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Peru continues to impress the world.

John Chadwick examines what is, arguably, the most exciting mining country in the world -- with the huge Antamina project, the ongoing SPCC programmes, Quellaveco, Tambo Grande and much more developing

To the Quechua Indians Peru means "land of abundance." Places such as Machu Picchu and Cuzco recall the wealth of the Inca civilization, obliterated in the early 16th century by the Spaniards, who built an empire on New World gold and silver.

Today, despite the recent worldwide slump in metal prices, Peru's mining industry continues the rapid development pace started in 1994. An analysis of the 17 Lima-registered mining companies by Peru's business daily Gestion shows they have cut costs and emerged in a better position to combat lower metals prices. Prices for Peru's chief products -- gold, copper and zinc -- are an average 2.5% weaker than a year ago. Yet the listed companies increased their incomes by an average of 5.3% in the third quarter of 1999, compared to 1998.

Mine production should have grown 10% in 1999, with export earnings increasing by about $3,000 million, the country's Minister of Energy and Mines, Daniel Hokama, said at the 24th Convention of the Instituto de Ingenieros de Minas del Peru (IIMP), held in Arequipa in early September (MJ, September 24, pp.242-243). The value of the industry's exports grew 92% between 1993 and 1998 and some $10,000 million is expected to be invested in the industry over the next four years. It currently ranks second, third, fourth, fifth and eighth, respectively in global silver, tin, zinc and lead, copper and gold production. Nevertheless, it is still early days for Peru's mining potential, not in efficiency but in magnitude.

There are currently about 84 important mining companies, domestic and foreign, active in the country. This includes many of the world's majors, such as Anglo American, Asarco (now Grupo Mexico), BHP, Barrick, Cambior, Cominco, Doe Run, Glencore, Newmont, Noranda, Phelps Dodge, Placer Dome, Rio Algom, Rio Tinto and Teck. Rio Tinto, for example, though not yet mining in Peru, has spent over $20 million on exploration since 1993. AngloGold, one of the latest arrivals, having opened its Lima office last November, plans to spend $3.3 million on exploration in Peru this year, searching for 2-3 Moz gold deposits with production potential at less than $100/oz.

Peru is the largest gold producer in Latin America (with output approaching 130 t last year) following a dramatic rise in stature among the world's producers that has, to date, been on the back of raised production at Latin America's foremost gold operation, Minera Yanacocha. It was expecting to produce 1.65 Moz in 1999 and has now been joined by Barrick's Pierina. The latter's impact helped put gold production for the first six months of 1999 up by almost 48% compared with the same period of 1998, to 62,766 kg. For the first six months of 1999, Pierina produced 554,500 oz gold and 1.5 Moz silver. Both enjoy very low operating costs -- approximately $95/oz at Yanacocha and $50/oz at Pierina. Peru's third largest producer, Cia Minera Sipan, yields about 180,000 oz/y and together these operations, the 'big three' of Peruvian gold, account for about 65% of total national production.

Another new gold producer started up in the second half of 1998, Cia Minera Ares, operating an underground gold and silver mine near Orcopampa in the department of Arequipa. It was expecting to produce 5,000 kg of gold in 1999.

Peru's largest single export has traditionally been copper but its price decline has seen a dramatic decrease in copper export income and it has lost its export leadership to gold. Copper output should have grown by some 20% in 1999 to over 560,000 t, due to the expansion at Southern Peru Copper Corp.'s (SPCC) Cuajone mine. SPCC accounted for 62% of total Peruvian copper production in 1998 and its output will have increased by about 19% in 1999, to some 300,000 t. Production at BHP Tintaya and Soc Minera Cerro Verde, together with SPCC account for about 93% of national copper output.

Following stagnant 1997/1998 production, the zinc industry was expected to have grown by about 6% in 1999 to some 939,000 t. The producers were a more diverse group this year following the privatisation of certain medium sized operations; for instance Centromin's transfer of Yauliyacu to Minera Casapalca and Mahr Tunel/San Cristobal to Volcan. Then Volcan acquired Centromin's Cerro de Pasco mine, the foremost producer, accounting for about 23% of national output. Forecasts estimate its 1999 production at 212,000 t. Volcan is making good progress with third quarter 1999 income up 39% compared with the same period in 1998.

Empresa Minera Izcaycruz and Cia. Minera San Ignacio de Morococha S.A (SIMSA) joined Volcan in increased production in 1999. "Izcaycruz," says Interfip analyst Gilbert Chauny, "is a new company undergoing important growth and carrying out extensive exploratory projects to increase reserves." Production was expected to have increased by 5% in 1999 to some 103,000 t. SIMSA is a mature operation (about 74,000 t/y) enjoying certain exploration success near its flagship San Vicente mine.

Interfip has predicted about a 7% rise in silver production in 1999 to 70 Moz, primarily on the back of increased production at Buenaventura's Uchucchacua and Volcan,, following expansion programmes. Uchucchacua was expected to take the leading silver producing position from Cerro de Pasco at 7 Moz in 1999.

Currently the great projects in Peru are led by Antamina, probably the greatest mining project in the world today. However, there is also Quellaveco (974 Mt at 0.65% Cu and 0.02% Mo), Tambo Grande (a polymetallic deposit with a gold cap) and La Granja (2,300 Mt of 0.59% Cu - nearly 30,000 Mlb of copper in situ!).

