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Mining Development Strategies With a Focus on the Case of the Iberian Pyrite Belt

Preface

Luis Rodrigues do Costa - President of the IGM

Taking advantage of the realization in Lisbon of the 78th meeting of the International Organizing Committee of the World Mining Congress, on 25th September, 1998, the Portuguese Organising Committee prepared a programme that included a Seminar and a technical visit.

The theme of the Seminar was 'Uning Development Strategies" with focus on the Iberian Pyrite Belt, being discussed trends and problems of the modern mining industry, nowadays strongly influenced by environmental constraints. The great quality of the communications addressed justifies this publication in order to further disclosure to the entrepreneurial community.

The technical visit was held the 26th September, 1998, at Neves-Corvo underground copper-tin mine, wbere, in place, the presentations of the Seminar were complemented.

Attended the Seminar 148 participants, of whom 45 were invitees of the organization, coming from 29 countries, so it was decided that the english language, understood by all participants, would be the working language. The publication of the communications is also in english, since they are addressed to people familiarised with this language.

 

 

Opening Address of 78th IOC Meeting of World Mining Congress

Luis Rodrigues do Costa

President of the IGM

Lisbon, 25th September 1998

Mister President of IOC
Dear Invitees of 78th I0C Meeting
Dear Colleagues

On behalf of the Portuguese Organising Committee 1 wish to address you all a warm welcome and make the wish that your expectations about this journey will be fulfilled.

This meeting is held in a very special occasion to our country that is when we are celebrating the arrival of Vasco da Gama to Calicut, in India, five hundreds years ago. This established an easier and direct communication route between east and west that profoundly influenced both civilisations and marked the birth of modern times. The arrival at India is a milestone of Portuguese exploration of the sea routes that started in the beginning of XV century in the nearby Atlantic and Coast of Africa and reached Japan one and half century later by middle sixteen-century. I should say that minerals played an important role in Portuguese expansion and its financing, firstly via trading of mining products extracted by local populations but later on engaging ourselves in mining itself, particularly in Brazil.

Coming back to the subject of our meeting and according to the recommendations of last meeting, the Portuguese Organising Committee prepared a programme that includes a technical journey and a technical visit. The theme of the technical journey is "Mining Development Strategies", starting with a focus on the Iberian Pyrite Belt, but enlarging later on the analysis to the former planned economies. The aim of this is to disclose trends and problems in the mining industry and mining related issues that could induce policy lines formulation. The visit to Neves-Corvo mine will be an opportunity to continue our work.

The Iberian Pyrite Belt is presently the main consolidated mining source of base and precious metals in Europe. Its productions represent 65% of European Union mining production of copper concentrates, 69% of tin concentrates, 28% of zinc concentrates, 8% of lead concentrates, 14% of gold and 28% of silver.

Known since the Antiquity the modern times developments of Iberian Pyrite Belt were induced by the industrial revolution by the middle of XVIII century, centred on the extraordinary orebody of Rio Tinto, this myth of mining history and today spread all around the world as the name of the biggest world-mining corporation. Such a long history shows flourishing as well as declining periods according to the changing trends of metals and minerals supply to the industry. The last twenty years saw very profound changes like elsewhere in the world, with mines closing and restructuring and the corresponding strong social impacts but also with remarkable discoveries occurring. All these events are the reasons to study the Iberian Pyrite Belt, so challenging to work on it and so exciting to be involved in the process. I am sure that the following communications will support these ideas.

Allow me to use this opportunity to comment briefly about mineral industry in Portugal.

Mineral exploitation has presently a production value of 140 billion Portuguese escudos (equivalent to almost 800 million US$) originated from world class deposits, as Neves-Corvo (Cu, Sn) and Panasqueira (W). Some other deposits producing salt, feldspar, uranium, kaolin, ball clay and fire clay and ornamental stones also contribute to that figure. Portugal is presently the main UE producer of copper, tin and tungsten concentrates and 5th World producer of ornamental stones. But is mainly because of its impact in the manufacturing industry must be evaluated. In this regard we can verify that some dynamic industrial sectors are based on mineral resources, which means that mineral resources play an important role in industrial development and performance of national economy.

