization plans to maximize the Tintaya
resource potential. Further optimization may enhance the open pit operation at
Tajo.
Engineers for
Tintaya have developed a mine plant for Tajo based on similar design parameters
used by PAH. The major exception is that they steepened the pit slopes to 49
degrees in contrast to the 45 degrees recommended by PAH. As would be expected,
this resulted in significantly less waste tonnage (about 35 million tonnes)
over the life of the pit. Over 1 million tonnes of high-grade ore on the lower
benches is also sacrificed. Although PAH does not fully endorse the Tintaya
mine plan, it represents one alternative that an investor may want to consider.
Reserves for the
Tintaya have been calculated for the mine areas discussed above. Table 3-1
summarizes the mineable reserve as of September 1, 1993. The total conceptual
mineable reserve is based on a combination of open pit and underground mining
activities. Additional exploration and mine optimization could change the
reserve status, most likely by increasing the reserve base.
Production from Tajo is scheduled to
continue through the year 1998. At that time, ore mining would commence at
Chabuca Sur open pit where ore mining is scheduled through the year 2000. Table
3-2 details the conceptual production schedule for the entire project area.
Table 3-1
Table 3-2 (foldout)
When the Tintaya pit production is
complete, underground mining of deposits located within the pit walls can
commence. For the Tintaya underground ores located below the ultimate pit
bottom, the development of the Chabuca Este haulage tunnel and an access ramp
will need to be completed before they can be mined. Nevertheless, PAH
recommends that this project be delayed until economic conditions improve.
Production from Chabuca Este and
Coroccohuayco is needed to meet the production goal of 2,800,000 MT for the
year 2001. The first year of production is usually less than the scheduled full
production rate due to the "learning curve" that exists at all newly
developed mines. Therefore, in order for Chabuca Este to produce at a rate of
1,400,000 MTPD in the year 2001, production must begin in the preceding year.
Production has been scheduled to begin with 800 MTPD in the first quarter and
then build up by 800 MTPD each quarter, i.e., 1,600 MTPD in the second quarter,
2,400 MTPD in the third quarter, and 3,200 MTPD in the fourth quarter. The next
quarter would begin year two and would be at the full production rate of 4,000
MTPD. This gradual buildup would result in an average production of 2,000 MTPD
in the first year.
With an estimated three years
preproduction development time required for mine and infrastructure
development, development for this mine will need to begin in the beginning of
1997.
With a full production of 4,000 MTPD
(1,400,000 MTPY) scheduled from Chabuca Este in the year 2002, a production
rate of 4,000 MTPD is also required from Coroccohuayco each year until the
Chabuca Este reserves are depleted in year 2008. At that time, ore production
will be supplemented by underground production from Tintaya at a significantly
reduced throughput.
As at Chabuca Este, the start-up
production at Coroccohuayco will be less than the scheduled full production
rate due to the "learning curve". However, because of the experience
grained at Chabuca Este, only two quarters have been estimated to reach full
production at Coroccohuayco.
At Coroccohuayco the pre-production
development period has been estimated at four years, so work will need to begin
at the same time as the Chabuca Este development, or at the beginning of 1997,
in order for the mine to be ready for production in 2001.
The ore
processing facility at Tintaya is a conventional crushing, grinding and
flotation plant. Principal operating parameters of the plant are presented in
Table 4-1. Figure 4-1 shows the facility layout.
The plant is a
very rugged, heavy duty design intended to operate for decades with low
operating and maintenance costs. SNC of Montreal, Canada was responsible for
the design, procurement, and construction management. The concentrator was
commissioned in 1985 and has been well maintained. The plant is in good
condition.
The ore in the
coarse ore stockpile is recovered by three vibrating feeders which feed onto a
conveyor leading to the fine crushing plant. In the fine crushing plant there
are three seven-foot Symons cone crushers, one standard and two shortheads.
There is a vibrating screen ahead of the standard crusher and vibrating screens
on the discharge of all three cone crushers. All the screens are 7- x 20-foot
double-deck units with half-inch openings on the bottom decks. Screen undersize
is conveyed to the fine ore stockpile. Oversize on the screen ahead of the
standard crusher is fed to that crusher; oversize of the screens located on the
discharge side of the crushers is recycled to the shorthead crushers.
Fine crushed ore
is reclaimed by variable-speed belt feeders which discharge onto two parallel
belts that feed the two primary grinding circuits. The primary grinding
circuits consist of 3,000 horse-power, 16- x 20-ft overflow ball mills closed
with four 26-inch cyclone (two operating, two standby). The cyclones are fed by
fixed-speed, 12- x 10-inch Warman high-chromium-alloy slurry pumps. Primary
mill grind is between
|
TABLE 4-1 Tintaya Mine Principal Processing Parameters |
||
|
Item |
Units |
Value |
|
Ore Processing
Rate Annually Daily Ore Grade |
tonnes/year tonnes/day percent Cu |
2,800,000 8,000 2 |
|
Copper Recovery Ore processing Smelter payable |
percent percent |
89.5 96.5 |
|
Concentrate
Grade Copper Silver Gold |
percent oz/tonne oz/tonne |
31.5 4.5 0.15 |
|
Operating Costs Plant Freight, smelting, and refining Charges Precious metal credit |
$/tonne ore $/lb payable Cu $/lb payable Cu |
6.00 0.32 0.080 |
|
Concentrate
Impurities Iron Sulfur Lead Zinc Arsenic Antimony Bismuth Alumina (Al2O3) Lime (CaO) Magnesia (MgO) Molybdenum disulfide (MoS2) Cadmium Mercury Fluorine Chlorine Silica (SiO2) |
percent percent percent percent percent percent percent percent percent percent percent percent parts/million percent percent percent |
18-20 21-24 0.01-0.04 0.01-0.09 0.01-0.05 0.01-0.04 0.01-0.02 0.60-1.90 4.00-5.10 1.70-1.92 0.10-0.20 0.002-0.004 1.0 0.003-0.009 0.001-0.003 10.0-14.0 |
Figure 4-1
50 and 60% minus
200 mesh and the particle size of the cyclone overflows are measured by
on-stream particle-size analysers. Mill control is manual.
The ore is
floated in a simple rougher and cleaning circuit. Eight 38-cubic-meter Otokumpu
cells are used in the rougher and rougher scavenger circuit and eight
300-cubic-foot Denver cells are used in the cleaner circuit. Part of the
rougher concentrates are reground in a 450 horse-power, 9- x 12-foot overflow
ball mill closed with six-inch cyclones. A small (1-meter diameter x 12-meter
high) pilot column cleaner cell is incorporated in the cleaning circuit. The
column cell has been shown to give marginally better results than conventional
cells.
The concentrate
is pumped to a 100-foot diameter thickener and the tailings to cyclones.
Tailings cyclone overflow is thickened in two 250-foot diameter thickeners.
Concentrate and tailings thickener overflows are recycled to the mill,
constituting about 50% of the plant water requirements.
Thickened concentrate
is pumped to a 6- x 5-meter agitated storage tank and is then filtered in four
Otokumpu Larox pressure filters. The filters have needed a great deal
maintenance and have, until recently, produced a filter cake with a relatively
high moisture content (between 12 and 13%). Recent innovations, primarily
eliminating the interconnecting piping between filters, has resulted in
substantially lower moisture content in the cake, and it is expected that it
will be possible to maintain a moisture content of about 10.5% in the future.
The concentrate
filter cake is conveyed to a storage area which consists of a large covered
area with 12,000 tonne capacity and an adjoining open patio. The concentrate is
loaded by 6.5-cubic-yard capacity scoop tram into 20-25-tonne capacity highway
trucks for overland transport to the Southern Peru Copper Corp. smelter at Ilo
and to the port of Matarani for export to other custom copper smelters. The
trucks are weighed on a truck scale located at the entrance to the plant area.