The great Antamina

Antamina should be producing 600 Mlb/y of copper and 360 Mlb/y of zinc by 2002. Cia Minera Antamino (CMA) is ownd 33.75% each by Rio Algom and Noranda,22.5 by Teck and 10% by Mittsubishi Corp. The resource amounts to 494 Mt at grades o 1.3% Cu, 1% Zn, 12 g/t Ag and 0.03% Mo. It will contribute hugely to Peru's base metal output, becoming the country's second largest copper producer and its largest zinc and silver producer. In the first two years of operation it will produce 660 MIb of copper, 500 Mib of zinc, 80 Mib of molybdenum as well as 7.4 Moz of silver.

A large part of the Caterpillar 793C truck fleet has already been delivered to Antimina and three Bucyrus 49RIII blasthole drills. The electric power connection to the mine was to be completed this month, allowing the 43 [m.sup.3] capacity 495B1 Bucyrus shovels to start stripping overburden.

At full production (treating 70,000 t/d of ore) in 2002, Antimina will be shipping 1.8 Mt/y of concentrates (produced in conventional grinding and flotation circuits). Outokumpu has a significant role to play in the project, which lies some 270 km north of Lima in northwest Peru at an altitude of 4,300 m. The flotation section will incorporate a total of 55 OK-130-TC TankCell flotation machines in separate copper and zinc roughing circuits plus cleaner-scavenging circuits. A separate bismuth! molybdenum recovery circuit will employ 12 conventional OK-16 cells.

Grinding circuit control will be afforded by five PSI-200 particle size analysers and on stream elemental analysis will be handled by three of Outokumpu's state-of-the-art Courier 3OXP wavelength dispersive analysers, each capable of handling up to 24 streams from the process. All of the samplers for the analysers are also being supplied by Outokumpu.

Concentrate from the mill will be delivered 296 km by pipeline to a new port being built at Huarmey by CMA. Work on the port facilities began towards the end of last year and work on the pipeline has just started. The full Antamina project construction is expected to be completed during the third quarter of 2001.

The final development cost estimate for the project, announced in mid-October, is $2,296 million, including all interest costs during construction, escalation and contingency. Antamina is expected to be among the world's lowest cost copper mines, with cash operating costs, net of byproduct credits, of below $0.30/lb in the first ten years and in the range of $0.35/lb over the life of the mine.

According to Daniel Hokama, Antamina will generate a 78% increase in Peruvian copper output in 2003, compared with 1998, and a 165% increase in 2004. Annually it is expected to generate $20 million in wages, $160 million in purchases and $80 million in taxes.

SPCC: huge developments

SPCC, operating in Peru's southeastern copper belt, could have spent as much as $1.8 billion on expansions and smelter modernisation by the middle of this decade. The first stage ($245 million) has raised output of the Cuajone concentrator from 60,000 to 87,000 t/d. Cuajone, in Moquegua, has proven and probable reserves of 1,400 Mt at grades of 0.65% Cu and 0.023% Mo, and a further 68 Mt of leachable ore. SPCC's other mine, Toquepala, is in Tacna and currently has 295 Mt in ore reserves at grades of 0.82% Cu and 0.039% Mo, with a further 725 Mt of leachable ore. The combined target of the two mines was for production of 1.34 Mt of concentrate in 1999.

As part of its mining expansions and modernisations, SPCC is purchasing 4100A electric shovels, 100XP rotary blasthole drills and a LeTourneau L-1 800 wheel loader from P&H in a major order.

Stage two focuses on the smelting facilities with a phase one, $535 million investment in a flash smelter and acid plant. Phase two foresees $252 million invested in converters and acid plant facilities. This investment will greatly improve environmental standards by capturing 95% of [SO.sub.2] emissions (compared with just 18% today). A third, optional stage costing $784 million, could see Cuajone expanded to 154,000 t/d and further investment in smelting facilities, raising treatment capacity to 1.75 Mt/y and blister output to 480,200 t/y.

SPCC was granted approval by the government in 1995 to expand its environmental control programmes to every operating unit, to meet the new Peruvian environmental standards by the end of 2006. SPCC's aims were to eliminate all production delays, to smelt its entire copper concentrate output and to maintain competitive operating costs.

Its existing copper smelter at Ilo was equipped with two reverb furnaces, seven Peirce-Smith converters and two blister casting facilities. An El Teniente converter was added recently and there is also a sulphuric acid plant and an oxygen plant. It can handle 1.165 Mt/y of concentrate, to produce 330,000 of blister copper and 300,000 t of sulphuric acid. Outokumpu was chosen to supply the technology, equipment and technical services for the complete modernisation of Ilo, and Kvaerner the engineering. The smelting and converting equipment is being replaced by Outokumpu flash smelting and Kennecott Outokumpu flash converting technology. Ilo will be only the second facility in the world, after Bingham Canyon, to use this flash converting technology. Smelting capacity is being raised to 1.25 Mt/y.

