Low prices force Rio to close North America’s only tin mine

North America will lose its only producing primary tin mine following a decision by Rio Algom (TSE) to close its East Kemptville operation about 60 km northeast of here.

The open pit mine, which opened two weeks before the collapse of a world tin cartel in 1985 that sent tin prices tumbling, has never made a profit. In 1990 operating losses reached $56.5 million.

Rio says it will make a $12.1-million (28 cents per share) provision against third-quarter earnings to cover the cost of the closing, which is scheduled for Jan. 3. The mine employs 225 workers and injects about $1.25 million per month into the Yarmouth economy.

Rio’s announcement came as a surprise to the busload of delegates who recently toured the mine as part of the 48th mines ministers’ conference the day before the announcement was made. Although management made no attempt to hide the mine’s dismal financial position, some were optimistic that continually improving mill recoveries would go a long way to strengthen the operation.

“At US$2.75 tin, we’re in trouble,” Ken Collison, president of East Kemptville Tin, told the conference delegates. “But we’re always trying to squeeze a little more out of the lemon.” Collison said the mine was aiming for recoveries of 81%, compared with 75% currently and 63% in 1989. With reserves of about 13 million tons grading 0.21% tin, East Kemptville ranks as the lowest-grade hardrock tin producer in the world. Reserves are contained within two shallow deposits — the Main zone and the higher-grade Baby zone to the west. Tin mineralization occurs as disseminated cassiterite concentrated along the contact between topaz-bearing granites and the surrounding metasediments.

At an average throughput of 9,100 tons per day, Rio estimates the orebody would be mined out within 3-4 years.

But a combination of weak demand during the recession and increasing production, particularly from Brazil, has kept a firm lid on the tin price and, consequently, on East Kemptville’s earnings potential. Tin has been selling recently at US$2.88, down from US$3.22 in 1990 and US$4.62 in 1989. Before the collapse of the tin cartel, the metal was selling at about $9. Rio’s concentrator is unique in North America. The process takes advantage of the difference in weight between the heavy cassiterite (tin oxide) and the waste host rock (granite) to produce a concentrate. Few chemicals are used in the process.

“You’ve just seen probably the most complex mill in Canada,” Collison said after the tour.

East Kemptville produces three concentrates: a 52% tin concentrate, a 20% copper concentrate and a 45% zinc concentrate. The tin is smelted under contract in Malaysia, while the copper and zinc, processed as byproducts, are sold to Noranda (TSE) for smelting in Quebec.

East Kemptville was constructed under a budget of $170 million in 1983. At the end of 1986, with tin prices in the dumps, Rio exercised an option on its loan agreement and turned over ownership of the mine to its banking group. After significant milling improvements, Rio re-acquired the mine in 1988 for about $40 million.

Last year, Rio wrote off $32.4 million to cover the costs of closure, including employee assistance programs and reclamation. When The Northern Miner visited the site as part of the conference tour, the company was testing the adaptability of various types of vegetation on the slopes of its 15-million-ton sandpile.