The Tintaya
processing staff have and are currently investigating several promising
projects to improve production, efficiency, and product quality, the principal
of which are as follows:
Pre-conditioning of slurry ahead of rougher
flotation. It is believed that the flotation time is barely adequate. To
counter the problem, an agitated tank that was formerly used for lime slurry is
being modified for this service and will be placed in operation shortly.
Flash flotation in the primary grinding
circuits. Investigations indicate that this is worthwhile and has the potential
to improve concentrate grade and reduce concentrate moisture content, the
latter as a result of producing a coarser concentrate product.
Computer control of the primary grinding
circuits. Instrumentation is in place to allow computer control of the grinding
circuits. Implementation of computer control will almost certainly result in
higher throughput, increased efficiency, and improved flotation performance.
On-stream x-ray analysis and computer
control of the flotation circuit. The single-product flotation system lends
itself to a installation of a simple, reasonably inexpensive, on-stream
analysis and control system which would maximize the economic operation of the
flotation circuit.
Column or Jameson cleaner flotation cells.
The pilot column cell has shown a slightly better performance than the
conventional cells. It is likely that a complete column or Jameson cell
cleaning circuit would improve concentrate grade.
Tailings flow by
gravity to pump boxes from which they are pumped to 20-inch cyclones (4 operating,
2 standby). The coarse, high-density cyclone underflow is laundered to various
points where it is placed in front of intermediate dikes within the containment
area that have been built of monzonite waste rock or borrow material. The
cyclone overflow flows to the two tailings thickeners where it is thickened and
separately laundered to discharge within the diked zones in the containment
area. In this way the capacity of the tailings area is maximized.
The tailings
containment system, as originally designed, was to thicken the tailings and
deposit the thickened slurry at the upper part of the dam furthest from the dam
wall so as to build up the solids at the upper end and with a slope of at least
1.5% and thus maximize the solids content of the structure. The system did not
work as planned; tailings slurry flowed all the way to the dam wall with a very
shallow slope, and in so doing filled the containment much more quickly than
anticipated.
To provide
additional tailings storage capacity, the main dam wall, which is built of
monzonite waste rock, was raised by a further addition of monzonite waste rock,
this time using upstream construction. A drawing showing a cross-section
through the newly raised dam wall is presented in Figure 4-2. At the same time
that the main dam wall was raised, the pumping and cycloning system for the
thickened tailings was installed and the system of intermediate dikes
investigated.
Figure 4-2
Decant water from
the intermediate dikes flows to the main dam wall where it collects and seeps
through the wall and flows in the natural drainage a distance of about half a
mile to enter the Salado river, just downstream of the river pumping station.
The water is normally clear, though there is occasional turbidity, primarily at
the time of heavy rainfall, and at such times part of the decant water usually
flows out via the dam spillway in addition to that seeping through the dam
wall.
Storm water
run-off is directed away from the dam by a ditch located upstream of the open
pit and which runs to natural valleys on either side of the containment area.
A study of the
tailings system is currently in progress. This is being conducted by the
Universidad Nacional de Ingeneria in conjunction with Centro Peruano de
Investigaciones Sismicas y Mitigacion de Desastres and the Laboratorio Nacional
de Hidrologio. Results of this study are due in December 1993.
Projected
remaining life of the tailings containment using the new system is through the
year 2005 though PAH considers this optimistic. In the judgement of PAH, a more
realistic projected life is through the year 2000, but even this will require
careful management so as to maximize storage in the upper reaches of the
containment area. In case of unexpected difficulties and for the long term
operation of the mine, planning will need to begin shortly for a completely new
tailings containment area. There is ample available land in the vicinity and it
should not be particularly difficult to find additional suitable tailings
containment sites.
Provision is made
in the cash flow analysis for new tailings facilities in the year 2000 and for
future sustaining capital for those facilities.
Power for the
plant is supplied by ElectroPeru with stand-by power supplied by the on-site
generating station. Mainline power is subject to frequent outages, especially
in stormy weather. Such unplanned outages result in considerable spillage in
the grinding area.
Water is supplied
by the pump station on the Salado river, though half of the plant requirements
are obtained by recycling water recovered in the concentrate and tailings
thickeners. The water supply is plentiful for most of the year but, towards the
end of the dry season, it is just adequate. Any significant expansion of mill
capacity would probably require an additional source of water.
Assaying services
are provided by a laboratory that is managed by the administrative department
of the company. Sample preparation is conducted in a sample preparation
facility in the mill building.
There are two
maintenance shops serving the processing facilities, one within the mill
building and one in a separate building. In addition there are several areas
adjoining the process buildings which are dedicated to maintenance work.
Mobile equipment
is serviced by the company vehicle maintenance shops. The shops also provide
truck cranes when needed and machining and major electrical equipment
servicing.
Tintaya
concentrates have been custom smelted at a number of smelter sites worldwide.
The current year's production is largely committed to smelters in Peru (Ilo and
La Oroya) and Brazil. Tintaya concentrates are unusually clean, with no
elements present at levels that would have a deleterious effect on any copper
smelting operation or cause unusual environmental problems; they also contain
appreciable quantities of precious metals.
In order to reach
overseas markets or Centromin's La Oroya smelter, concentrates are trucked
either directly to the port of Matarani or transhipped to rail at Canahuas, 150
km from the mine site. Concentrates smelted locally are shipped by road to the
Ilo smelter. For all destinations, the first 150 km of road from the mine site
are the most difficult and probably lead to the greatest element of inland freight
costs. Truck loads are limited to 20-25 tonnes and large numbers of contractor
owned trucks are continuously employed in shipping concentrates. The use of
rail freight should be capable of reducing inland freight costs, but the
existing contract with the state-owned railroad is extremely unfavorable. Only
minimum contract commitments are transported by rail.
Past and
projected costs of freight, smelting and refining are summarized in Table 4-2
which shows a marked decline in FSR costs in recent years, almost all
attributable to decreased transport and other domestic costs. Total FSR costs
have fallen from 49.5¢/lb in 1990 to 34¢/lb in 1993 and are projected to fall
to 32¢/lb in 1994. In summary, 1993 freight, smelting and refining costs
average U.S.$0.34/lb payable copper, while payable precious metal credits add
U.S.$0.08/lb to the value of payable copper.
TABLE 4-2
Tintaya Mine Concentrate Production and Freight, Smelting and
Refining Costs, 1990 - 1992 |
|
|
|
|||
|
|
1990
|
1991
|
1992
|
1993 (Contracted) |
1994 (Projected) |
|
|
Concentrate
Produced: |
|
|
|
|
|
|
|
MT wet (x1000) |
144.8 |
166.6 |
178.1 |
|
|
|
|
MT dry
(x1000) |
128.8 |
147.7 |
157.9 |
|
|
|
|
Average % moisture |
12.4 |
12.8 |
12.8 |
10.0 |
|
|
|
Average % Cu |
31.5
|
31.7
|
31.7
|
31.0 |
|
|
|
Freight,
Smelting and Refining: |
|
|
|
|
|
|
|
Sales |
119.8
|
138.6
|
161.3
|
165.0 |
|
|
|
Total
contained Cu (Mlb) |
83.2
|
96.8
|
112.7
|
112.7 |
|
|
|
Total
payable Cu (Mlb) |
80.4
|
93.5
|
108.9
|
108.8 |
|
|
|
Costs: Inland Freight |
M
U.S.$ |
6.2
|
9.3
|
10.1
|
6.0 |
|
|
|
U.S.$/lb |
0.077
|
0.099
|
0.093
|
0.055 |
0.04 |
|
Other Sales Costs |
M
U.S.$ |
10.3
|
4.3
|
2.6
|
0.7 |
|
|
|
U.S.$/lb |
0.128
|
0.046
|
0.024
|
0.006 |
0.01 |
|
Treatment & Ocean |
M
U.S.$ |
14.1
|
16.5
|
19.0
|
19.4 |
|
|
Freight |
U.S.$/lb |
0.176
|
0.176
|
0.174
|
0.172 |
0.19 |
|
Refining |
M
U.S.$ |
9.1
|
10.7
|
12.6
|
11.82 |
|
|
|
U.S.$/lb |
0.1136
|
0.114
|
0.1161 |
0.1087 |
0.08 |
|
Deductions
(% of total Cu) |
3.4
|
3.4
|
3.4
|
3.3 |
|
|
|
Total
FSR, U.S.$/lb |
0.495
|
0.435
|
0.407
|
0.342 |
0.32 |
|
As a result of
the remote location of Tintaya, the mine is provided with a very complete
infrastructure, including housing and services for all employees. A general site map showing the general
layout of the production and infrastructure facilities is shown in Figure
5-1. Principal components of the infrastructure
are as follows:
Access routes
Power supply
Fuel supply
Water supply
Buildings
Mobile equipment
Communications systems
The main
transportation route used by the mine is that which connects Tintaya with
Matarani, a 370-kilometer road, having two sections: Tintaya-Arequipa section
with 260 kilometers having a compacted gravel surface which is in an average
condition, and the Arequipa-Matarani section with 110 kilometers of asphalt
surface in good condition.