The decision to use flash smelting was easy, the choice of flash converting needed more consideration. SPCC could have modified its existing Peirce-Smith converters but decided on flash converting because of its environmental advantages, the high productivity of a single furnace, the ease of future expansions and the improvements it brings to the working atmosphere.

The change of technologies is being managed such that it has minimal impact on smelter production. The new flash smelting furnace will be nearly at maximum production before the converting furnace is commissioned. The existing reverbs and El Teniente reactor will be shut down as production from the flash smelting furnace replaces their output. Similarly, the converters will be shut down as the flash converting furnace increases production and consumes their matte.

Outokumpu is also providing engineering, design and construction for a pilot plant to test the suitability of Toquepala ore for SX-EW processing. The plant should be the forerunner to a plant producing 20,000 t/y of cathode plant at Toquepala where copper reserves were more than doubled towards the end of last year.

SPCC, 54%-owned by Asarco and now a subsidiary of Grupo Mexico, spent over $5 million on exploration last year and currently holds some 275,000 ha of claims. It has been trying to generate projects in the Tintaya-Las Bambas and Cuajone-Toquepala-Quellaveco-Cerro Verde zones, in Puno, and the Nazca-Ocofia zone as well as in the copper-gold porphyritic belt that stretches south from the northern border and ends in the central region.

One advanced project is Tantahuatay in Cajamarca, management of which is in the hands of SPCC's partner, Cia de Minas de Buenaventura. Tantahuatay is a deep copper porphyry with a surface layer of low-grade, oxide gold ore, estimated to contain some 650,000 oz at 1 g/t Au. Porphyry resources are estimated at 350 Mt containing 0.85% Cu, 0.33 g/t Au, 9 g/t Ag and 0.18% As. The high arsenic content is a problem, which would lead to a concentrate arsenic content of 8-10%. The project is being maintained at minimum cost pending improvements in metal prices and advances in technology.

There is also the 10,000 ha Shahuindo project in the Cachachi district of Cajamarca. A pre-feasibility study has been completed, out-lining a resource of some 600,000 oz of gold.

Although the Quellaveco deposit, 35 km southeast of the city of Moquegua on the western slopes of the Andes, is close to the Toquepala and Cuajone mines SPCC was not interested. Instead, Minera Quellaveco is owned 80% by Empresa Minera de Mantos Blancos (a subsidiary of Anglo American) and 20% by the IFC.

Kvaerner started on the basic engineering for the concentrator and ancillary facilities in March last year, and is also providing overall co-ordination and integration of the bankable feasibility study being undertaken by Minera Quellaveco. The ore reserves at the end of 1998 were reported as 974 Mt at 0.65% Cu, 0.02% Mo, including a secondary enrichment zone of 213 Mt at 0.94% Cu (cut off 0.51% Cu). At this stage, the copper concentrator is expected to process 64,000 t/d of ore initially, treating the softer secondary ores. Over the first eight years of operation, output is projected to average approximately 190,000 t/y of fine copper contained in concentrate. The bankable feasibility study is being analysed at present.

Deputy Mining Minister Juan David Mendoza Marsano has commented that Quellaveco needs an infrastructure-sharing agreement with SPCC in order to proceed.

At La Granja, one of the ten largest copper deposits in the world, in northern Cajamarca region, 100%-owner Cambior estimates a mining reserve of nearly 30,000 Mlb of copper in situ. Cambior has filed a feasibility study with the Peruvian authorities based on an open pit and an anticipated mill capacity of 130,000 t/d, producing 250,000 - 300,000 t/y of copper. The capital cost is estimated at $1.3 billion for the mine or $2.2 billion for an integrated mine and smelter/refinery development. The project includes plans for a 270 km pipeline to transport concentrate to the Bayovar port in the north, where Cambior is considering the viability of a smelter and refinery.

Heap leaching and SX-EW extraction were planned to commence two years after the concentrator started production with La Granja yielding some 900,000 t of copper concentrate (27-32% Cu) and 35,000 t of copper cathodes. At a cut-off grade of 0.4% Cu, mineable reserves were estimated to be 2,000 Mt at 0.61% Cu, with 3.88 g/t Ag, 0.04 g/t Au and 0.12% Zn.

The project has gone on hold temporarily and has been subject to some re-engineering such that mining reserves, using a 0.25% Cu cutoff grade, are now estimated at 3,831 Mt containing 0.53% Cu, 0.04 g/t Au and 3.7 g/t Ag. Cambior now plans the project development in multiple phases focussing first on leaching alternatives for secondary mineralisation and subsequently on concentrate production from the primary mineralisation.

The company has proposed in a pre-feasibility study an initial phase leaching campaign based on a reserve, using a cutoff grade of 0.35% Cu, of 55 Mt at 1.13% Cu, with a stripping ratio of 1.6:1. This could be followed in subsequent phases, expandable in modules, by two other reserve bases, one of 180 Mt at 0.85% Cu and one of 536 Mt at 0.65% Cu. Production would be 10,000 t/d (3.65 Mt/y), producing 33,000 t/y of copper for a 15-year mine life. The process would comprise fine crushing/coarse grinding, tank/vat leaching using hydrometallurgical technology and SX/EW. Production cost is estimated at $0.42/lb and capital cost $135 million, including upgrading of the existing roads and a power connection from the national grid. The construction period would be 18 to 24 months.