Exploration activity is also at high level with a general investment of 1 billion of Portuguese escudos (6 million US$) for a territory roughly 90 thousand square kilometres. Big international companies and junior international companies alone or in consortia with national partners conduct exploration mainly addressed to base and precious metals and Portuguese companies are mainly exploring for ceramic raw materials.

Thanks are due to all speakers that promptly accepted the invitation addressed by the organisation and prepared there expositions in order to induce debate and experience change among all the participants in this meeting. We want also to thank Somincor by tomorrow visit and co-operation and understanding expressed in its acceptance that these visits take place during the weekend.

Finally, on behalf of the Portuguese Organising Committee I would like to thank all the support and contribution of President Eugene Ciszak, as well as the Vice-Presidents Michael West and Ramon Mañana and, of course, the Secretariat through Mr Najberg.

Thank you very much for your attention.
On behalf of the Portuguese Organising Committee

 

 

Present Status of IPB Activity: A Case of Re-emergence of Mining Activity in Europe ?

J. Ramón Morales

Vice-President Navan Resources (Spain)

The Iberian Pyrite Belt

Massive sulphides linked to coorogenic vulcanism in the Southwestern part of the Iberian Peninsula has a typologic entity at a world wide level. The metalogenic province stretches some 250 Km from Seville to the South western coast of Portugal. The deposits have been mined from around the year 2000 BC and in Phoenician and Roman times were extensively worked, mainly for gold and silver from the gossan material overlying the pyrites orebodies, being thus, the main source of precious metal for the Roman Empire and being the origin of an active trade on the Mediterranean. Once Rome disappeared from the area, a general decay took over the mining activity, which became purely local during the Visigotic and Arab periods and through the Middle Ages.

It is again in the XIXth century when interest on copper extraction revived, mainly from secondarily enriched upper zones in the orebodies or segregated chalcopyrite areas with high copper content, and in the latter years of the century up to 60 mines were in operation. In the XXth century pyrites from the IPB became and important source of sulphur for making sulphuric acid but from the early 1950s onwards increasing competition from other sources, including smelter byproducts resulted in the disappearance of most of this mining activity.

Later on and until the 80s prospection and research of new massive orebodies of polymetallic sulphides is carried out on areas with better potential, mainly on those structures where formation of Vulcanic-Sedimentary complex came to surface and selecting those in which the said formations were over the 300 metres level. Research of these areas considered as "best potential" and evolution of the concept of geological models related with the formation of those orebodies, gave as a result a change on research methodology, greatly improved by the introduction of gravimetric methods, which enabled to detect orebodies, specially those at a deeper level. A very active approach of mining companies and official institutions made it possible to discover new orebodies, many of which were located near existing mining sites.

The discovery of Neves Corvo in 1977, made it possible to define a new orebody model in the Iberian Pyrite Belt in which Cu and Sn metal grades are very high.

It is in the eighties when accumulated knowledge on geology and metalogenics in the IPB, together with an improvement in the geophysics methods applied and its computerised treatment, led to the establishment of research objectives which reach frequently 500 metres level and located in higher risk areas, where tectonic complexity and the existence of thrust have altered the sequence of horizons and structures.

From the sixties till today the basic prospection method is gravimetrics normally accompanied of magnetometrics and with the support of geologic cartography highly qualified. When dealing with localised areas and to confirm gravimetric anomalies which have been previously detected, usually electrical methods are applied (resistivity, induced polarisation, eletrichal drilling), electromagnetic, seismic and magneto-teluric.

More recently geophysics have been used at a regional level to detect gravimetric and magnetometric anomalies, some-times applied jointly with radiometrics. After Neves Corvo the most important discoveries in the Iberian Pyrite Belt during the eighties have been Los Frailes orebody in Aznalcollar (Seville), Migollas in Sotiel (Huelva) and Aguas Teñidas Este in Valdelamusa (Huelva).