The connection
between Lima, Nazca and Arequipa forms part of the system of the southern
Panamerican highway, which is asphalted in its entirety and is in average
condition.
Cuzco and Tintaya
are interconnected by means of a 2560‑kilometer compacted gravel surface
road which is in average condition.
Figure 5-1
When Tintaya
commenced operations in late 1984, all power was supplied by Tintaya's own
diesel-electric generating plant (16.2 MW).
This continued for about 18 months when, following the installation of a
power transmission line from the state hydroelectric power plant at
Machupicchu, power was provided (12 MW) from this source. The hydroelectric power is provided at a
much lower cost than that which can be generated on site. The power plant at Tintaya is in excellent
condition and is used periodically when there are interruptions in the mainline
power supply.
The electrical
system that serves Tintaya is part of the state power company, ERSESA, which
supplies the power through SISE (Sistema Interconectado Sur Este). The power is supplied on the basis of a
two-year written contract.
The demand for
fresh water for the Tintaya mine, which amounts to about 100 liters per second,
is provided from two sources: the first, from the Salado river, which amounts
to 96% of the supply, is used for both industrial and potable services; the
remainder, which comes from seven springs located in the upper reaches of the
Tintaya stream valley, is exclusively used for potable water.
The flow in the
Salado river, which occurs year round, amounts to approximately 1,000 liters
per second in the dry season and about 200,000 liters per second in the rainy
season.
The mine has
authorization to take a maximum of 400 liters per second from the Salado river
and to pump eight liters per second from the springs.
In addition to
fresh water supply, about 128 liters per second of water is recycled and
reutilized within the ore processing plant.
Administration
requirements for Tintaya are extensive, primarily as a result of the remote
location of the mine. The largest
employee group is that for operations comprising 516 of the total 907
employees. The employees which are
directly part of administration are the Administration group and the Accounting
and Finance group.
An environmental
review and assessment of operations of the Tintaya facility was performed in
September 1993. This work involved a detailed file review at Tintaya's main
office in Lima followed by an assessment, using World Bank standards as
guidelines, of the mine facilities near Yauri.
The project can
best be described as located in a semi-arid, high altitude (+4,000 meters above
sea level), altiplano type environment.
Generally, the Tintaya project can be characterized
as a modern facility with environmental controls that approach North American
standards. Notable exceptions include the geotechnical stability of the pit
wall, the geotechnical stability of the tailings impoundment, and the disposal
of solid waste/lab waste and used oil and solvents.
Listed below by section are critical environmental
components of the Tintaya facility. Assessments and recommendations, where
applicable, for each component are discussed.
The tailings dam was designed by Robinsky Associates
of Toronto, Canada and was originally designed for a downstream extension. In
fact, an upstream extension has been incorporated. The original design also
called for a limestone, rock filled dam that allowed for limited seepage.
However, the facility is currently holding excessive amounts of water.
Tintaya personnel have attempted to minimize the
adverse impacts of this design by the creation of miniature dikes within the
tailings impoundment and diversion dikes on the peripheral edges of drainages
coming into the tailings impoundment.
In early september 1993, the consulting company of
CIS MID had the following comments to make on the tailings facility:
1. Outside slopes needed to be graded to 1.7:1 versus the current
1:1 ratio.
2. Tintaya needed to locate the source of material of competent
rock for the dam extensions.
3. Tintaya needed to correct filtration problems in the dam face.
4. Tintaya needed to make sure that the canal or diversion was
designed to handle 60 liters per second.
5. Tintaya needed to drill the foundation of the dam itself to
ensure that it was geotechnically stable.
6. Tintaya needed to eliminate the use of escorellos (floating
dams) as they were only a temporary measure. These are considered to be
unstable and one had already disappeared.
7. Tintaya was instructed to improve the storage capacity and
design of the emergency pond. This included increasing the dam face and the
relocation of the canal on the berm.
None of these activities appeared to have been
initiated during our visit later on in the month. Tailings stability and
capacity are being reviewed by Universidad Nacional de Ingeneria.
Tintaya also needs to look into the geotechnical
stability of the southeast portion of the mine pit area. During the course of
our visit, the upper portions of the pit wall were sliding down into the pit at
what appeared to be a rather fast rate. Diversion ditches have been constructed
in an attempt to keep surface waters from saturating the soils and making them
more unstable.
Solid waste disposal can be broken down into three
categories:
1. overburden
2. refuse
3. septic/sewage
The placement of waste rock/overburden at the Tintaya
facility is being carried out according to acceptable industry norms. The
geochemistry of the rock appears to be good with no visible signs of acid
generation. This is apparently due to the excess amounts of limestone
(buffering capacity) available in the waste rock.
Tintaya disposes of all solid waste/refuse in the
waste dump. However, there is no specific area designated for this. It would be
advisable to set aside a certain portion of the waste dump for this activity.
The purpose of this recommendation is to have access to the area should
problems with disposed items come up.
The sewage treatment at the Tintaya facility was a
very modern state-of-the-art designed facility. However, during the course of
our visit, it was evident that the capacity of the facility was exceeded at
times. Visible signs of nutrient enrichment in and near Rio Tintaya were
observed.
On a positive note, Tintaya's water treatment plant
provides a good source of drinking water to the employees and their families.
This water meets all applicable drinking water standards.
However, current practices with regards to the
disposal of hydrocarbons (used oil and solvents) by direct discharge onto land
surfaces and the disposal of lab wastes into the sewage treatment system could
have an adverse effect on surface and groundwater quality in and around the
project area.
Tintaya's mitigation of air quality
impacts is extremely efficient. The utilization of water trucks for dust
suppression on haul and access roads, coupled with the covered coarse ore
stockpiles, have a positive effect on visual air quality.
The utilization of scrubbing systems in the crushing
circuit also are some of the best units on the market. However, one practice
that could be improved upon is the disposal of fines that are collected in the
scrubbers. Currently this material is piled outside of the scrubber facilities
and is ultimately discharged into Rio Tintaya. It is recommended that this material
be put into the mill circuit, minimizing any adverse effects and recovering
additional metal value.
Tintaya has done an excellent job of providing an
improved standard of living for the local people. These improvements are seen
in the education system, health system, as well as improvements in the personal
wealth.
In addition, Tintaya also allows for the relocation
of displaced herders to an encampment that has such facilities as clean
drinking water and electricity.
The impacts on vegetation and wildlife resources are
considered minimal, in that the only adverse effects are those impacts directly
associated with the facilities. The natural vegetation includes high altitude
grasses and shrubs that are important to area livestock.
Only avian species of wildlife were observed.
However, there appear to be no adverse impacts on these species. In fact, the
tailings impoundment water storage area served as a resting point for numerous
migratory species.
Interviews with Tintaya personnel confirm that no
reclamation plan or closure plan existed for the facility.