Galleno is a copper project 45 km northeast of the northern city of Cajamarca in which North has a five-year option agreement to become 100% owner. North has estimated a resource of 500 Mt at 0.6% Cu and 0.2 g/t Au for this 2,500 ha property. North is also working on the nearby, 900 ha El Molino prospect.

Golden riches

Peru is a great country to explore for gold, as are many in Latin America. According to Andre Gauthier [1] managing director of Soc Minera Cambior Peru, the cost per hectare of discovering an ounce of gold in Peru is $0.17, compared with $0.13 in Bolivia, $0.16 in Argentina, $2.08 in Ecuador and $2.34 in Chile.

Cia Minera Manhattan Sechura, the Peruvian subsidiary of Manhattan Minerals, is certainly finding Peru a great gold country. Its Tambo Grande project attracted a great deal of attention at last year's Arequipa convention. Manhattan expects to have completed at least 75,000 m of diamond drilling on the project by March. It should complete a feasibility study by 2002 and will then decide if it will exercise its option on 75% of Tambo Grande. This would lead to the establishment of Empresa Minera Tambo Grande, with Minero Peru holding a 25% stake.

The Tambo Grande project is opening up a new mining district for Peru, in the northern department of Piura which borders Ecuador. In total, Manhattan holds exploration rights for 87,000 ha of ground, comprising Tambo Grande (10,000 ha), plus the Lancones (73,700 ha) and Papayo (3,200 ha) concessions. Work to date has concentrated on Tambo Grande, known to host one polymetallic volcanogenic massive sulphide deposit, TG-1, and other geophysical anomalies within a radius of 5 km. Drilling has confirmed the known TG-1. However, the cream on the top is a gold cap that has been discovered overlying TG-1. The latest work on this gives an inferred resource of 8 Mt grading 5.2 g/t Au and 48 g/t Ag for 1.3 Moz of gold and 12.4 Moz silver, at a 0.5g/t Au cut-off grade. The deposit has "excellent exploration potential" to the north, reports Manhattan. "It is easily accessible and will provide significant low-cost production early in the project life."

Preliminary open-pit design estimates a 1.2:1 stripping ratio for the near-surface deposit, with metallurgical tests showing recoveries of more than 90% gold and 75% silver. The inferred resource on the TG-1 sulphide deposit is 64.2 Mt grading 1.7% Cu, 1.4% Zn, 0.7 g/t Au and 31 g/t Ag at a 1% Cu cutoff. Manhattan is conducting a 50,000 m, second phase exploration programme on Tambo Grande, leading to completion of a pre-feasibility study in June.

The leading gold poducer in both Peru and Latin America is Minera Yanacocha. This year, Yanacocha plans to invest $200 million, part of a programme to invest $500 million by 2005. The programme is designed to consolidate the company's leading position in Latin America and raise its world stature through productivity improvements, and maintain environmental, safety and social responsibility standards. Production this year is expected to be at least 1.7 Moz, but could be up to 2.0 Moz.

About 70% of the capital set aside for investment this year will go into the construction of the new La Quinua mine, to begin operations at the end of the year, or early in 2001. The rest of the money will support the expansions of the Carachugo and Yanacocha leach-pad fields. The next mine development will be Yanacocha Sur, followed by Cerro Negro and/or Cerro Quillish. Eventually a third leaching field will have to be constructed.

Yanacocha is a very low-cost operation as the ore does not require any comminution. Once mined, it is sent directly for heap leaching. Proven and probable reserves in the Yanacocha mining district amount to some 20 Moz, with potential resources of a further 35-40 Moz.

Yanacocha is of course a joint venture between Newmont and one of Peru's foremost mining companies, and largest publicly traded precious metals miner, Cia de Minas Buenaventura. Joining with another world major, Buenaventura is acquiring a 25% stake in Rio Tinto's Pukajaja property, 20 km north of the city of Huancavelica, covering an area of 10,000 ha. Pukajaja lies adjacent to Buenaventura's Tinyaclla exploration project and the Rio-Tinto/Pangea joint venture in Huancavelica.

The deposit comprises primary high-grade copper mineralisation and a mineralised secondary copper blanket that account for a combined resource of over 100 Mt. The primary ore assays 1.2% Cu and 0.2 g/t Au, while the secondary blanket assays 0.6% Cu. Buenaventura considers "that most of the ore could be open pittable and that the potential for high-grade copper discoveries, and for more tonnage is open." The company also considers that the Tinyaclla belt "offers excellent opportunities for the discovery of high-grade skarn type copper and polymetallic deposits."

Worldclass Pierina

Pierina, currently the world's lowest-cost major gold mine, was expected to have produced more than 800,000 oz last year. At year end 1998, proven and probable reserves were 7.2 Moz Au and 782,000 oz Au in resources. There were also 56 Moz Ag in proven and probable reserves. A total of 2.7 Mt (ore and waste) was moved in 1998 and for 1999, the mining rate was estimated at 20 Mt or 54,000 t/d. Much of this year's activity focused on two laybacks; layback zero mining the high-grade ore near surface, situated beside the crusher, and layback one primarily stripping waste material. Layback one should provide a significant portion of the ore in 2000 when the mining rate will increase to 77,000 t/d.

