Soaring costs threaten Teck Cominco's Panama copper mine venture

Still reeling from its decision to shelve the Galore Creek project in British Columbia after construction costs more than doubled, Teck Cominco Ltd. is now facing massive inflation at another planned copper mine in Panama where costs have also doubled, throwing the viability of the entire project in doubt.
Teck of Vancouver and its partners Inmet Mining Corp. of Toronto and Vancouver-based Petaquilla Copper Ltd. said an interim engineering report estimates capital costs to build the Petaquilla copper project have surged to $3.5-billion (U.S.) from an original estimate of $1.7-billion published last year.
Teck now has until March 31 to decide whether to acquire a 26-per-cent interest in the Panamanian project. It could also decide to walk away from the endeavour or try to renegotiate the joint venture agreement with Petaquilla and Inmet, said Greg Waller, Teck's head of investor relations.

"It's a great resource. We'd love to find a way of making it work, but clearly these numbers are challenging," Mr. Waller said in an interview.

In development for more than a decade, Petaquilla has been touted as one of the largest untapped copper deposits in the world, with the potential to produce an average 411 million pounds of copper, 95,000 ounces of gold, and 8.6 million pounds of molybdenum a year over a 23-year mine life.

However, if Teck were to decide to exercise its option to acquire the stake in the project from Petaquilla Copper, it would be obligated to fund 52 per cent of the development costs of the project or roughly $1.8-billion.

Following the Galore Creek debacle that saw Teck order construction of the much-heralded copper project halted after cost estimates skyrocketed to $5-billion from $2.2-billion, the company may not be willing to take on the Petaquilla risk, said Canaccord Adams analyst Orest Wowkodaw.

"I think the project is in serious limbo. It's very unclear to me whether this thing can be developed," Mr. Wowkodaw said in an interview.

The analyst said the project's best hope is for Petaquilla Copper, the junior firm that currently owns 52 per cent of the venture, to consider relinquishing more of its interest in the potential mine.

"This is going to come down to Petaquilla Copper and what they are willing to give up. They've got to change the ownership structure or this thing is dead," Mr. Wowkodaw said.

Although Teck has laid out relatively little capital for the project to date, Petaquilla is second in the company's pipeline of copper development projects behind its Andacollo hypogene mine in Chile. A diversified metals producer and Canada's largest base metals miner, Teck is trying to reshuffle its production profile, reducing its exposure to zinc and increasing its copper production.

The loss of Galore Creek and the potential loss of Petaquilla could put the ability to execute that strategy in doubt.

Here is the full article.

Chile's Copper Boom - Who Does it Benefit?

"The future of copper in Chile can be splendid, significant, or plain irrelevant or negative, depending on how we handle it as a nation. Our development does not depend on foreign companies, nor imperialism, nor ghosts from our past; it depends on whether we do things properly." ~ Gustavo Lagos, Catholic University Mining Center

Jan 11 (IPS) - According to global forecasts, the price of copper, Chile’s main export, will remain high in 2008 thanks to strong demand from China. But just who will benefit from this bonanza is up for debate.

Chile is the world’s largest producer and exporter of copper, with a 35 percent market share, and the biggest global reserves.

According to the state Chilean Copper Commission (COCHILCO), the country produced 5,361 tons of copper concentrate in 2006, nearly five times as much as its closest competitor, the United States, which produced 1,226 tons. Peru followed, with 1,049 tons.

The Chilean state controls just 30 percent of the total output, through the National Copper Corporation (CODELCO). The remaining 70 percent is in private hands.

In 1966, the government of Christian Democrat President Eduardo Frei Montalva (1964-1970) "Chileanised" copper by purchasing 51 percent of the shares in mines worked by foreign companies.

Then in 1971, Socialist President Salvador Allende (1970-1973) expropriated the private mining companies and nationalised the copper industry before he was overthrown by a military coup.

