MAC: Mines and Communities

Xstrata To Study $1.8b Copper Venture

Published by MAC on 2006-11-02
Source: Sydney Morning Herald ()

Xstrata to study $1.8b copper venture

Jamie Freed, Sydney Morning Herald

2nd November 2006

THE $US1.4 billion ($1.8 billion) Tampakan copper and gold project in the Philippines has edged closer to development nearly 15 years after its discovery.

Xstrata agreed yesterday to fully fund more work on the deposit, which Australia's Indophil Resources owns, in return for an option to pick up 62.5 per cent of the project for between $50 million and $60 million.

Tampakan has a resource of nearly 2 billion tonnes at 0.72 per cent copper equivalent, which makes it the largest undeveloped copper-gold project in South-East Asia. The pre-feasibility study outlined a plan to mine 210,000 tonnes of copper and 218,000 ounces of gold a year.

The capital costs of the project were originally estimated at about $US600 million in a scoping study completed several years ago. But because of industry-wide cost pressures over recent months, Indophil has referred to Tampakan as a $US1 billion-plus project.

It said the pre-feasibility study estimated cash operating costs of less than US70c a pound of copper. Copper has been trading at about $US3 a pound.

Indophil's managing director, Tony Robbins, and exploration head, Chris Middleton, were part of the team of WMC geologists who discovered the deposit on the island of Mindanao in 1992.

Mr Robbins bought the project from WMC when it decided to divest projects in the Philippines, Cuba and Uzbekistan to focus on its giant Olympic Dam mine in South Australia.

Xstrata gained its option over Tampakan through its acquisition of Mt Isa Mines, which signed a joint venture with Indophil in 2000.

Many market observers expected Xstrata would decide to fund more work on the project when the chief financial officer of its copper division, Louis Irvine, was appointed to Indophil's board earlier this year.

Xstrata was required to make a decision on whether to keep its option over the project by Tuesday evening. It is believed Xstrata waited until the deadline because its management team has been busy integrating its $C20 billion ($23 billion) acquisition of Canadian base metals miner Falconbridge.

The Philippines has proven a difficult operating environment for companies such as Australia's Lafayette Mining, which was forced to close its mine for months after an accidental contaminant discharge. But an Indophil spokesman said his company had a good relationship with the Philippines Government.

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