The area with higher copper content of Migollas is being mined since 1994, after reaching the orebody through the existent infrastructure in Sotiel, while open pit mining in Los Frailes started in 1997. On the other hand, the access to the Aguas Teñidas orebody through a ramp is being opening since October 1997 and accumulated development reached 1,100 meter last month.

The most recent discoveries in the Iberian Pyrite Belt are Lagoa Salgada (1992) still under research, and Las Cruces (1994) on which an advanced feasibility study is in progress.

North of the IPB, where the provinces of Seville, Huelva and Badajoz join, the Aqua Blanca area was identified in 1993, and a new Ni-Cu orebody has been evaluated after drilling between 1994 and 1997. Although this deposit is located in a different metalogenic contest, known as Ossa Morena, it is included here because of some synergic aspects with an existing operation in the IPB.

Neves Corvo

Neves Corvo mine is operated by Somincor (51% EDM, Portuguese State Minerals Company and 49% RIO TINTO) and produces copper and tin concentrates by processing exceptionally high grade massive sulphide ore and smaller quantities of shale-hosted ore in two on-site concentrators. The mine is located in the Alentejo region of southern Portugal towards the western and of the Iberian Pyrite Belt metalogenic province and is approximately 220 Km. Southeast of Lisbon and 80 Km. north of Faro.

Neves Corvo was discovered in 1977 by follow-up drilling of an anomaly picked up on a regional gravity survey and remains the largest "blind" orebody to be discovered in the Iberian Pyrite Belt. The discovery was the culmination of a systematic exploration programme carried out since 1972 by a consortium of Portuguese and French companies over a large area in the Lower Alentejo.

The copper plant and mine were commissioned in late 1988 with the tin plant being brought on stream in 1990. A 30 Km. railway spur joining Neves Corvo to the main national rail network was built between 1990 and 1992 and a mine deepening project to access lower reaches of the deposits was finished in 1994.

Type of mineralization

The predominant type of economic mineralization is polymetalic (Cu, Sn, Zn, Pb, Ag) massive volcanogenic sulphides. Two other types of mineralization-stockwork (locally known as "fissural") and shale-hosted ("Rubané") are present and although less important economically may be enriched locally in Cu, Sn and Zn.

Orebody and reserves

The orebodies currently being mined are Corvo, Graça and Neves. Two other orebodies - Zambujal and Lombador - are known within the mine lease area but these are not mined at present.

"In situ" total resources contained in the three categories measured, indicated and inferred declared as of 31.12.97 were 36,3 million tonnes of copper ore with 5,71% Cu and 1,52 million tonnes with 11,47% Cu and 2,87% Sn.

A complex zinciferous geological resource of 46,2 million tonnes (all categories) with an average grade of 6,01% Zn has been outlined. Somincor is making efforts to define a viable project based on this resource.

Geology

The Neves Corvo ore deposits occur in the Volcano-Sedimentary Complex, the middle unit of the Iberian Pyrite Belt (IPB). The other units making up the IPB are the basal Phyllite-Quartzite Group and the lower Alentejo Flysch Group, which is the uppermost unit of the IPB. The youngest units in the IPB are the Upper Devonian while the oldest are of Lower Carboniferous age. Neves Corvo is located in the southernmost part of the Portuguese.

Mining characteristics

Neves Corvo is an underground mine which uses a drift-and-fill method to mine copper and tin ores. A conventional drilling, blasting & mucking cycle is used and material is moved to an underground crusher station by LHDs and dumper trucks using a system of ore passes, ramps and haulageways. Backfill - predominantly fluvial sand with minor amounts of sand and plant tailings is hydraulically emplace in the stopes. Ore is hoisted to surface via a 5-m. diameter 500-m. deep vertical shaft. Additional surface access to the mine is provided by and inclined spiral ramp; ore from the lower parts of the mine is brought to the base of the shaft by an inclined conveyor system.

A mining rate of 1,5 Mt. was achieved in the early years of the mine and this has been regularly increased. 1,9 Mt. of ore were mined and treated in 1997 and the objective for 1997 is 2,1 Mt.