In order to
satisfy World Bank guidelines and standards, it would be advisable to develop
closure/reclamation plans for implementation during and after the facility is
mined out. It is evident that livestock can be supported in the surrounding
area. By careful planning, opportunities for the stockpiling of service topsoil
can take place. Many species of livestock forage have been adapted to upper
elevation sites throughout the world. These include alfalfa, rye grass,
trefoil, and foddering turnip.
PAH has based a
conceptual development plan on two major principals. First, although there are
important proven and probable ore reserves, significant time and expense will
be required to develop this to the production stage. There are, fortunately,
sufficient developed reserves in the Tajo to allow enough time to proceed with
the orderly development of these new mining areas. Additionally, there is good
reason to believe that new reserves will be found through additional
exploration and effectively extend the mine life.
The second major
principal is that Tintaya, like any operating mine, must continually strive to
lower its cost structure. Although its current cost of USD 0.57 places it
at the bottom half of the cost curve, the introduction of new processing
technology can have significant positive effect. A number of processing
alternatives exist whereby costs may be reduced, additional production might be
achieved or value added by producing and shipping metal rather than
concentrates.
The combined
costs of freight, smelting and refining of concentrates constitute approximately
45% of the total costs of copper production. The production of metal, in the
form of blister or anode copper, at the mine site presents the potential for
savings in overall production costs. The viabilility of on-site metal
production will be, to a considerable extent, dependant on the operating life
of the facilities and the rate at which they may be amortized. This, in turn,
is dependant on the reserve base of the area. It is possible that reduction in
operating costs by on-site metal production will positively affect cut off
grades and therefore reserves. In addition, some of the processing alternatives
considered for the production of metal from sulfide concentrates also present
opportunities for low cost sulfuric acid production, which may substantially
improve the cost of copper production from oxide reserves.
Traditional
pyrometallurgical methods of metal production from sulfide concentrates demand
substantial economies of scale for viability; the current concentrate
production rate at Tintaya and the probable constraints of future underground
mining methods indicate that the economies of scale required for traditional
smelting methods will not be achieved. However, emerging pyro-metallurgical
techniques have been developed to the stage that relatively low cost metal
production at rates comparable to those anticipated at Tintaya has been
achieved. In addition, well established combinations of pyro and
hydrometallurgical processes are possibly applicable to Tintaya concentrates,
while less developed hydrometallurgical processes are worthy of consideration.
The following list, although not exhaustive, summarizes potentially applicable
processes:
1. Continued production and
shipping of concentrates for custom smelting.
2. On-site flash smelting of concentrates.
3. Submerged combustion
smelting of concentrates (known commercially as Sirosmelt, Ausmelt or
Isasmelt).
4. Roasting and sulfuric acid
leaching of concentrates.
5. Ammoniacal leaching of
concentrates.
6. Bacterial leaching of
concentrates.
7. Nitric/sulfuric acid
leaching of concentrates.
Of the above processes, bacterial leaching
and nitric/sulfuric acid systems are considered unproven at the industrial
scale at this time, while ammoniacal leaching is unlikely to be appropriate for
the suite of minerals in the Tintaya concentrates. PAH examined the other
technologies and have concluded that submerged combustion smelting offers the
best chance of economic and technical viability.
Submerged combustion smelting is an
emerging technology that has been successfully applied at an industrial scale
and has shown potential savings in capital costs relative to flash smelting for
small to medium sized operations. Unlike a flash smelter, in which fast
reaction kinetics are achieved by oxidation of sulfides in gas suspension, the
sulfides are introduced, together with fuel and air or oxygen enriched air,
below the surface of a pool of molten matte and slag. This is achieved by means
of a lance that is protected by frozen slag. The resulting reactions are not only
extremely fast, but do not require the volume of the reaction shaft of the
flash furnace. Relatively small, low cost furnaces are therefore required.
It is possible to use a single vessel for
both smelting, which is a continuous process and converting, which is a batch
process. However, this gives rise to great fluctuations in gas flows. If a
sulfuric acid plant is operated, better control of gas flows is obtained by
operating separate vessels or conventional converters. Flow of matte from
smelting to converting vessel may be in liquid or granulated form.
Enrichment of air by gaseous oxygen may be
advantageous but is not necessary even at the altitude of Tintaya. The major
advantages of oxygen enrichment are a smaller furnace, lower fuel consumption,
lower offgas volumes and offgas richer in SO2 . The major
disadvantages are the high capital cost of the oxygen plant and the power
consumption required for oxygen production. This study addresses smelting with
and without oxygen enrichment, but this subject requires study in much greater
detail.
Several possible treatment approaches have
been considered for Tintaya oxide ores. On the basis of the test data available
and the recommendations in the COMMSA oxide ore feasibility study of 1988 and
the Kilborn feasibility study of 1989, an oxide ore pilot plant was constructed
during the period between June 1988 and January 1990, largely with used
equipment. The pilot plant was operated between February 1990 and December
1991. The objectives for operation of
the pilot plant were defined by Tintaya as follows:
1. To confirm, at a larger scale,
the results previously obtained in order to support the development of basic
and detailed engineering for construction of the full-scale plant.
2. To better define the
hydrometallurgical process for the treatment of Tintaya oxide ores, studying
the alternatives of agglomeration, curing and leaching in load-unload thin
layers versus leaching separately of the coarse and fine portions of the ore.
3. To define the principal
operating parameters.
4. To verify the use of leaching,
solvent extraction, and electro winning at a larger scale.
5. To train future administrative
staff, as well as supervisors and operating personnel.
Although all of the laboratory scale
testwork conducted in conjunction with the pilot plant showed that ores had
good permeability to leach solution and extraction of copper in 8 to 12 days
with moderate acid consumptions, difficulties were experienced at the pilot
plant, in part because of economic constraints that did not allow for the
installation of an improved heap loading system, especially in conjunction with
drip irrigation of the leach heaps.
The elevated content of natural clays and
the disintegration of both coarse and fine ore during curing and leaching
considerably decreased the permeability of the ore. The high natural moisture
content of the ore (12% in summer and 18% in winter) interfered with the
correct adjustment of moisture in the curing and agglomeration process unit
operations and limited the use of solvent extraction tailings solution
(raffinate) to adequately dilute the concentrated acid introduced ahead of the
agglomerator.
The direct leaching circuit was operated
from January 25 through September 21, 1990. The test results indicated that
direct leaching is not a viable alternative because of lack of permeability of
the ore. It is believed that the carbon dioxide gases generated during leaching
flowing upward through the material and the plugging of the ore under treatment
caused leach times to be in the range of 60 to 77 days, and lowered the
extraction of copper.
A flowsheet using agglomeration and curing
of the ore ahead of leaching This system was operated from September 22, 1990
until December 1991 when the pilot plant was shut down. Two ore irrigation
systems were studied, watering with sprays, and drip irrigation. Drip
irrigation resulted in better operation and recoveries than watering with
sprays.
In order to better establish the treatment
parameters for Tintaya oxide ores, PAH agrees with the Tintaya engineers
working on the oxide project that the oxide ore treatment pilot plant should be
reactivated.
PAH has evaluated
three processing scenarios. Scenario 1 is a continuation of the current
situation, i.e. concentration with shipment to custom smelting. Scenario 2 is a
continuation of Scenario 1 but with the addition of copper recovery from oxide
material through leaching and SX/EW recovery. Sulfuric acid for leaching would
be bought off-site and transported to Tintaya. Scenario 3 involves the
construction of a submerged combustion smelter (e.g. Sirosmelt) to treat
Tintaya concentrates. Sulfuric acid would be generated on-site and used in acid
leaching of oxide material. This would result in a significant reduction in
freight and smelting charges.
The development
plans for all three Scenarios are presented in the following series of tables.
Scenarios 1, 2 and 3 all assume the same mine development sequence and the
delivery of 2.8 million tons per year (8000 tpd) to the concentrator. Table 8-1
illustrates the mine sequence.