For 1999 and beyond, mining cost was expected to be in the range of $0.85 to $0.90/t. The depth of the pit and the height of the heap leach pad both impact the trucks' haul cycle time and unit cost, which is the most significant component of mining costs. The crushing/processing rate is 21,500 t/d. It is expected to rise to 30,000 t/d in 2000 with the completion of the leach pad expansion.

Over 1999, the average grade of ore placed on the pad was expected to be 0.11 oz/t. Gold recovery rates have been consistent with the anticipated life-of-mine rate of 80%. Silver, which leaches at a slower rate, also appears to be following the expected recovery pattern of 23%.

Barrick has also held the 11,000 ha Quicay project, in the central department of Pasco, but has now returned that to Centromin for resale. It has reserves estimated at 10.8 Mt grading 1.6g/t Au. More than 20 companies were invited to another auction of Quicay in mid-November - the fourth attempt to sell it. The auction had no base price and was to go to the highest bidder, but was abandoned due to lack of interest.

Solitario Resources is a major explorer for Peruvian gold. It is joint venturing the Sapalache gold property in the north with AngloGold. The agreement allows AngloGold to earn a 51% interest in the property by spending $6 million on exploration during the next four years. The 170 [km.sup.2] property is situated within Tertiary-aged volcanic rocks which host the Yanacocha and Pierina gold deposits. Surface exploration conducted by Solitario and AngloGold on Sapalache has defined two target areas displaying broad areas of silicification and gold mineralisation. Terms of the Letter of Intent call for AngloGold to spend $1 million on exploration within two years, including a firm work commitment to drill a minimum of 2,000 m within 16 months.

Solitario now has four major joint ventures in Peru with total combined partner spending of over $40 million through each ventures' respective final earn-in. Besides Sapalache, these include the $27.5 million Bongara zinc project with the largest zinc miner in the world, Cominco; and the $3 million Soloco zinc and $4 million Yanacocha gold projects with Billiton and Placer Dome, respectively.

Cambior's Huamachuco project, not far south of La Granja, the mining properties of La Arena (17,000 ha) and Virgen (where the current drilling campaign is focused) covers 45,000 ha of oxidised sedimentary rocks and intrusives, in the department of La Libertad. The ore is amenable to open pit mining and low cost heap leach extraction. The 1999 budget of $6 million was spent on the option payment for Virgen ($2.5 million), definition drilling (4,000 m from surface and 1,400 m underground), metallurgical testing, and environmental and social studies. At the end of 1998, the mineral resources were estimated at2l Mt at 1.1 g/t Au, amounting to 760,000 oz gold. That resource comprises 14 Mt at La Arena (426,000 oz in the ground) and 7.2 Mt at Virgen (334,000 oz in the ground). At that time the project exhibited a potential to produce 100,000 oz/y at a cost of $180/oz at an estimated capital outlay of $70 million. Furthermore, La Arena is known to contain copper-gold porphyries at depth, in the first 350 m.

Major moves in zinc

Peruvian-owned medium-sized mine operators like Buenaventura, Minsur, Milpo and Volcan remain the backbone of the industry and are growing in stature. Volcan, for example has consolidated its position among Peru's medium-scale operators to the point that in 1998 it ranked third among domestic zinc producers and fourth among silver producers. During 1999, through a dynamic investment programme, sustained essentially by domestic capital, it rose to first place among Peru's zinc producers and to the second largest worldwide trader of zinc concentrates. Current output is about 300,000 t/y zinc, 70,000 t/y lead and 10 Moz silver.

Volcan operates, in the province of Yauli, four underground mines and three concentrators, with a total capacity of 6,000 t/d. Its proven and probable reserves amount to 11 Mt, ample for the next six years of operations; and indicated reserves amount to 20 Mt, with a development profile estimated at eleven years.

Volcan merged with Mahr Tunel and the mining operations of San Cristobal, Andaychagua and Carahuacra, were integrated. From then on Volcan achieved a significant improvement in productivity. Mahr Tunel, acquired through the privatisation programme in February 1997, was purchased from the state for $127 million and an investment commitment of $60 million more, to conclude last year. Volcan initiated an expansion and modernisation programme for two of its three concentrators, Victoria and Andaychagua, to optimise recovery and quality and to lower unit costs through economies of scale resulting from the expansion. It will continue to increase zinc concentrate output (its most important revenue source) in 2001.

Volcan continues to invest and has acquired the rights to Paragsha S.A., owner of the Cerro de Pasco mining complex. These include an open pit, an underground mine and two concentrators -- Paragsha (7,200 t/d capacity) and San Expedito (400 t/d) -- and one small SX-EW plant (20 t/d cathode). Volcan bid $62 million for Paragsha and assumed an investment commitment of $70 million over five years. In January 1999 Paragsha's proven and probable reserves amounted to 16.9 Mt (sufficient for seven years of operation) and indicated reserves to 6.8 Mt.

Currently, Volcan is rationalising these units' development programmes. For example, at the end of the economic life of the open pit it proposes recovering silver from the tailings, and mining bismuth and silver ore-bodies. At Paragsha, there are accumulated stockpiles containing 36.9 Mt of material containing an average 185 g/t Ag. Furthermore, Volcan director Michael Glover has commented that "there is a very large underground mine to develop, which will need years to prepare." At the time of the purchase, Paragsha was producing 860,000 t/y of ore from the underground operations and the open pit produced 1.6 Mt, plus 135,000 t of marginal ore.