Concentrators

There are two concentrators at Neves Corvo: the Copper Plant and the Tin Plant. In the former, massive sulphide copper ores are comminuted using a secondary crusher, rod and ball mills before a copper concentrate is produced using conventional flotation techniques. The Tin Plant has two circuits which share an initial crusher unit: one which treats massive sulphide copper-tin ore by grinding and flotation to produce separate copper and tin concentrates and a shale - hosted tin ore circuit where tin is recovered from ground ore by gravity techniques.

The fine grained nature of the massive sulphide mineralization requires an exceptionally fine grind to be carried out in order to achieve satisfactory recovery levels. For example, the regrind section of the Copper Plant has a d80 of 20 microns.

After filtration the concentrates are loaded into containers for rail transport to the Company's port facilities at Setúbal. Tailings are pumped 3 km. for subaqueous storage at a zero discharge tailings dam.

Concentrates

Chalcopyrite is the only commercially significant copper mineral in the concentrates with pyrite being the main gangue mineral. The ores contain a variety of other sulphide minerals such as tetrahedrite, stannite and sphalerite. Care has to be taken to ensure that levels of the penalty elements mercury, antimony, arsenic and bismuth are kept as low as possible. Silver is present in the copper concentrates at payable levels. Typical analysis of the copper concentrates is: Cu 24,5%, Fe 32%, S 35%, Ag 65 ppm.

Two grades of tin concentrates are produced: high grade and medium grade. The average grade of the concentrates is about 53% Sn. Cassiterite in the sole commercial tin mineral. Somincor does not currently produced any sailable by-products

Concentrates marketing

Somincor's policy is to sell most of its copper concentrate on long term contracts to a variety of clients situated preferentially around the North Atlantic rim. Currently, copper concentrate is shipped to clients in Spain, Germany, Finland, Canada and Brazil. Relatively minor tonnage of copper concentrates are sold on the spot market through traders. Tin concentrate is sold mainly to clients in Malaysia and Thailand with lesser amounts going to Russia and elsewhere.

Exploration

Somincor currently carries out exploration drilling both on the mine lease and in an exploration area immediately surrounding the mine lease. The on-lease work has been successful in recent years in giving the Company increased knowledge of the reserve quality, in identifying sufficient reserves to allow increase ore output for an extended mine life to be achieved and in locating new resources, such as the zinc mineralization in Lombador which may be exploited in the future.

The off-lease exploration programme has the objective of identifying extensions of the mineralised horizons out of the mine lease area, particularly to the north.

Exploration plans & forecast production

Somincor's main production strategy in recent years has been to offset the effect of failing grande on copper metal output by increasing ore output. This strategy will be continued in coming years and, in combination with the Company's policy of putting b emphasis on improving efficiency through continuous improvement, will permit Somincor to achieve its objectives of remaining a major base metal producer for many years.

Aljustrel

Concentrates production of basic metals via differential flotation of the pyritic complex mineral of Aljustrel was stopped during 1992 due to the fact that average grades of copper, lead and zinc did not allow its exploitation for economic reasons.

The orebodies of the Aljustrel area, Feitais, Moinho, S. João, Gavião and Estação reach more than 100 Mt of potential reserves. These reserves, referred to the first three orebodies, amounts for 23 Mt. Base metal grades are in the following ranges: 0.3% - 1.5 % Cu, 1.0 % - 1.9 % Pb and 3.0 % - 5.7 % Zn.

The Empresa de Desenvolvimento Mineiro (E.D.M.) has amongst its priorities to define limits to richer areas through a research programme which includes additional drilling. Prospects to reopen mining operations in Aljustrel depend on results of current research.

Portuguese Production

In table 1 productions for the period 1992-1997 and forecast for 1997 ared detailed, expressed in tonnes of metal contents in concentrates.

