BHP on exploratory mission in Chile
Sydney Morning Herald
Friday April 1, 2011
SPURRED on by near-record copper prices, BHP Billiton and its partners in the Escondida copper mine at high altitude in the Atacama Desert in northern Chile are continuing to invest heavily to offset the natural decline in the operation's ore grades.The latest (100 per cent) commitment is for $US554 million (BHP's 57.5 per cent share is $US319 million) for what BHP as the managing partner has dubbed the "Escondida Ore Access (EOA)" project.The project involves the relocation of Escondida's two in-pit crushing and conveying facilities so that the mining operations can access higher-grade ore, leading to an unspecified increase in production from 2013.BHP's base metals president, Peter Beaven, said Escondida has been one of the world's "premier copper mines for over two decades and and our ongoing exploration program suggests the basin retains a number of options". "We are studying a number of [opportunities] to improve access to higher-grade ore and increase processing capacity over the years to come," he said.Declining ore grades have been an issue at Escondida ever since the mine began in 1991. In the past 10 years alone, the ore grade has fallen 30 per cent from 1.82 per cent to 1.26 per cent copper. Production this year is expected to be down 5-10 per cent, due mainly to lower grades.By increasing throughput and developing the Escondida Norte project, Escondida has nevertheless grown to be the world's biggest source of the red metal, increasing output from an initial 320,000 tonnes in 1991 to more than 1 million tonnes.The mine is hugely profitable. On a standalone basis it is BHP's most profitable mine. BHP's Pilbara iron and coking coal operations in Queensland only pip its earnings contribution on a multi-mine basis.In the financial year ending last June Escondida contributed $US2.17 billion to BHP's netprofit, up from a contribution of $US422 million in 2009, when copper prices took a hit from the global financial crisis.The other Escondida owners are Rio Tinto (30 per cent) and a Japanese consortium (12.5 per cent).In February 2009 Rio proposed to sell half its Escondida stake to China's state-owned Chinalco in a controversial refinancing package that was later replaced by a rights issue to Rio shareholders.The planned Rio sale price for the effective 15 per cent of Escondida was $US3.38 billion - a figure arrived at when the effects of the global financial crisis were at their worst. The same stake today would be worth more than $US7 billion.