Volcan's mining interests, excluding Paragsha, are located in the Yauli Dome region, famed for its rich zinc deposits. The Yauli Dome is a geological structure 35 km long by 15 km wide and hosts Volcan's Carahuacra mine and the San Cristobal and Andaychagua mines it bought from Mahr Tunel. The full potential of this mineral district is yet to be fully explored, according to Gilbert Chauny. Thus, Volcan has considerable upside potential to discover further zinc, lead and silver orebodies. Commenting on that potential, Gilbert Chauny notes, "Carahuacra alone has extracted over 14 Mt of ore over the past 32 years, while its official reserves have never exceeded 2 Mt in a single year."

Milpo is a good example of how Peru's midsized companies are evolving. It is changing from being a family concern with the aim of becoming a "medium size mining company of choice in Peru." A new management team has been brought in under Mr Ulrich Rath as president and chief operating officer. Speaking at the Arequipa convention, Mr Rath outlined the company's four main aims of growth, improved margins, increased efficiency of operations and a strengthened financial position. Milpo aims to double in size over a period of three to five years, raising its annual treatment rate to at least 2 Mt/y, through the development of new underground mines.

Milpo is primarily an underground operator, and one of the most experienced in the country, in the Yanacancha district of the department of Pasco. In 1999 it celebrated 50 years of operations, having, over that time, extracted 19 Mt of ore. Reserves at its current operation were estimated at December 1998 as 6.7 Mt containing over 7% Zn, 2% Pb and 3 oz/t Ag. Projected production for 1999 was 112,000 t of zinc concentrate (55% Zn) and 30,000 t of lead concentrate (70% Pb and 75 oz/t Ag). Its current exploration thrust is the neighbouring Contacto Oeste orebody, thought to have a similar reserve potential to that already being mined. It has also purchased the Evita mine, 5 km distant, where there is a probable reserve of 300,000 t and exploration continues.

Milpo's modernisation programme has included deepening the shaft system by 400 m, introducing new mining methods and improved environmental compliance. At 900 m, the main shaft is now the deepest in the country. The new mining methods, necessitated by the changed nature of the orebody at depth, should have increased operating efficiency by 5-10% by the end of last year. Operating costs have been reduced and the plant is now treating 30% more, some 3,000 t/d.

Elsewhere, Milpo has been exploring Cerro Lindo since 1982, at one time in joint venture with Phelps Dodge, but the latter pulled out in 1997. Cerro Lindo is located 1,030 km south of

Lima, near Arequipa and is estimated to host two zones, each with resources of at least 75 Mt of sulphide mineralisation. A diamond drilling programme was started on this project in the second half of last year and encouraging results obtained in the second half of the year have led to an expansion of the drilling campaign. One resource of 27 Mt at grades of 2.5% Zn, 1.2% Cu and 26 g/t Ag has been more accurately defined, including a high-grade zone of 4.5% Zn, 1.7% Cu and 35 g/t Ag.

Milpo increased income for the third quarter of 1999 by 28%, compared with the same quarter of 1998. The company has also just expanded out of Peru with the purchase of the Ivan underground copper mine in northern Chile last October for $21 million.

The start of the San Gregorio project by Soc Minera El Brocal could soon show a significant contribution to the development of the Central Sierra and to the economy. The geological corridor that hosts San Gregorio, in the Pasco mining district, is where a large part of Peru's mining potential is concentrated. Along its 27 km is produced some 46% of all the country's lead, 37% of the zinc and almost 19% of all the silver. San Gregorio's estimated reserves amount to some 70 Mt of open pittable ore, averaging 7.33% Zn, 2.19% Pb and 0.57 oz/t Ag. San Gregorio is a world class deposit, and one of the two largest zinc deposits known in Peru. San Gregorio may produce at about 10,000 t/d of ore, yielding a daily output of 350 t of lead concentrate and 1,300 t of zinc concentrate.

According to Soc Nacional de Mineria Petroleo y Energia (SNMPE) "El Brocal's experience as mining operator is proven. For example, in the last four years there have been no fatal accidents and for two consecutive years the company has ranked second nationwide in the contest organised by the Institute of Mining Safety."

El Brocal's current operation, also in Pasco, has proven and probable reserves of 11.8 Mt containing 6.15% Zn, 2.25% Pb and 2.81 oz/t Ag. Production is around 90,000 t/y of zinc concentrate (50% Zn, 2% Pb and 8 oz/t Ag) and 20,000 t/y lead concentrate (60% Pb, 5.8% Zn and 40 oz/t Ag).

In July 1996 President Alberto Fujimori inaugurated Cia Minera Izcaycruz (Glencore 75%), which in the years to come could become Peru's largest private zinc operation. The Izcaycruz deposit boasts one of the highest zinc grades in the world, at 22%. Its output is 130,000 t/y of zinc concentrate. The mine is located at about 4,800 m above sea level in the highlands area near Lima. Ore is slurried and pumped 25km along a 90 mm diameter pipeline to the concentrator at Churin at an altitude of some 2,300 m.