But under the dictatorship of the late General Augusto Pinochet (1973-1990), laws were passed to promote the reopening of the industry to private companies, even though the Chilean constitution says that "the state has absolute, exclusive, inalienable and imprescriptible domain over all mines."

This was done by granting concessions, which in practice allow private firms to treat mines as their private property. The system has attracted a large number of foreign investors, mainly since the return to democracy in 1990. But for critics, the new legislation is unconstitutional and signifies the denationalisation of copper.

Debate on these issues has heated up because of the high international prices for copper seen since 2003.

According to a COCHILCO report, the average price of copper for 2007 was 323 cents of a dollar per pound on the London Metal Exchange.

That is 5.9 percent higher than the average for 2006, and is the highest nominal value in history and the third highest in real terms, after 1966 and 1969 (361 and 325 cents per pound, respectively), the December report says.

"Some of the world’s most respected companies and institutions in copper futures are saying that copper prices will fluctuate between 280 and 360 cents per pound in 2008, with an average of approximately 325 cents, similar to that of 2007," Gustavo Lagos, head of the Catholic University’s Mining Centre, told IPS.

"In 2009, the average price is predicted to be under 300 cents per pound, and in 2010 it is expected to be around 270," said Lagos. Despite the falling trend, these prospects are excellent, given that in 2003 the price per pound was 70 cents of a dollar.

"There was no such extended copper boom in the 20th century. These very high prices, of over three dollars a pound, are likely to last for at least three years, 2006, 2007 and 2008, which is unprecedented," said the engineer.

In Lagos’ view, the run of high copper prices can be explained by two simultaneous global phenomena.

These are, on one hand, "the unexpected rise in Chinese demand for commodities," including copper which is used in building infrastructure, and on the other hand, "the inability of the mining industry, in the short term, to supply the quantities it had promised, because of underinvestment" since 1998, he said.

"The long-term price of copper will remain high, above 130 cents, unless there is world over-production, such as the transnational mining companies in Chile created between 1995 and 2000," economist Orlando Caputo, head of the Centre for Studies on Transnationalisation, Economics and Society (CETES), told IPS.

Caputo’s career has been in academia, except for the period when he was named general manager of CODELCO by Allende, from 1970 to 1973.

Along with some lawmakers belonging to the centre-left coalition that has governed Chile since 1990, and subcontracted CODELCO workers who organised a major strike in mid-2007, Caputo holds the view that copper should be renationalised in order to finance wage increases, greater social spending and economic diversification.

But in September, the lower chamber of congress rejected a draft statement calling on President Michelle Bachelet to move towards renationalisation.

Gustavo Lagos, by contrast, says that "the future of copper in Chile can be splendid, significant, or plain irrelevant or negative, depending on how we handle it as a nation. Our development does not depend on foreign companies, nor imperialism, nor ghosts from our past; it depends on whether we do things properly."

This, he says, means maintaining the present tax rates to ensure private investment over the coming years, drawing greater talent into the industry, removing barriers so that transnational mining companies can bring in technological innovation, and improving the management of CODELCO to increase its competitiveness, "because there are signs that it may not be competitive in the future."

Due to the high prices, the industry’s contribution to gross domestic product (GDP), measured at current prices, rose from 8.3 percent in 2003 to 23 percent in 2006.

In 2006, CODELCO contributed 9.2 billion dollars to the state coffers -- over 20 percent of total revenue. And in 2007, the state received some 16 billion dollars from CODELCO profits and taxes on private mining companies.

But the state mining company faced a series of labour conflicts in 2007, led by subcontracted workers who want equal wages and benefits to those of company employees doing the same jobs.

The latest tension broke out late last year, when the Labour Ministry, which had completed a review of subcontracting practices in the mining industry, ordered CODELCO to directly hire 5,000 workers who are subcontracted in contravention of the recent Subcontracting Law.

CODELCO refused, and has appealed in court.

On Jan. 3, subcontracted mineworkers held protests demanding that the Labour Ministry’s ruling be implemented. Two hundred protestors were arrested.

