Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The Chuquicamata mine in Chile – the world’s largest open cut copper mine, will commence underground operations after nearly a century of open-cut production.
The San Francisco Chronicle reports that the mine’s colossal size and and depth have made operations increasing impractical and expensive. Dump trucks must now drive 11 kilometers to bring lower grade ores to the earth’s surface.
Although experts forecast that the mine will become unprofitable by 2019, state-owned miner Codelco still hopes that underground extraction will grant access to Chuquicamata’s vast amount of unexploited deposits and enable it to remain in operation for many years to come.
Existing reserves are equal to 60% of all copper retrieved throughout the mine’s history, and Codelco believes the mine can still maintain an output of around 308,000 tonnes of copper per annum.
Codelco has already invested USD$3.8 billion in the underground mining project, and plans to replace trucks with an in-pit crushing and conveying system.
The company’s plans are not without recent precedent, with Xstrata (LSE:XTA) extending the life of its Ernest Henry copper mine in Australia by 12 years through a transition from open cut to underground operations.
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