Minera Izcaycruz is undertaking an aggressive exploration programme to uncover the potential reserves of the 40,000 ha area where the mine operates. Once the reserves have been quantified, the company plans to expand the concentrator accordingly.

At the Bongara project in the north, Cominco, operating under an option agreement with Solitario Resources (earning a 65% interest in the project by spending $27.5 million on exploration), has undertaken a major campaign involving stream geochemistry, prospecting, mapping and drilling, which extended the Florida Canyon mineralised area and enhanced its knowledge of the extent of geological conditions suitable for high-grade zinc mineralisation in this area. The drilled area yielded eight inter-sections of better than 8% zinc.

Cominco considers this may become another important zinc mining district, of Mississippi Valley-type deposits, and is looking at other properties nearby. The company expects to undertake a drilling campaign of at least 3,000 m on Bongara this year, according to MinerAndina.

A Phase I expansion of the Cajamarquilla zinc refinery (owned 82% by Cominco 17% and Marubeni Corp.) was completed in May 1998. This raised zinc production by 20,000 t to 120,000 t/y. However, in May last year Cominco announced the deferment of Phase II, previously scheduled to be ready for start up by the end of this year, to double annual capacity to 240,000 t. Nevertheless, Cominco did note that "construction is now expected to commence in the year 2000."

Cajamarquilla, located 35 km from the port city of Callao, currently refines more than 200,000 t/y of zinc concentrate producing 120,000 t of zinc metal and byproducts that include sulphuric acid, lead-silver residue, copper cement and cadmium. The concentrate feed all comes from Peruvian mines. Today, those mines produce about four times as much zinc concentrate as the country's refining capacity can consume. Since concentrate output is only likely to increase, there remains considerable potential for downstream zinc developments in Peru.

Atacocha is to invest $17.5 million to increase production at its Atacocha polymetallic mine in the central Pasco department. The expansion, over two years, will lift annual production to 140,000 t/y of lead and zinc concentrates from some 90,000 t/y. The mine also produces copper, gold and silver as byproducts.

Atacocha is also carrying out an extensive underground exploration programme. Current reserves are estimated at 4.7 Mt of ore, which will ensure a further five years of mining operations.

Tin ambitions

According to MinerAndina, Minsur, the country's sole tin producer, has ambitions to become a world leader. Already its operations rank Peru second after Indonesia in tin production. Minsur operates the San Rafael mine in Puno and the Funsur smelter/refinery in Pisco. Minsur expects to raise its reserves this year to 15 Mt, up from the 13.7 Mt, containing 5% Sn and 0.2% Cu, estimated in June 1999 and aims within five years to become the world's largest tin mine with reserves of around 20 Mt.

The mine's capacity was expanded from 1,500 t/d to 2,500 t/d last year, at a cost of $36 million. Output this year should be 30,000 t of tin.

Leading by example

Operator of the La Oroya metallurgical complex (MM, February 1998, p.106), Doe Run Peru is setting high standards for the Peruvian mining industry to follow. Since it acquired La Oroya in October 1997, Doe Run Peru has initiated a ten-year strategy to upgrade equipment and improve the work environment. Very quickly, the operation saw a decrease in accidents and record-setting work performance. Doe Run Peru's philosophy is that every employee is responsible for preventing accidents and for the safety record of the company. In addition to increased safety, Doe Run Peru has posted improvements in the health of the workforce, and the surrounding community. Employee blood lead levels have dropped, in part due to better industrial hygiene practices.

The Doe Run Peru master plan calls for an investment of $304 million during the next decade for plant modernisation and new technology, including $167 million for environmental upgrades. Priorities are replacement of critical equipment, projects identified by the government as part of the site's privatisation, and expanding production capacities, soon to reach 125,000 t/y lead, 1,200 t silver, 80,000 t zinc and 75,000 t copper.

Doe Run bought the Cobriza copper mine, for $7.5 million, ten months after the acquisition of La Oroya. The latter is in the central highlands of Peru and Cobriza is in the southern part of the country. Jeffrey Zelms, Doe Run's chief executive officer, is bullish about Latin America and expects the region to boom over the next decade. He is particularly keen on investing in Peru and intends that Doe Run Peru increase its ownership of mines in the region such that it can supply about half La Oroya's feed from its own mines. At present, Cobriza supplies 40-45% of the facility's copper concentrate.

Still to sell

The sell-off of Peru's state-owned mining assets has been a great success, bringing much foreign capital into the country as well as helping Peruvian mining companies to grow. A few properties remain to be sold off and include:

* The former Minero Peru's Michiquillay prospect, a copper porphyry covering 18,978 ha. A reserve of 544 Mt was estimated back in the 1970s at grades of 0.68% Cu and 0.1-0.2g/t Au. Michiquillay is located in the district of Encanada in Cajamarca at altitudes between 3,000 and 3,600 m.

* The 31,798 ha of Las Bambas deposits are found in the department of Apurimac, some 70 km from Cusco. Total reserves of these skarn type copper deposits have been estimated at 41.75 Mt containing 2.2% Cu, comprising primarily Chalcobamba (29.1 Mt at 2.1% Cu), Ferrobamba (9.6 Mt at 2.3% Cu) and Sulfobamba (2.9 Mt at 2.8% Cu).