Mine production
will continue in the Tajo until 1998 when it will move to Chabuca Sur. Open Pit
production will continue through 2000 at Chabuca Sur. Underground development
for Chabuca Este and Coroccohuayco will begin in 1997 which will allow enough
time for them to be in full production by year 2001. Mining at a rate of 1.4
million tonnes annually from each of these deposits can continue until 2008
based on current reserves. Coroccohuayco will have a few years of ore still
available after this.
Mining from areas
under and beside the current Tajo are not programmed into this schedule.
Table 8-1
Annual mine
operating costs are shown in Table 8-2. They are based on the following unit
costs:
Surface Mining USD 0.90 per tonne (increased to USD1.00 after 1996)
Chabuca Este USD 9.50 per tonne
Coroccohuayco USD 12.50 per tonne.
NB: All costs are in 1994 USD
Coroccohuayco costs are higher due to
increased lifting and hauling costs.
Mine operating costs will climb from the
USD 18 million forecast for 1994 to over USD 30 million by 2002. This cost is
directly related to the movement from open pit to underground mining. It is
compensated by higher ore grades.
Significant expenditures will be necessary
to develop the known mine reserves. Table 8-3 shows the equipment and
infrastructure costs associated with each operation. Table 8-4 shows the mine
development costs.
The total anticipated equipment and
infrastructure capital cost to allow mining to continue over the next 15 years
is USD 119 million. Mine development costs are forecast to be USD 38 million
over the same period. The combined total is USD 157 million. The majority of
this (USD 137 million) will have to be spent between now and 2000 to insure
sufficient mill feed.
PAH has previously explained that
optimization of mine planning and consideration of open pit mining at Chabuca
Sur may have a significant positive impact on the amount and timing of capital
expenditures. Further study is called for and PAH strongly recommends that this
be considered.
Table 8-2
Table 8-3
Table 8-4
Scenario 1 assumes a continuation of the current practice of
custom smelting of concentrates. The concentrator production schedule is shown
in Table 8-5. Although mill feed is kept constant at 2.8 million tonnes annually,
concentrate production climbs from 166,270 tonnes in 1994 to 223,360 tonnes by
2002. This is a direct function of the higher ore grades anticipated from
Chabuca Este and Coroccohuayco.
Concentrator operating and capital costs
are shown in Table 8-6. Annual operating costs are based on a unit cost of USD
6.00 per tonne of ore processed. Capital costs are for sustaining capital and
some plant modification with the exception of new tailings capacity. A new
investment of USD 7.5 million will be required by the year 2000 to insure
adequate tailings capacity.
General, Administrative and Marketing
expenses are shown in Table 8-7. Annual G&A costs are fixed at USD3.5
million. Although these costs appear modest in comparison to many operations it
should be pointed out that Tintaya accounting policy allocates certain G&A
costs back to the mine and mill areas. This results in those areas being
slightly higher than might be expected. PAH has continued with this policy in
its cost estimation. Annual FSR costs are based on a unit cost of USD 0.32/lbCu
copper payable. This includes all inland freight, ocean going freight, smelting
and refining charges.
The second alternative development plan,
Scenario 2, maintains concentrate production as described but also includes
recovery of copper from oxide resources. Table 8-8 presents anticipated oxide
copper production as well as the forecast production and investment costs.
Table 8-5
Table 8-6
Table 8-7
Table 8-8
Full scale production would begin in 1997
processing 910,000 tonnes of ore per year and continue through the life of the
project. Initial production would come from the existing high grade stockpiles.
However subsequent processing of lower grade materials would result in a drop
of production. There are potential but unquantified higher grade resources that
could be substituted for the low grade material in later years. Initial
production is expected to be 17,000 tonnes annually. This will continue for six
years before dropping off.
Total capital expenditures, including the
operation of a pilot plant for two years, are forecast to be approximately USD
56 million. Annual operating costs of USD 11.4 million is based on a unit cost
of USD 12.94 per tonne ore processed plus USD 0.43 per tonne material from the
existing stockpiles of 10 million tonnes to leaching areas. Cathode freight
costs of USD 60 per tonne are additional to the operating costs.
The construction of an on-site submerged
combustion smelter combined with sulphuric acid production and recovery of
oxide copper is modeled for Scenario 3. Concentrates will be treated on-site to
produce blister copper which will be shipped for refining. The smelter
production schedule and costs are shown in Table 8-9. This scenario results in
the same total copper production as Scenario 2.
This Scenario has the advantage of
eliminating custom smelting charges and lowering freight costs due to shipment
of higher value added products. Also sulphuric acid would be generated as a
by-product which can be used in the oxide recovery process. This would
eliminate the USD 80 per tonne acid cost included in Scenario 2. This
advantages are partially offset by higher on-site operating cost (smelter
costs).
Table 8-9
Annual smelter operating costs vary
between USD 13.5 and USD 17.5 million. This is based on a unit cost of USD
0.1231 per pond of copper in blister. Blister refining charges are USD
0.11/lbCu payable copper. Blister freight charges are estimated at USD 60 per
tonne. Based on a purity of 97.5% this translates into USD 0.028/lbCu copper.
The total FSR charges under Scenario 3 are therefore USD 0.26/lbCu. This
represents a reduction of USD 0.07 from custom smelting. Annual savings are
approximately USD 7-8 million depending on the volume of copper produced.
The cost to produce oxide copper will also
drop under this scenario as acid is generated as a byproduct of smelting. This
would eliminate the estimated USD 80 per tonne cost for delivered acid. Copper
oxide production costs would drop substantially from the USD 12.94 per tonne
ore treated ( Scenario 2) to USD 7.39 per tonne treated. This results in an
annual saving of about USD 5 million.
The cost savings will not come without a
price. The investment expense is estimated to be USD 64.4 million. PAH
emphasizes that this Scenario is conceptual and substantial investigation will
be required before its feasibility is proven.
PAH has taken a
two-fold approach to the valuation of Empresa Minera Tintaya S.A. Its first
approach uses discounted cash flow methods to determine a present value of the
company. The second approach is to use comparable transactions as the basis for
determining a "market-based" value. Ultimately the real value of the
company is what someone is willing to pay for it, i.e. this is the true market
value. By adopting the twofold approach PAH is able to determine a range of
reasonable values that can be used as the basis of negotiations with potential
investors.
PAH has not used
an "asset-based" approach to valuation because it believes that this
often results in an exaggerated value for the company. Many of the fixed assets, such as buildings
or earthworks, have value only if the mine is in operation. If the mine ceases operation then the
building will cease to have any value because of its remote location. Essentially, the only true "asset"
value is the liquidation or salvage value of the fixed assets and
inventories. This is often only a small
fraction of their depreciated or "book" value.
PAH has applied
its valuation methodology to two distinct operational areas: The Tintaya Mine
with its nearby deposits (Chabucas, Coroccohuayco) and other areas (Las Bambas,
Katanga, etc).
The two valuation
methodologies are appropriately applied to the Tintaya area. Cash flows are
based on production parameters and
costs that can reasonably be
quantified. The historical data and the relatively high level of engineering
input allows forecasts to be made with confidence. In regards to the comparable
transaction analysis there are a sufficient number of similar transactions to
allow reasonable comparisons to be made.
The other areas
present a different problem. They are all considered to be exploration prospects
and therefore any forecast of future production or costs would be so
speculative it would have no meaning.
PAH does not consider discounted cash flow techniques suitable for this
situation.
There are a
number of comparable transaction for similar exploration properties. Their
value, however, if often based on some future "option value" to be
realized if exploration is successful. It is PAH's experience that any
agreement is likely to be structured to
allow the investor to commit to a
spending program with an option payment made only if a positive production
decision is made. A typical agreement might require the investor to spend
increasing annual sums on exploration and feasibility studies until a future
date. If these commitments are not made the property would be returned to the
owner. At the future date, the investor would decide whether to purchase the
option at the previously negotiated price or return the property rights to the
owner.
PAH has decided
to assign only a minimal value to the other areas. It has maintained the
comparable transaction approach under the assumption that this represents a
certain amount that will be paid for the exploration rights.
