MINING IN CHILE — Third Escondida expansion to boost output

If the current feasibility study of Escondida is approved, an expansion project will begin which would increase the copper mine’s annual output to more than 700,000 tonnes copper in concentrate.

The expansion, the mine’s third, would cost an estimated US$500 million, and come on stream in 1996, reports 30% owner RTZ (NYSE).

Situated in the Atacama Desert in northern Chile, Escondida is a large, low-cost, open-pit mine with proven and probable reserves (as of the end of 1993) of 619 million tonnes grading 2.08% copper.

RTZ’s partners in the venture are BHP of Australia, the majority partner and manager with a 57.5% interest; a Mitsubishi-led Japanese consortium with 10%; and the International Finance Corporation with 2.5%

Construction on the mine began in August, 1988, with production commencing in November, 1990. The total capital cost for the project was US$824 million, which was financed by equity and non-recourse loans.

In 1993, Escondida produced 886,477 tonnes of concentrate containing 388,760 tonnes copper, 73,440 oz. gold and 2.56 million oz. silver.

The total amount of rock mined last year was more than 128 million tonnes, and about 15.3 million tonnes of ore were milled at an average headgrade of 2.8% copper.

In October, 1993, a US$76-million expansion project was completed, which increased Escondida’s nominal capacity to about 400,000 tonnes copper in concentrate per annum.

A second expansion, expected to cost US$200 million and to include the expansion of mine production and concentrating facilities as well as the construction of the copper cathode plant, is under way.

This work will increase nominal capacity to about 480,000 tonnes copper in concentrate per annum. About 80,000 tonnes of that amount will be converted to refined (cathode) copper using a hydrometallurgical process — an alternative to conventional smelting and refining — developed by Escondida. Commissioning of the new plant is expected in late 1994. Prior to startup, most of Escondida’s concentrate production until the end of 2002 was committed to smelters in Japan, Germany and Finland. Contracts of shorter duration (2-6 years), including the additional production from the first expansion, have been entered into with smelters in Spain, South Korea, Brazil, the Philippines, Sweden and Chile, with sales to traders accounting for the small remaining balance. RTZ says the terms of most of the contracts are renegotiated annually, although some are renegotiated every two or three years.