Lagos says that subcontracting workers is one of the reasons for CODELCO’s loss of productivity. Caputo, in turn, says that the subcontracted workers’ demands are fair, because of their low pay and the physically demanding nature of work in the mining industry.

Caputo also says that "there is a scramble for plunder going on within CODELCO. Former CODELCO employees are now owners of contracting firms, and some politicians are also involved in outsourcing."

The Mining Ministry’s public report for 2007 says that mining development has brought about considerable poverty reduction. "The mining regions of Tarapacá, Antofagasta and Atacama have poverty levels that are below the national poverty rate" of 13.7 percent, it says.

Mining has generated more and better jobs, development of physical infrastructure, opportunities for companies to supply goods and services and the incorporation of new technology, among other benefits, it says.

Among the proposals made by political and social sectors on how to make the most of the boom are improvements in education, investing in public capital goods (mainly in the health sector), supporting small and medium-sized businesses and spending more on the regions.

In May, Bachelet announced that an additional 600 million dollars from copper earnings would be spent on education in 2008, but the government’s economic policy is mainly based on investing savings abroad.

Caputo complained that private mining companies made profits of nearly 20 billion dollars in 2006, which according to his calculations were equivalent to 17 percent of the country’s GDP, 75 percent of the national budget, and twice the combined budgets of the Health and Education Ministries.

In his view, the specific tax on mining approved in 2005 is too low. For 2007, it brought in revenues of approximately 670 million dollars, which are to be spent on technological innovation and development.

(To understand just how small a figure that is, the EPA recently handed out a fine of 400 million dollars to clean up a single river:

US Environmental Protection Agency forces paper companies to begin $400 million clean-up project to deal with PCBs in the Fox River )

"The Chilean state has no national development plan. That word (plan) is prohibited. Everything is left up to the market. Everyone talks about improving productivity factors, such as human capital, and generating conditions for higher productivity. But that isn’t enough," said Caputo.

According to Lagos, labour strife as well as international turbulence caused by the U.S. mortgage crisis may affect copper prices in 2008.

Here is the full article.

Three Chinese firms to develop Afghan copper mine - biggest investment in Afghanistan history

China Metallurgical Group Corporation, Jiangxi Copper Corporation and Fujian Zijin Mining Group Company Limited jointly obtained the right to develop the biggest Afghan copper mine, Aynak copper deposit, with their offer of over US$2.87 billion, the Afghan Ministry of Mines announced recently.

Aynak copper deposit is one of the world's largest copper mines with proven reserves of 690 million tons of copper ore containing about 1.65 percent or 11.3 million tons of copper. The Aynak reserves consist of about one third of China's total proven copper reserves. Some geologists even believe that Aynak might be the world's largest copper mine.

Afghan Minister of Mines Ibrahim Adel said that this deal was the biggest investment in Afghan history, with about 10,000 people expected to work there. Its present copper reserves are more than 10 million tons and are likely to rise to 20 million tons, with copper values at about US$ 30 billion under present prices, he said.

China Metallurgical played the main role during bidding; Jiangxi Copper Corporation and Fujian Zijin Mining Group Company acted as shareholders. China Metallurgical will invest US$3 billion in this project over the next few years, a related responsible person inside the company claimed.

Jiangxi Copper Corporation also stated that the successful bidding would guarantee its sufficient supplies of copper over the following ten years.

International copper prices have risen twice since 2004. Enormous profits have lured world's mine giants to Afghanistan searching for copper. Nine mining companies from China, Canada, Russia, America and India took part in the competitive bidding for Aynak mine.

Due to rising domestic demands China has become the world's largest copper consumer, consuming about 4 million tons or 22 percent of the world's total supply last year.

Here is the full article.

Wind Energy for Chile’s Mines. BHP Billiton and Pacific Hydro to develop 100 megawatt windfarm in Northern Chile – BHP has first option to buy.

SANTIAGO, Nov 19 (Reuters) - Mine giant BHP Billiton and Pacific Hydro said on Monday they signed an agreement to develop wind power in excess of 100 megawatts in Chile's northern mining region.

