Antamina benefits seen clearly now

The very profitable Antamina mine in the Andes of north-central Peru is run by Compania Minera Antamina S.A., which is owned by Falconbridge Ltd. and BHP Billiton (33.75% interest each), Teck Cominco (22.5%) and Mitsubishi Corp. (10%).

The copper/zinc project was built at a cost of US$2.2 billion and reached commercial production in October 2001 (CMJ October 2001). It remains the most expensive greenfields mine project ever developed. Teck Cominco’s US$44-million share of unrecovered project costs and interest at the end of 2005 is expected to be paid off by mid-2006, when the company will begin to pay the vendor a net profits royalty (7.4% of the company’s share of the project’s free cash flow).

In 2005, the truck-and-shovel open pit mine fed 30.4 million tonnes of ore grading 1.35% Cu and 0.92% Zn to the flotation plant, which produced 374,600 tonnes of copper, 184,300 tonnes of zinc and 14.8 million lb of molybdenum. A project increasing the molybdenum flotation circuit capacity, increased the amount of moly recovered last year to 14.8 million lb, up from 7.9 million lb.

With its copper cash costs in the bottom quartile of copper mines, Antamina would make money even in a weak market, but last year’s high metal prices ensured strong profitability. On total revenue of US$1.8 billion in 2005, the mine made US$1.3 billion in total operating profit (Cdn$384 million of which went to Teck Cominco).

Workers also benefited, taking home a bonus worth 150% of their salary last year, as 8% of the mining company’s taxable earnings must be distributed to its employees. As well, 50% of Antamina’s corporate taxes — hundreds of millions of dollars this year; likely even more next year — are to be spent on local community projects in the few small villages nearby. This is allowing significant improvements to be made, but is also resulting in headaches, said Teck Cominco’s vice-president of base metals mining Rob Scott in a March interview. He gave the example of a village with a usual annual budget of $200,000 that has to come up with a plan to spend $12 million this year on government-approved projects.