UPDATE: A piece of mining history revived – original Rio Tinto mine back in production

While the following article is not specifically on precious metals, but on the revival of one of the world’s oldest known mines, it relates to a mine which has in its time produced silver and gold – indeed the Romans mined it primarily for its silver – and the orebody still contains both precious metals.  While silver is still a byproduct, albeit a small one, the gold content is probably too low to be profitably extracted.  Nevertheless as a piece of mining history – and a potentially decently profitable copper mining operation – even at current copper prices, readers may find it an interesting article.

Additionally the operating company – EMED Mining – has announced today (Sept 11th) that it is convening an Extraordinary General Meeting in order to consolidate the Existing Ordinary Shares, amend the Articles of Association and to change the name of the Company to Atalaya Mining plc.

Alberto Lavandeira, CEO, commented: “With the focus now firmly on production and further developing the historic mine the company is very much a different entity to the one that came to the market. With all licences and financing in place to produce 7.5 million tonnes of ore a year we are excited by the prospects and ability to grow our operations. As such we are now establishing a structure that reflects our current standing as we focus on maximising returns for shareholders.”

Lavandeira also commented, at a meeting this week in London, that the company was considering dropping its Toronto quotation as it had relatively few Canadian registered shareholders and he did not consider it was getting much value out of its TSX quote.

In what has to be a mining engineer’s dream, the old Rio Tinto copper mine in Spain – which in its heyday was the foundation stone for the mega mining company which still bears its name – is being brought back to life. Indeed it is well on the way to becoming a major producer again – and the economics in comparison with low grade copper porphyries which provide the bulk of global copper production, are impressive.

The Rio Tinto mine in southwestern Spain has one of the world’s longest known mining histories with copper having been mined there even before Roman times, but it was in the late 19th Century, and the development of the operation into what at the time was one of the world’s largest copper mines as its first operation by the UK’s Rio Tinto company which made it into a mining classic – and as the mining world knows Rio Tinto has subsequently gone on to become one of the world’s biggest diversified mining companies.

But the resurrection of the old Rio Tinto mine has nothing to do with the company which now proudly bears that name. Rio Tinto ceased to mine there back in the 1950s and the mining was subsequently taken over by a number of successive Spanish enterprises and eventually ceased operations at a time of weak base metals prices in 2001. It was since kept on a limited care and maintenance basis until being acquired by the current owner and operator, EMED Tartessus – a subsidiary of LSE AIM quoted (EMED) and TSX quoted (EMD) EMED Mining which recognised the potential and which for several years now has pursued permitting and conducted studies leading to the mine’s re-opening this year, although it is not scheduled to reach full commercial production until early next year.

Despite the deposit being mined on and off for well over 1,000 years – there’s a fascinating history of Rio Tinto published on theAndalucia.com website – there remains still a major ore deposit ready to be mined again. Nowadays it is classified as a low grade Volcanogenic Massive Sulfide (VMS) deposit with the latest resource estimate of Measured and Indicated material totaling 203 million tonnes grading 0.46% copper containing 930,000 tonnes of the metal. Within this there is a currently mineable Proven and Probable open pittable ore reserve of 123 million tonnes grading 0.49% copper for 606,000 tonnes of contained metal.

Now while the deposit is low grade, the capital cost of re-opening the mine is tiny in comparison, say with a greenfield Andean copper porphyry of similar grade which could cost billions of dollars to bring to production – probably out of the question in today’s economic environment. Because this is in effect a brownfield site with great local infrastructure and only around 65 km from Seville and 80 km away from the port of Huelva – which was originally built for the old Rio Tinto mine – the capital cost to bring the mine to initial Phase 1 production of ore throughput of 5 million tonnes/year has been reduced to only $82 million. Indeed EMED will be expanding this virtually immediately to 7.5 million tonnes/year at an additional capital cost of $58 million. This has been achievable as much of the old concentrator infrastructure was already in place and while some equipment needed totally replacing, other parts and the concentrator buildings only needed refurbishing.

EMED Mining’s CEO, Alberto Lavandeira, who has an impressive mine development cv both in mines in Spain and the DRC, has brought together an impressive team to bring the project through its final production stages and so far it is progressing far under the original capital budget and ahead of schedule. It is fully financed up to the end of its Phase 1 expansion construction programme for the production of 37,500 tonnes of copper a year, and there is potential to expand to 45,000 tonnes/year copper by processing 9-10 million ore tonnes a year (Phase 2). Most of the output is covered by offtake agreements. Cash costs are estimated at US$1.90/lb of copper (compared with the current copper price of around $2.45/lb).

Longer term the company sees excellent potential for expanding the reserves and is upping its infill and exploration drilling programs. It reckons there is still some excellent high grade potential around the historical underground workings, although at the moment is concentrating on its open pittable resource. It also sees exploration potential in the surrounding area where there have been other significant past mining operations.

On the face of things the economics look impressive as are the huge strides the current operations team has made in keeping capital costs way below initial estimates and already coming up with initial copper concentrate production in the plant commissioning phase. While copper prices have been very depressed of late, to bring a large low grade new mine into production – potentially economically at current price levels – is an impressive achievement and is rewriting yet again the mining history of an area which is believed to have supported the world’s oldest known mining operations.

 

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