BHP Billiton (BHP.AX: Quote, Profile, Research) and Pacific Hydro (PHY.AX: Quote, Profile, Research) said in a joint statement construction would begin in late 2009 and would feed into the northern power grid (SING), which mainly serves Chile's mining industry.

Pacific Hydro will do the studies, engineering, construction and operation of the resulting Aeolic (wind) projects, while the miner will have the first option to buy the energy.

"Energy is one of our big operational challenges and to confront it we have developed a plan that assures supplies of energy from conventional sources, and is complemented by sources, such as Aeolic energy," said Diego Hernandez, president of BHP Billiton's base metals division.

Chile's northern mining region has been hit by energy shortages after cuts in supplies of Argentine natural gas forced generators to use costlier fuels like diesel.

Here is the full article.

Town Hopes to Recover From Chile Quake

QUILLAGUA, Chile (AP) — Residents of this tiny desert town expressed hope Friday that their first visit ever by a Chilean president will spur recovery after a huge earthquake damaged dozens of homes.

Touring the region the day before, President Michelle Bachelet promised that within 15 days the most urgent housing problems would be solved in Quillagua, where about half of the hamlet's 60 homes were damaged.

"We had strong earthquakes here before," said resident Erwin Delgado. "Let's hope this time we will really be helped after her visit."

But others worried that the damage could be tough to overcome in rapidly shrinking Quillagua, where decades of nearby copper mining have reduced river levels and contaminated what little water still flows, making small farming difficult. Today it is home to just 100 mostly elderly residents, down from several hundred a decade ago.

Here is the full article.

Barrick Gold Chairman, Peter Munk complains rogue Environmental NGOs are Destroying the Mining Industry

In the communities of Peru, where new copper mines are planned a referendum on mining was held.

Votes cast: 8,873 (48.17 percent of the total electorate)
Votes in favor of mining in the district: 176
Votes against mining in the district: 8,294



It would appear the people of Peru disagree with Peter Munk and the Barrick Gold Corporation.

Want to see more outrageous assertions from the Barrick Gold Corporation? Watch this next video: Barrick Gold Corporation Chairman asserts that gold mines create jobs and feed people. (so would dismantling the Pyramids of Egypt)

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It is not the Environmental NGO's that are out of control, but the rogue Canadian Mining Industry:

Mining Misery: Guatemala is one of many countries that has attracted the investment of Canadian Mining Companies – but at what cost to its people?

Canadian Government Urged to Rein in Mining Sector

10 Things Canada Does Best - What Canada doesn't do best is hold domestic mining companies accountable for the damage they do abroad.

In Chile, Precious Lands Often Go for a Pittance - Barrick Gold Corporation Pays $19 Dollars for 20,000 Acres

Canadian, Goldcorp's open pit, cyanide-leeching mine runs up against local opposition in Guatemala

Canadian Barrick Gold Corporation Pascua Lama Project Protested - Al Gore insisted upon removing Barrick Gold as a sponsor of his May visit to Chile.

Corporate rights trump human rights - alleged that Canadian Barrick Gold security forces intentionally buried alive 52 artisanal miners in Tanzania.

If Mongolia wants to get rich, it's now or never says Rio Tinto and Ivanhoe Mines

Mongolia's dilemma: democracy or wealth?

OYU TOLGOI, Mongolia, Nov 15 (Reuters) - If Mongolia wants to get rich, it's now or never.

That's what mining firms are telling Mongolia's parliament, which is in a position to unlock the country's mining sector by taking a landmark decision on a multi-billion dollar copper deal.

"If that happens, the floodgates will open," said Evan Jones, director of exploration firm Altan Rio. "These guys could create some serious wealth if they get their act together. Seeing as there's only 2.7 million people, they could really fix the place if they use it wisely. It's a huge deal for them."

The alternative, foreign miners warn, would mean Mongolia missing out on a China-driven boom in minerals prices and being consigned to impoverished obscurity for decades.