* Toromocho in the department of Junin, 32 km by road from La Oroya, comprises the concessions, equipment and installations of the Morococha operation and the Toromocho copper deposit. Morococha has proven and probable reserves of 2.2 Mt at 1% Cu, 1.5% Pb, 4.5% Zn and 226 g/t Ag, with a further 3.9 Mt in the possible and potential category. It has a 1,400 t/d capacity concentrator.

The Toromocho deposit has been extensively explored, including 42,394 m of diamond drilling, and a reserve of 364 Mt containing 0.67% Cu, 0.40% Zn, 12.4 g/t Ag and 0.03% Mo has been estimated.

* Some 10km north of the Morococha operation, at 4,400-4,950 m above sea level is the Puy Puy copper-gold porphyry. It was explored in the 1970s and, most recently, between 1996 and 1997, when six exploration holes, totalling 1,122 m, were drilled. Reserves have been estimated at 5.24 Mt containing 0.27% Cu, 0.43 g/t Au and 5.54 g/t Ag, with a further potential of 20 Mt.


(1.) Gauthier, Andre, Where to explore for gold in the Andes, Third International Gold Symposium, Lima, Peru, May 5-8, 1998.

(2.) Various issues of MinerAndina (e-mail:

(3.) Various reports from Interfip Bolsa (
Peruvian mine output by prinicpal metals, January to October 1998 and 1999
Metal        1998 period 1999 period % change
Copper (t)       391,025     435,045    +11.3
Gold (kg)         76,051     105,280    +38.4
Zinc (t)         723,351     747,947     +3.4
Lead (t)       1,683,340   1,833,339     +8.9
Iron ore (t)   2,800,714   2,274,392    -18.8
Tin (t)           22,139      23,719     +7.1
Source: MinerAndina
                       Peru's major mining companies
Name                   Mine types     Projected 1999 output
Ares                   ug             5,000 kg Au
Atacocha               ug             82,000 t Zn conc
                                      31,000 t Pb conc
                                      3,600 t Cu conc
Barrick Misquichilca   surface        26,000 kg Au
BHP Tintaya            surface        80,000 t Cu
Buenaventura           ug             260 t Ag and 700 kg Au
                                      25,000 t of Pb/Ag conc
Cerro Verde            surface        62,000 t Cu
Chungar                ug             25,150 t Zn conc
                                      3,310 t Pb conc
                                      1,380 t Cu conc
Comarsa                surface        2,000 kg Au
Doe Run Peru (Cobriza) ug             101,000 t conc
                                      (25% Cu and 250 g/t Ag)
El Brocal              surface        90,000 t Zn conc
                                      (50% + 8 oz/t Ag)
                                      20,000 t Pb conc
                                      (60% + 40 oz/t Ag)
Horizonte              ug             3,000 kg Au
Iscaycruz              ug             185,000 t Zn conc (52.8%)
                                      8,000 t Pb conc (65%)
Lizandro Proano        ug             7,000 t Zn conc
                                      6,O00 t Pb conc
                                      26,000 kg Ag and 800 kg Au
Milpo                  ug             112,000 t Zn conc (55%)
                                      30,000 t Pb conc
                                      (70% and 75 oz/t Ag)
Minsur                 ug             60,000 t Sn conc
Nor Peru               ug             619,000 t conc
                                      (209 g/t Ag, 4.6% Zn,
                                      1.2% Pb and 0.4% Cu)
Poderosa               ug             3,000 kg Au
Retamas                ug             5,000 kg Au
Santa Luisa            ug             23,000 t Pb conc
                                      48,000 t Zn conc
Selene                 ug             800 kg Au
Shougang Hierro Peru   surface        4.6 Mt iron ore
Simsa                  ug             110,400 t Zn conc (62.5%)
                                      7,680 t Pb conc (70%)
Sipan                  surface        6,200 kg Au
SPCC                   surface        300,000 t Cu
Volcan                 ug and surface 276,000 t Zn conc
                                      100,000 t Pb conc
                                      9.8 Moz Ag
Yanacocha              surface        50,000 kg Au
Name                   Department
Ares                   Arequipa
Atacocha               Pasco
Barrick Misquichilca   Ancash
BHP Tintaya            Cuzco
Buenaventura           Lima and Arequipa
Cerro Verde            Arequipa
Chungar                Pasco
Comarsa                La Libertad
Doe Run Peru (Cobriza) Huancavelica
El Brocal              Pasco
Horizonte              La Libertad
Iscaycruz              Lima
Lizandro Proafio       Lima
Milpo                  Pasco
Minsur                 Puno
Nor Peru               La Libertad
Poderosa               La Libertad
Retamas                La Libertad
Santa Luisa            Ancash
Selene                 Apurimac
Shougang Hierro Peru   Ica
Simsa                  Junin
Sipan                  Cajamarca
SPCC                   Moquegua and Tacna
Volcan                 Yauli Dome
Yanacocha              Cajamarca
Source: Minas y Petroleo, September 9, 1999.
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Publication:Mining Magazine
Geographic Code:3PERU
Date:Jan 1, 2000
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