Table 1 - Portuguese production in tonnes of metal contents in concentrates
  Aljustrel Neves Corvo Total
Cu Zn Cu Sn Cu Zn Sn
1992 1,809 11,103 148,636 2,981 150,445 11,103 2,981
1993 464 2,381 149,848 5,314 150,312 2,381 5,314
1994 - - 130,245 4,330 130,245 - 4,330
1995 - - 129,726 4,617 129,726 - 4,617
1996 - - 107,617 4,626 107,617 - 4,626
1997 - - 106,500 3,500 106,500 - 3,500

Cerro Colorado

This open pit mine is operated by Minas de Riotinto S.A.L. since 1995 when the mining operation was acquired by this labour company. The said labour company has also the polymetallic orebodies of San Antonio and San Dionisio and also a mine out of operation called Mina Concepción, where until 1991 pyrite was extracted in an open pit (Corta Atalaya) and cupriferous ore in an underground mine (Pozo Alfredo) up to 1997.

Type of mineralization and reserves

Mineralization in Cerro Colorado is based on a stockwork of sulphides dispersed and with veins where pyrite and calcopyrite are predominant. Other sulphides such as galena, spahlerite, tetrahedrite, arsenopyrite and cassiterite are also in the orebody though in much smaller quantities.

With current exploitation scheme, mineable reserves are 107 Mt with an average copper grade of 0.48 %.

Geology

It is located in the eastern part of the Iberian Pyrite Belt. The volcanic rocks to which it is spatial, and genetically linked forms an anticline structure with a basic rock nucleus surrounded by acid rocks and these through a transition to piroclastic rocks where massive sulphides are located. The whole volcanic mass is buried under carboniferous slates and reappears in other structures located North and South of the Riotinto anticline. The Cerro Colorado orebody is located in the Eastern half of the said anticline.

Mining operation

The Cerro Colorado operation is mining an open pit with the traditional method of drilling and blasting. Due to the mine-ral characteristic it is necessary a complex mining system of research and planification which allows definition of mineral blending which have to comply with the requirements of the Plant feed grade.

Electric drilling with Bucyrus Eire is done at 9 718 '1 The explosive used for blasting is an emulsion of Heavy Anfo. Loading is done with PH electric excavator 2100 and CAT shovel on wheels 994. Transport is carried out on CAT trucks 789 and Lectra Haulk MK 36.

The whole mining operation is controlled through computers installed in the new CAT equipment and a frequency system which transmits information to a central system.

Concentrator

Primary crushing is done in a jaw crusher to reduce the ore size to 150 millimetres. Secondary crushing is done in a cone crusher and tertiary in three cone crusher working in closed circuit which reduce mineral size to d 80 = 16 mm.

Three lines of wet grinding each with a rod mill and its matching ball mills working in a closed circuit with cyclon batteries, thus producing a d 80 = 210 microns before feeding the ore to the rougher flotation circuit. The rougher concentrate is reground down to d 80 = 47 microns. Selective flotation is carried out in three cleaning steps and the first cleaner tail is fed back to the reground mill.

Concentrates characteristics and marketing

Copper concentrate produced has an average copper grade of 24% with contents of lead and zinc of 0.17% and 4.65%, respectively. Gold content in concentrate is 0.4 ppm, silver content is 62 ppm. No significant minor metal deriving in penalties are present. No sailable coproduct or by-product is produced.

The main destination of copper concentrate is Atlantic Copper in Huelva, to whom is sold 80% of total production. The rest is sold in the international market on pluriannual terms.

Exploration

Minas de Rio Tinto, S.A.L. is basing its exploration activity on improving information on Cerro Colorado orebody. At the same time and keeping in mind the future of complex minerals mining, is completing information on the San Antonio and San Dionisio orebodies, though the Company's opinion on the viability of exploitation of polymetallic orebodies will depend on the availability of hydrometallurgical methods to process bulk or semibulk concentrates obtained through flotation.

Expansion plans & production

From the constitution of the labour company MIRT, their efforts were driven towards the improvement of their competitive position through a plan to increase efficiency and production in Cerro Colorado. At the same time an intense renewal of loading and transport equipment has been carried out.