"If the deal doesn't go through, other major companies won't invest here," said Dogsom Ganbold, head of the National Mining Association. "There's a risk of them pulling out."

Mongolia's future hinges on parliament ratifying, or not, an agreement the government struck in June with miners Rio Tinto and Ivanhoe Mines, which plan to produce copper and gold from the colossal Oyu Tolgoi deposit in the Gobi desert.

Oyu Tolgoi's potential was enough to make geologists' eyes bulge on a recent tour of the site, where traditional Mongolian white tents stand alongside thousands of crates containing 720 km of drill core -- rock drilled out during the exploration phase.

If it goes ahead, the headframe for the main mineshaft, at 95 metres, would be Mongolia's tallest building. But Ivanhoe says it won't sink the shaft until the investment agreement is ratified.

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PARLIAMENTARY PRESSURES

The deal is on the agenda for parliament's current session but members face re-election in July and are nervous that approving it could lose them votes, as it would mean the project would escape a 68 percent windfall profits tax that parliament introduced last year. "The windfall profits tax was seen as a way of clawing back money going to Russia," said the head of one foreign mining firm, referring to Mongolia's biggest existing mine, Erdenet, which is 49 percent-owned by the Russian government.

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THE GOLDEN EGG

Although the windfall tax applies only to copper and gold, miners say the deal with Rio Tinto and Ivanhoe would set a standard for deals across the industry, effectively abolishing the windfall tax before it has yielded any benefit.

On the flipside, the two firms are offering the government 34 percent in the project, which could also set a precedent. But they say they can't wait forever as they are spending $30-40 million a month while equipment gathers dust in the Gobi.

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"The sooner this deal gets approved, the sooner people start to get the benefits," said Ganbold, a young carpenter, rubbing his eyes in the dawn coal smog that cloaks the capital. "With all its minerals, this should be a really rich country." The extent of Mongolia's mineral wealth is unknown, but geologists say comparisons with Chile or Indonesia are realistic.

Here is the full article.

Africa's Grand Inga Hydroelectric Project to produce three times as much power as China's Three Gorges Dam, electricity to supply Copper Mines

[Monday, 12 November 2007] When the giant Inga hydro-electricity power project began in the then Zaire in 1972, the anticipation was that its capacity to produce 1,775 Mega Watts of hydro electricity would be enough to supply the inevitably growing industrial and consumer power demand in southern and central Africa for many years to come. After a protracted civil war in the country, demand for electricity has surged indeed with the emerging interest in developing the vast mineral resources in the Katanga region yet both Inga Phases I and II (with 351 MW and 1,424 MW capacities respectively) are producing at less than 30% capacity, way below the needs of regional economies whose own domestic supplies are also falling short.

However, help is on the way, through a Public-Private Partnership (PPP) created by the Democratic Republic of Congo (DRC)’s power utility, SNEL and the Canadian energy and resources company, MagIndustries.

The PPP project, which began in the first quarter of last year, mandates MagEnergy (a subsidiary of MagIndustries), in Phase I, to refurbish elements of the Inga II plant at a cost of US$25 million and then in Phase II, to rehabilitate four of Inga II’s eight turbines to full capacity (712 MW) at a cost of US$110 million. Phase I will be completed in the first quarter of 2008 and Phase II will commence mid-year 2008 to finish by year-end 2011.

South Africa’s IDC is an equity partner with 30% in Phase I and 15% in Phase II.

According to MagIndustries’ president, William Burton, the refurbishment and rehabilitation work should result in the Inga power plants being able to meet the anticipated 800 MW power demand from the DRC’s Copper Belt in six years.

“In addition to that, there should be enough power to supply other needs in the country as well as for export to, primarily, South Africa and other regional economies like Zambia (which shares the mineral rich copper belt). International power demand exceeds supply and the gap is growing rapidly,” said Burton.