Cash flow models
for the three cases described in Section 8.0 have been constructed. The first
cash flow model is the base case - continuing to operate the mine at its
current rate of 2.8 million tonnes of sulphide ore per year and shipping the
concentrates elsewhere for custom smelting. The second model allows for processing
910,000 tonnes of stockpiled and in-situ oxide ore annually through an SX/EW
circuit and producing cathodes on-site. Acid for use in the SX/EW circuit is
purchased at a delivered cost of $80 per tonne. The treatment of 2.8 million
tonnes per year of sulphide ore, and off-site custom smelting continues. The
third model incorporates the SX/EW circuit plus an on-site submerged combustion
smelter for smelting all concentrates and producing acid for use in the SX/EW
circuit. The operating parameters for the three cases are summarized in Table
9-1. All three cases have project lives of 15 years.
|
TABLE
9-1 |
|||||
|
Summary
of Operating Parameters for Cases 1,2 and 3 |
|||||
|
|
Production |
Operating Costs |
Capital
Spending |
||
|
Case |
000's tonnes
ore/yr |
MM lbs Cu/yr |
$/tonne
ore |
$/lb
Cu |
MM $ |
|
1 - Base Case |
2,800 |
125 |
30.80 |
0.57 |
120 |
|
2 - Addition of
SX/EW Circuit |
3,710 |
147 |
27.76 |
0.55 |
149 |
|
3 - SX/EW +
On-site Smelting |
3,710 |
147 |
25.04 |
0.51 |
187 |
All three cases
begin in 1994 and continue until 2008. At this point it is assumed that the
mine is closed and all remaining equipment is sold at salvage value. Even
though the production schedule shown in Table 2.2.6-2 of Volume II shows enough
ore to last until 2021, it is in the year 2009 that total ore production falls
from 2.8 MM tonnes/yr to 1.75 MM tonnes/yr and total production continues to
fall to 105,000 tonnes/yr in 2015. While the potential for finding more
mineable reserves is good, there are not enough currently known reserves to
keep the concentrator at full capacity past 2008. Operating costs would become
unreasonably high with the concentrator operating at only half of its capacity.
The NPV's for the
projected cash flows in cases one, two, and three are shown in Table 9-2 using
a range of discount rates from 20% to 10% per annum. The results of the
analysis indicate that Case 2, with the addition of the SX/EW circuit, has
marginally higher NPV's ranging from US$65.8 MM to $US142.3 MM. It is interesting to note that there is
little variation in NPV among the three cases.
The major difference is the unit operating cost (per pound of copper)
which decreased from US$0.57 (Case 1) to US$0.51 (Case 3).
|
TABLE 9-2 Tintaya Project Net Present Values ($ 000's) |
|
|
|
|
Discount Rate |
Case 1 |
Case 2 |
Case 3 |
|
20% |
63,521 |
65,884 |
53,181 |
|
17.5% |
73,902 |
78,857 |
657,851 |
|
15% |
86,980 |
95,154 |
86,546 |
|
12.5% |
103,633 |
115,811 |
110,508 |
|
10% |
125,083 |
142,250 |
141,488 |
A sensitivity
analysis was performed on the cash flow models to investigate the reaction of
the present value of the three projected cash flows to changes in copper price,
capital costs, and operating costs. The results are shown in Table 9-3, using a
real discount rate of 15%. The value of the project is most sensitive to
changes in commodity price. It is also sensitive to changes in operating cost.
Changes in capital cost have relatively small effects. All three cases show
positive NPV's when copper price is $0.75/lb. This is encouraging since copper
price recently reached a low of $0.72/lb but is currently trading at $0.80/lb
as of this writing.
|
TABLE 3.1-7 Tintaya Project Results of Sensitivity Analysis |
|
|
|
|
||
|
|
NPV's at 15%Discount Rate |
||||
|
|
Case 1 |
Case 2 |
Case 3 |
|
||
|
Copper Price |
|
|
|
|
||
|
$1.05 |
152,582 |
171,629 |
163,043 |
|
||
|
$0.90 |
86,980 |
95,154 |
86,546 |
|
||
|
$0.75 |
19,814 |
17,961 |
7,493 |
|
||
|
Capital Cost |
|
|
|
|
||
|
+15% |
77,557 |
82,515 |
68,522 |
|
||
|
Base |
86,980 |
95,154 |
86,546 |
|
||
|
-15% |
96,402 |
107,703 |
104,352 |
|
||
|
Operating Cost |
|
|
|
|
||
|
+15% |
41,130 |
43,330 |
37,112 |
|
||
|
Base |
86,980 |
95,154 |
86,546 |
|
||
|
-15% |
131,834 |
145,414 |
134,680 |
|
||
To establish a basis for the value of the
Tintaya mine, a comparable transaction analysis was completed using recent
transactions of copper reserves in South America. The comparative transaction
approach to valuing an asset consists of collecting price, quantity, and
quality information on recent sales of similar assets. The price, quantity and
quality information is used to deduce a value for the asset in question. For
the Tintaya mine, the results of a similar comparable transaction study by PAH,
completed in 1992 was reviewed. This study analyzed copper property
transactions from 1985 to April of 1992 and gives a reasonable range of unit
prices (US$/lb. Cu in reserves) in which to expect the unit price for the
Tintaya mine to be.
Next, information was gathered on sales of
copper properties in Peru and Chile from May of 1992 through October, 1993.
Specific information gathered included property names, location, ore type
(sulphide/oxide), reserve tonnage, reserve grade, reserve classification,
mining method, operating cost, production rate,% of ownership transferred, cash
paid in the transaction, and the names of the buyers and sellers.
To begin the analysis, the characteristics
of the Tintaya project must be assessed so that reliable comparisons to other,
recently traded properties can be made. The Tintaya mine is an open-pit mine
with a concentrator. Underground mining is planned for exploiting a portion of
the reserve. It is the world's highest open-pit copper mine, located in the
Andean altiplano at an elevation of 4,100 meters. The Tintaya mine went into
production in 1985 with a development cost of $315 million. The mineable
reserves (proven and probable) currently stand at 48.2 million tonnes of
sulphide ore at a grade of 2.4% Cu and a stockpile of 9.86 million tonnes of
oxide ore at a grade of 1.61% soluble Cu. Currently, all ore is processed
through a modern mill, and trucked 370 km to the port of Matarani for export.
The concentrates are sold to a variety of smelters in the region. Annual production rates of contained Cu in
concentrates is between 110 and 125 million pounds. The production of an
additional 35 million pounds of cathode copper through SX/EW processes is
possible but will require a capital investment of $47 million.
A study of acquisition costs for copper
properties was completed by PAH in the Spring of 1992. A total of 147
transactions were analyzed in the period from 1985 to 1992. Property locations
were world-wide excluding the CIS and China. The median price paid for copper
properties exhibiting the major characteristics of Tintaya are shown in Table
9-4. The unit prices, stated in US
cents/lbCu Cu contained in reserves, range from 0.31 to 5.69.
TABLE 9-4 Tintaya
Project: Comparable Transactions |
|
|
|
|
||||
|
Summary from
1992 PAH Study Median Acquisition Costs for the Following Copper Property
Characteristics |
1st Quarter
1992 Cents/lb Cu |
3rd Quarter
1993 cents/lb Cu |
Premium/Discount
from Dataset Median |
|
||||
|
Median Value
of 147 Cu Property Transactions
from 1985/1992 Properties in
Chile Production Stage Properties
with both Sulphide and oxide Ore For Proven and
Probable Reserves For Average
Ore Grades >2.00% For Total
Contained Cu Between 2.5 B lbs and 5 B lbs Open Pit Mine Acquired
Interest (100%) AVERAGES |
1.42 1.13 2.82 0.30 2.34 2.46 0.73 1.76 0.97 |
1.46 1.16 2.90 0.31 2.40 2.53 0.75 1.81 1.00 1.59 |
0.00% -20.42% 98.59% -78.87% 64.79% 73.24% -48.59% 23.94% -31.69% 9.00% |
||||
Pertinent findings of the study indicated
that discounts were taken below the median price of 1.46 cents/lb Cu for
properties located in developing or politically unstable countries.