Table 2 - Cerro Colorado: Production Figures
  1995 1996 1997
R.O.M. (x1000 t) 1,297 5,146 7,102
Cu grade % 0.49 0.48 0.49
Cu concentrate (t) 26,290 94,634 125,087
Cu metal in conc (t) 5,348 21,691 30,031
Gossan ore (x1000 t) 2,607 2,248 1,521
Au content (gr/t) 1.15 1.19 1.02
Au recovered (Kg) 2,522 2,133 1,111
Ag content (gr/t) 45.20 57.50 46.83
Ag recovered (kg) 52,716 57,552 29,588

Extracted ore from the mine in 1997 shows an increase next to 40% on production over the previous year. Although plans established by MRT in 1997 regarded reaching an annual production figure of 9.5 million tonnes in the follow years, the company has just announced a temporary shut down of Cerro Colorado operation, till the current low copper price is maintained.

On the other hand, Au and Ag production failing from the exploitation of Gossan and its process in the cyanidation plant is due to the reserve exhaustion of such an ore. Gold and silver production will continue till the complete exhaustion of reserves.

Los Frailes

Recent mining activity of Apirsa in the province of Seville, in the cast part of the Iberian Pyrite Belt, started in 1979 operating the Aznalcollar open pit which has been in production till the end of 1996. After the acquisition of Apirsa by Boliden and during the period 1987 - 1996 research and evaluation was carried out in Los Frailes area, 2 Km of the existing Aznalcollar operation.

Production of the new open pit started in 1997 and both, the mine and the rebuilt concentrator, reached the designed capacity of 4.0 Mt on December 1997.

As it is very well known, the breach of the tailings dam wall that took place on the 24th of April this year, caused the stop of the production activity. Boliden Apirsa, the Spanish mining company owned by Boliden, is trying to obtain the necessary permits to restart the operation.

General geology

The Los Frailes deposit is a massive, complex sulphide mineralization similar to those found elsewhere in the Iberian Pyrite Belt. It is stratiform and interbedded with volcano-sedimentary rocks. The country rock close to the massive mineralization is in places sulphide disseminated.

Up to 30 metres from the massive mineralization in the hanging wall and up to 60 metres in the footwall, the country rock is sericite-chlorite altered, schistosed and with gouge horizons. The closer to the massive mineralization the more pervasive is the alteration, the ber the schistosity are the more frequent gouge horizons. The rock sequence has been subject to folding, thrusting and transverse faulting. The thrust and fault tectonics are well demonstrated in the test mining area.

The rock units in the drill holes from top to bottom are as follows:

Miocene
Ashtuffs, tuffites
(Devonian detritic series)
Acid tuff, agglomeratic (Upper felsic epiclastites)
Dacitic tuff
Altered rock
(Black shales and vitric tuffs)
Massive pyrite
Altered rock
(Black shales and vitric tuffs)
Dacitic tuff
Acid tuff, agglomeratic
(Upper felsic epiclastites)

The Miocene is discordantly overlaying the volcano-sedimentary rock sequence. The miocene is up to 30 m. thick and consists of unconsolidated conglomerates, slates, claystone and shell-grit.

Mineralization

The deposit is syngenetic and predominantly pyritic with Ag, Cu, Zn and Pb showing a tendency of mineral zonation with high-grade ZnS-PbS banded pyrite on the hanging wall and in the upper parts of the footwall. In the high grade ZnS-PbS zones, Cu is usually of lower grade. There are some secondary mineralization of PbS filling thin veins.

The ZnS-PbS banded pyrite is considered as a lithological unit originally on top of the deposit. The appearance at different parts of the deposit is caused by tectonics.

The deposit has an east-westernly strike and dips 30-40º towards north. The kown strike-length is 400 m. at + 45 m. level and more than 1000 m. at - 200 m. level. It reaches from + 65 m. level to below - 300 m. level. (Surface is approximately + 100 m. level).