He added that for its current work at Inga, MagIndustries receives revenues of US$200,000 a month. After the first quarter of 2008, with the completion of its Phase I work, MagIndustries will recognize revenues on the sale of 84 MW per year for six years.

MagEnergy, as DRC’s first Independent Power Producer, is also actively interested in other power projects, including Busanga, the country’s second largest hydro site with a potential to produce 250 MW.

Pre-feasibility study is underway at Busanga, which is adjacent to the Katanga Copper Belt and can be readily connected to the South African power pool grid. Another project MagEnergy has interest in is the Zongo II site (100MW potential) where a “scoping study” is underway.

MagEnergy projects at Inga are expected to lead into an ambitious plan by a group of five African countries and their international backers who have explored plans to establish the world’s biggest hydro-power generator, the Grand Inga Project at an estimated cost of US$50 billion.

According to information sourced from SADC publications and sinkswatch.org, an environmental website, the proposed 39,000 MW Grand Inga project (double the current supply for all of Africa) would be a joint project by the governments of Angola, Botswana, DRC, Namibia and South Africa through a company called Western Power Corridor (Westcor) with financial assistance from various world renowned institutions. Planning is coordinated by the World Energy Council (WEC).

Here is the full article.

Ransacking Chile - Fabulous Profits for Multinationals

The rise in copper prices has produced euphoria in the government and ruling elites, despite relative complications for certain exporters. The price rise seems not to be a momentary phenomenon. Although abundance is not noticeable in the daily life of Chileans, three out of four expect that the price rise will raise their living standards. Everything is looking good. But a kind of conspiracy of silence hides something basic. The ones who do best out of the copper price are the multinationals who manage two thirds of Big Mining, not Chile. The multinationals are the main winners : they pay low taxes and walk off with colossal profits.

The figures are startling. With copper at US$2.60 per pound, the profits leaving Chile for production in 2006 will be US$16 billion. More than twice the surplus of CODELCO One is dealing with real plunder, the culmination of an open handed policy towards the multinationals that began with the dictatorship and has been maintained to the present day and which, apparently, President Bachelet wants to continue. Punto Final talked to the economist Orlando Caputo of the Study Centre CETES, an academic and expert in copper and the world economy.

PF. What is the situation relating to multinational profits in Big Mining of copper during this period of high prices?

OC. The profits of the foreign companies that control 70% of Chilean copper are so high that they are equivalent to more than twice the surplus of CODELCO. El Mercurio (3) on April 30th reported that in the first quarter the profits of Escondida (4) were US$1.136 billion, which means more than US$5 billion for the whole year, including taxes. One has to take in the general panorama and we can use data from recent studies. There is no information from the multinationals since they are not obliged to publish accounts. We can only make deductions. There are figures for profits sent overseas resulting from direct foreign investment, which are after-tax profits. The significant figures are these : 1999, US$1.603 billion; 2002, US$2.557 billion; 2003, US$4629 billion; 2004, US$8.231 billion; and 2005, US$11.088 billion.

These figures include the total of foreign direct investment but help us get to the figures for the mining multinationals. If we discount profits of foreign non-mining companies, we arrive at the companies that are, namely, the copper mining companies. To their profits we need to add remittances made up of accelerated depreciation and other items that we can consider as earnings. We can conclude from these calculations that the surpluses of the mining multinationals were approximately US$10 billion in 2005. This year however, when prices and their trends are higher, the surpluses of the copper mining multinationals are around US$16 billion. A figure that would finance the new social program announced by Michelle Bachelet for 27 years.

To appreciate what these earnings mean we can establish other relations. One is that which exists with the material investments made, which together with labour and the natural resource itself, constitute the source of those profits. According to the Foreign Investments Committee, that investment in the mining sector for the period 1991 - 2004, that is to say the democratic period, was US$16 billion in round figures. That figure is practically the same as the earnings for 2006. In just one year the multinationals will earn the same amount that they invested over 14 years, and the investments in the democratic period represent more than 80% of the investment in copper Big Mining since 1974.

Here is the full article.