Unfortunately, none of the transactions in the database were for Peruvian
properties. Chile was used as a proxy for location. Premiums were paid for
properties already in production, since the level of confidence in costs and
production rates is much higher than for properties in exploration or
development. A discount is made for properties having both sulphide and oxide
ore, most likely due to the higher capital cost incurred in having two ore
processing facilities on site. Premiums are paid for certainty of reserves and
for reserve grades greater than 2% Cu. Premiums are also paid for reserves in
excess of 10 billion pounds of contained Cu and for properties exploitable by
surface mining methods. Discounts were taken for purchase of 100% acquired
interests and premiums were paid for 10% to 30% acquired interests.
In light of the study, the positive
aspects of the Tintaya mine are that it is an operating mine producing very
clean concentrates, ore reserves have been established with a high degree of
certainty, the average grade of reserves are greater than 2%, and it is an open
pit mine. The detrimental aspects of the Tintaya mine are its location in Peru,
a country known for political uncertainty, remoteness of the site and the high
cost of concentrate haulage, the relatively small size of the deposit, the
necessity of building an SX/EW facility to treat oxide ores, and that 100% of
the mine is for sale. From the PAH study, a premium of 10% is indicated for the
Tintaya property above the median purchase price of 1.46 cents/lb Cu for all
147 transactions. This results in an adjusted price of 1.61 cents/lb Cu for the
Tintaya property. This can be regarded as the high range of possible value for
the Tintaya property. If this factor of 1.61 cents/lb Cu is multiplied by the
mineable reserves of 2.92 billion lbs Cu at Tintaya, the resulting value is
US$47 million.
The next part of the analysis of
comparable transactions was to gather information on all comparable copper
property sales since the Spring of 1992. During this time, the governments of
Chile, Peru, and Argentina all liberalized investment policy for development
and exploitation of domestic mineral resources by foreign, private companies.
This resulted in numerous transactions of mineral properties occurring in the
last year. Table 9-5 shows the transactions for which public information was
available. The sale of the Lince mine in Northern Chile by Outokumpu was not
included here due to a large portion of the sale price representing the cost of
the mill that Outokumpu built. Since all of these transactions took place
either in Peru or Northern Chile, these will be used as the set from which
comparative prices will be estimated.
Table 9-5
Two Peruvian properties, Cerro Verde II
and Quellaveco, were sold in the last year. The weight-average price per lb Cu
in reserves paid for these properties was 0.3 cents. The weight-average price
for the four transactions in Chile was 2.2 cents.
Even though Cerro Verde II is in Peru, it
has significant differences to Tintaya that preclude using its transaction
price as a comparable. The Cerro Verde deposit is over twice the size of
Tintaya, with a reported reserve of 8.7 billion lbs Cu. However, the grade of
the ore is less than half that of Tintaya. The mine is close to a major city,
Arequipa, were there is rail haulage access to Matarani, 85 kilometers away.
Similarities to Tintaya are that both oxide and sulphide ore are processed, the
property is currently in production at a rate of 68 million lbs. Cu/yr, and it
is a surface mine.
Quellaveco is closer to Tintaya in reserve
size (6.3 billion lbs Cu.), however, Quellaveco has no known oxide ore. It also
has much lower grades (0.8%) than Tintaya. It is undeveloped and its reserves
are still classified as "geologic". Quellaveco has the advantage over
Tintaya of being closer to rail transportation and a port.
The Ivan property in Northern Chile is
comparable to the Tintaya mine in several ways. The average grade of the Ivan
reserve is 2.52%, it has both sulphide and oxide ore reserves, and a
combination of surface and underground mining are planned for exploiting the
reserve. Unlike Tintaya, however, the Ivan property is within 100 kilometers of
a port city (Antofagasta) and the reserve is smaller (262 million lbs. Cu).
The combined characteristics of the three
copper properties above come reasonably close to matching those of the Tintaya
mine. The one characteristic that they are missing is Tintaya's remoteness. A
weight-average of the unit price for the three properties above results in a
price of .37 cents/lb Cu. The discount for Tintaya's remoteness is hard to
quantify. A subjective estimate of a market value for the Tintaya mine is .3
cents/lb Cu. This results in a value of US$8.76 million for the Tintaya
property. This value can be regarded as the low range for the value of Tintaya.
Since the Tintaya mine is currently in
production and producing cash flow, its value should fall within the high
portion of the range between US$8.76 million and US$47 million. A premium for
the mine is warranted since a new owner could begin making money from the mine
the day it is purchased. No large amount of up-front capital is needed to get
the mine into production.
PAH has considered only Las Bambas
in assigning value to the other areas outside of the Tintaya and
surrounding district. The other concessions controlled by the company can only
be considered as early exploration prospects.
Most have only some surface exploration and no or little drilling to
quantify resources. For these reasons, PAH believes that potential investors
will fully discount their value.
As discussed above, PAH believes that the
speculative nature of future development in
Las Bambas makes their value minimal in comparison to the main area of
interest, i.e. the Tintaya district. Never-the-less the amount of historical
work has allowed a preliminary quantification of resources which in turn
creates some current value.
Resources in Las Bambas have been
calculated during previous periods of exploration, mostly by the Cerro de Pasco
Corporation and Mitsui Corp. This resources were presented in Section 2. A
summary of the relevant numbers is presented below:
Mt ore Grade
% M lb Cu
Chalcobamba 10.200 2.2 % 494.6
Ferrobamba 8.300 2.1 % 384.2
Sulfobamba 3.100 1.3 %
88.8
Total 21.6 2.0 % 967.6
Using the same transaction database
discussed above, PAH has determined that an average value of US$ 0.00
75/lbCu of contained copper in resource for
all thirty properties in the exploration stage of development. PAH believes
that a substantial discount should be applied for the area's remote location
(and correspondingly high infrastructure requirements) and its location in
Peru. PAH has applied a 50% discount to determine a common value of
US$0.0038/lbCu contained copper. Applying this multiplier to the resource base
a value of US$ 3.7 million is indicated for Las Bambas.
PAH emphasizes that this value is highly
speculative and that many investors will be more inclined to pay it at some
latter date upon the exercise of a development "option".
As discussed in the introduction to this
section PAH emphasizes that the value of any mining project is based on a
complex set of investor perceptions. These include many factors such as metal
price expectations, possible reserve
expansion, new operating efficiency and the introduction of new technology to
increase production or lower costs. Individual investors will bring a different
set of expectations and perceptions to their own concept of the property's
value. It would be impossible to anticipate all of these different
possibilities.
From the sellers point of view it becomes
necessary to anticipate a reasonable range of values upon which to base any
subsequent negotiations. PAH, in its valuation has taken a multifaceted
approach to provide such a range. The cash flow analysis is based on a specific
set of operating assumptions. These can either be fully accepted by the
investor or remodeled to suit their personal perspective. Although PAH believes
that the US $0.90 copper price used for the base case projections is reasonable
over the long term it may clearly be an area of controversy. Investors may use
a lower price or assume a higher discount rate to accommodate the perceived
higher risk. This could substantially reduce the net present value.
The comparable transaction method attempts
to incorporate investor perceptions as indicated by historical market activity.
It is a useful methodology but any adjustments made to place transactions on a
truly comparable basis may be questioned. Regardless, PAH has found that this
methodology tends to provide an accurate indication of market value. Based on
the previous discussion, PAH believes that a market value of US$ 40 million is
appropriate.
Results from the above analyses are
summarized below:
NPV
(15% discount) Base Case US$ 87 million
Comparable
Transaction (Tintaya) US$ 40
million
Comparable
Transaction (Las Bambas) US$
3.7 million
A combined indicated value of US$ 43.7 to
90.7 million is indicated.