The deposit is generally thinner in the upper parts and thickens downclip, up to arround 90 m. and the shape is controlled mainly by thrusts and to some extent transversing faults. The thrusts have and east-westernly strike. The dip is towards north, usually 30-400 but varies between 20-700. Judging from the thickness of shear zones and gouge horizons, displacements of +/-100 m. can be expected. Transversing faults are directed NW-SE and NE-SW with a steep dip. Displacements up to some tens of metres are indicated. In general the transversing faults seems to be younger than the thrusts. If so, the thrust surfaces will be disrupted and the risk for persistent low angle zones of weakness is reduced. However, in the Aznalcollar open pit, possibly regenerated low angle shear zones have out transversing faults.

Computerised model

A computer model of the deposit has been designed for open pit planning. For that purpose a simplified interpretation of the geometry has been done. This is reasonable from a pit planning point of view, since the pit in any case has to be adapted to simplified pyrite geometry.

Grade zonations have been delineated based on the following criteria for the major metals:
  Cu Pb Zn Ag
Very Low < 0,3% < 1,0% < 1,5% -
Low 0,3%-0,5% 1,0%-1,7% 1,5%-2,5% < 50 pprn
Medium 0,5%-1,0% 1,7%-3,0% 2,5%-5,0% 50-80 ppm
High > 1,0% > 3,0% > 5,00 > 80 ppm

The massive mineralization has been delineated on each cross-section using grade plots and logging data. In some cases disseminated mineralization is included. From the cross-sections, the outline of massive mineralization and the zonation have been transferred onto horizontal levels.

Similar maps have been made for minor elements such as Sb, As and Bi, based on limited sampling of the drill holes. 793 samples from 41 drill holes, representing a total of 2,202 drilled metres, were available. The zinc zonation has been used for the design of the block model.

Expected production figures

Production figures reflected in Table 3, covering the period 1998-2001 were established during 1997, before the breach of the tailing dam wall.

Table 3 - Expected production in period 1998-2001 (*). (Metal contents in concentrates)
  1998 1999 2000 2001
Cu (t) 5,400 6,100 6,000 6,900
Pb (t) 47,700 49,000 46,400 46,000
Zn (t) 124,000 120,000 113,000 125,000
Ag (Kg) 92,800 99,300 95,000 85,300
Au (Kg) 251 260 239 242
(*) Production plan set up in 1997

Strategic Position of Navan Resources in the IPB

Navan Resources currently has three main interests in the Iberian Pyrite Belt.

  • Almagrera, S.A. that operates in Sotiel, Sotiel-Este and Migollas deposits, producing copper, lead, zinc and pyrite concentrates. Sulphuric acid and oleum are produced in the chemical complex at the mine site. The Sotiel Mine and Metallurgical Facilities formerly owned by SEPI (State industrial holding group) were acquired by Navan on April 1997, through a privatisation process.
  • Aguas Teñidas Este is a polymetallic deposit near de Almagrera operation. The rights to exploit this orebody were acquired to Billiton Española and Promotora de Recursos Naturales (subsidiary of Banco de Bilbao Vizcaya) in 1995.
  • Agua Blanca, a nickel/copper deposit located south of the Badajoz Province, some 8 Km from the town of Santa Olalla de Cala. Rights on these deposits are 50% Atlantic Copper's and 50% Spanish State's (being PRESUR the operating company of the Spanish State).

In July this year, the Cabinet authorised the transfer of rights from Atlantic Copper to Almagrera according to the purchase option contract previously agreed by both companies.

Navan Resources is bly oriented to become a major base metal producer in Europe being the IPB its main focus of interest and two of its main performances are:

  • The development of Aguas Tehidas Este as a Mine, transporting the ore to Sotiel and utilising the existing infrastructure there, lowering the barrier of capital expenditure. This means, on the other hand, expansion of grinding and flotation capacity units as well as some auxiliary facilities at Sotie).
  • Further development of Sotiel facilities as a metallurgical centre taking advantage of the existing roasting and gas conversion facilities in the sulphuric acid plant. Such development is being evaluated for three different purposes, production of zinc calcine, the transformation of Ni/Cu flotation concentrate into a Ni/Cu matte, and the roasting of refractory gold preconcentrates before cyanitation.

The complex nature of the common mineralizations in the IPB make it even more important any increase in the added value of final products as well as efficiency improvements directed to reduce specific cost per unit of recovered metal.