The Tintaya
mining concession is located in the "Ferrobamba Copper Belt" which
extends in a NW‑SE direction over a distance of 500 km between
Arequipa and Cusco and covering parts of the departments of Cusco and Apurimac
in southern Peru. Tintaya's concession is located in the SE corner of the
copper belt, 260km NW of Arequipa and 250km SE of Cusco, just off the national
road which links Arequipa to Cusco, through Canahuas, Negro Mayo, 16km
south of the town of Yauri.
The
"Ferrobamba Copper Belt" contains a variety of metallic orebodies
which are related to the Andine uplifting i.e. copper, copper‑gold‑silver,
lead‑zinc‑gold‑silver, gold, iron. Tintaya is the only active
copper mining operation in the copper belt but there are several other
concessions owned by private companies, including the Japanese Mitsui which
holds a concession on a porphyry type orebody.
Known geological
resources in Tintaya's concession are distributed in four main areas explored
as of today; they are referred to as Tajo, Chabuca Este, Chabuca Sur
and Coroccohuayco. Tajo is the open‑pit mine in which Tintaya first
started mining operations in years 1983‑1985 but which is nearing
depletion (4‑5 years are left). Chabuca Este, Chabuca Sur and
Coroccohuayco are prospects for the continuation of present mining operations.
The former are continuous and adjacent to Tajo, the latter is situated
8 km away, to the SE. All these orebodies are volcanic intrusions in
sedimentary formations, which have been transformed into skarn type
mineralisation by contact metamorphism.
The combined
copper resource of the four areas, as quantified by the present status of
drilling and sampling work, is summarised as follows in million of metric
tonnes (Mt) and copper grade (% Cu) at the cut‑off grades selected (see
later):
Sulfides 61.4 million tonnes 2.50 % Cu
Oxides 23.5 million tonnes 2.15 % Cu
Total 84.9 million tonnes 2.40 % Cu
Oxides represent
more than 25% of the total resource; approximately 10 Mt have already been
extracted during the process of mining Tajo and are stockpiled on the mine site
for future development which will require special treatment.
In addition to
copper, the sulphide ores contain significant gold and silver values which can
be recovered in traditional pyro-metallurgical processes. The ores produced by
Tajo since 1985 have shown gold and silver values of 0.2‑0.3 g/t and
8‑10 g/t respectively (or 4.5 g/t and 150 g/t in the
concentrates produced).
The exploration
potential in Tintaya's concession is reportedly good. It appears highly
possible that quantified resources would be substantially increased by
continued exploration. In this respect, Tintaya's experience since Tajo started
operations in 1985, clearly demonstrates that additions to the reserve
inventory, have considerably exceeded the quantities of ore extracted, as a
result of continuous exploration effort.
Neighbouring
Tintaya, there are two other copper concessions. Quechuas, 8km to the SSE,
belongs to the Japanese company Mitsui; this is a porphyry copper orebody with
an estimated 80 Mt of ore and an average grade of 0.85% Cu. Antalaya,
3km SSW, belongs to a private owner; it is a similar orebody as Tajo with a
quantified resource of 2 Mt of ore and a grade of 2% Cu.
Other important
exploration areas exist outside Tintaya's concession. The most important of
these is an area known as las Bambas, a Quechua word for plateau. Significant
copper and gold mineralizations are known owing to remote geological campaigns,
geochemical surveys, ground sampling, drilling and underground workings the
latter being limited in extent. Detailed and extensive exploration work has so
far been limited by the more remote location of this area; indeed, it is
located some 300 km NW of Tintaya (100km SW of Cusco). However, it
definitely represents a potential resource for future development. Such
development is dependent on infrastructures.
Minable reserves
in Tintaya's concession, have been estimated for the four main areas known
today. The Tajo and Chabuca Sur orebodies are considered to be mined as as
open pit operations. Chabuca Este and Coroccohuayco are considered to be
exploited as underground operations. However, it is realised that the future
owner may wish to consider openpit mining also for Chabuca Este and
Coroccohuayco, depending on the outcome and results of additional exploration
and cost planning. Considering the current costs of ore extraction and of concentration
at Tintaya's Tajo mine and concentrating plant, and with estimates of
underground costs of extraction derived from experience in Peru, cut‑offs
of 0.65% Cu and 1.45% Cu have been determined for openpit and
underground operations respectively.
Minable reserves
have been established using these cut‑off grades. Minable reserves for
the four areas are presented overleaf (table IV-1):
Table IV-1
IV.C. ORE EXTRACTION
IV.D. ORE CONCENTRATION
Tintaya operates
a concentrator which produces 32% Cu concentrates from the ore mined. The
present capacity of the concentrating plant is 8 000 t/day or
2.8 Mt/annum. The plant is in excellent condition both in technology and
in state of maintenance; moreover, its capacity could be easily increased to 12 000 t/day
or 4.2 Mt/annum, with marginal investments.
The copper
concentrates produced by Tintaya from Tajo openpit feature good metallurgic
quality, with low or no content of deleterious elements e.g. As, Hg etc
Mineral
processing is by conventional sulphide flotation (8 000 tonnes/day)
to produce a copper concentrate. The concentrate is trucked to either the
smelter at Ilo or to the port of Matarani for shipment overseas. The production
parameters for 1993 are the following.
Ore Processed 2.8 Mt
Ore Grade 1.96 % Cu
Metal recovery 89.7 %
Concentrate
Produced 158 000 tonnes
Concentrate Grade 31.62 % Cu
Add-on precious
metals 150 g/t silver
4.5
g/t gold
Transport costs
are approximately 22 USD:t of concentrate, to which 10 USD/t are
added for port handling charges, and 30‑40 USD for sea freight, or a
total of approximately 60‑70 USD/t of concentrate, which corresponds
to 0.09‑0.10 USD:lb Cu.
Current smelting
contracts result in a smelting and refining charge of approximately US$0.22/lb
Cu. Precious metal (Au and Ag) credits are about 10% of Cu sales value..
The Tintaya
mining area contains all the necessary infrastructure to support the openpit
mine and the concentrator, i.e. a maintenance workshop, stores warehouses,
reserve power generating plant (17MW), field offices and general administration
blocks. In addition there is a mine township which includes all necessary
amenities: hospital, school, shops, recreational facilities, chapel. Lodging
facilities comprise of separate sets of bungalows for engineers and employees
while housing for workers is provided in multi‑level appartment blocks
situated in the main township area.
Power is supplied
from the State Hydroelectric Plant of Machupicchu (12 Mw) via a high
voltage transmission line (140 kV). A reserve diesel powered generating
plant (8 units with a total power of 17 MW) is also available. This plant
was initially meant to provide the full power requirement of mine and
concentrator (main users being the mine's cable loaders and the concentrating
plant's mills and flotation cells). After, connection with the national
electricity grid, the full reserve value of this generating plant has become
particularly useful. Indeed, the mine and concentrator are fully reliable with
regard to possible power trip‑offs from the network. Power trip‑offs
can indeed considerably affect the operation of the concentrating plant by
imposing costly clean‑ups and circuit emptyings, with damaging effects on
metal recovery and concentrate quality and grade. The existence of reserve
generating capacity, capable of taking full load and immediately in case of a
power trip‑off is therefore an important plus for the future owner of the
property.
Ample water
supply is available from the nearby Salado river, where the main pumping
station is situated.
The project is
run in an environmentally sound manner although certain issues must be
addressed. Dust from scrubbers should be recycled into the mill circuit. A
closure plan does not exist. The tailings facility is currently holding excess
amounts of water.
Current operating
costs at Tintaya are US$0.57/lbCu copper (net of precious metal credits). A
number of alternatives have been reviewed to lower the cost structure. These
include the addition of acid leaching and SX/EW recovery of copper from oxide
resources and the construction of a submerged combustion smelter to treat
concentrates on site. Although these alternatives are conceptual in nature,
unit costs have been forecast. Acid leaching can reduce costs to US$ 0.56/lbCu.
On site smelting would further reduce costs to US$ 0.51/lbCu. These are average
prices over the life of the known reserves.