Sotiel & Migollas

Underground mining of the Sotiei orebody started in 1984 and it is operated by Almagrera, S.A. The Sotiel Centre was designed as an economic unit based on treatment of polymetallic sulphides by differential flotation with contents of 0,601o Cu, 1,13% Pb, 4,5% Zn and 42% S.

Ore reserves at Sotiel were estimate to be 50 Mt. and the production programme was based on five stopping zones containing 11,5 Mt. and an average yearly output of 600.000 t was established in the design of the operation.

Selling products are metal concentrates of copper, lead and inc, sulphuric acid and oleum which result from roasting residual pyrite in a Sulphuric Acid Plant at the mine site. Copper sulphate is also produced through a solvent extraction unit processing the roasting ashes. A 10 Mw turbogenerator produces electricity using the thermal energy released by the exothermic reaction that takes place in the fluidised bed roaster. Electricity generated in the Sulphuric Acid Plant covers 80% of the total Sotiel Centre demand.

Current annual rate of production is 750,000 t of ore and 300,000 t of sulphuric acid and oleum. Another 80,000 tonnes of copper slag with 6% Cu coming from Atlantic Copper Smelter will be concentrated by flotation in tolling bases.

Migollas discovery and evaluation

The knowledge of good results of gravimetric methods in the location of new masses in conjunction with the results obtained in Sotiel using electromagnetics measures made it possible to detect an important anomaly in the site called Migollas.

A new geological interpretation of the area was carried out and it was determined that it had a high potential of polymetallic sulphides due to theoretical existence of a carrier horizon in the volcano-sedimentary complex under devonic shales and quarzites.

In the summer of 1989 drilling at 600 m level started and physically it was demonstrated the existence of an important orebody when a layer of 104,3 m of massive sulphides was cored. Till August of 1992 more then 24.000 m of total length were drilled in 41 diamond core-drills. The nearest research area is only 1.000 m from the Sotiel Mine crusher.

After the mentioned drilling Migollas was identified as a massive sulphides mineralization with the following fundamental characteristics.

  • Great dimension: the mineral deposit length reaches 900 m with maximum thickness of 126 m and a third dimension over 450 metres.
  • Depth: It is situated at levels inferior to 350 metres from surface with a higher volume around the 500 metres deep.
  • Polymetallic character: The contents in Cu, Pb and Zn are distributed in a preferential manner along the mineralization, offering clear areas according to direction, and important enrichments with different stratigraphic levels.

With data obtained from drilling, two different zones were established in Migollas with the following tonnage and grades.

  Mt. % Cu % Pb % Zn
Zone 1 38,5 0.61 1.34 2.66
Zone 2 19,1 1.43 0.69 1.35
TOTAL 57,6 0.88 1.12 2.23

Nevertheless, the whole of the deposit and each of the areas are not economical, so the interest from the summer of 1991 was focused in a rich context in ZONE 2 called COBRIZO-MIG0LLAS (CUPRIFEROUS MIGOLLAS).

In this area drilling was concentrated since the hole MM-22 which cored three cupriferous bands, of which one measured 18,8 m with an average of 5,18% Cu and another measured 18,3 m with 7,97 % Cu.

Drilling with a pattern of 80 x 80 m made it possible to evaluate the area with a cutting grade of 1,2 % Cu which resulted in a total of 5,2 million tons with an average grade of 3,2 % Cu.

At the end of 1992 it was taken the decision of accessing to the upgraded copper zone from the Sotiel underground infrastructure with the object of narrowing the pattern of drillings, to define stopes and to develop production infrastructure. The production of copper ore from Migollas started during the last months of 1994.

Mining Methods

Two exploitation methods are being applied in Migollas. In those areas where mineral presents a dip over 300 the method used is Sublevel Sotping. In areas where mineralization is horizontal or sub-horizontal, the method used is Room and Pillars. Currently 60% of the total of Migollas ore output is being mined through Room and Pillar method.

Average distance for transport is 1,550, of which 1,100 m are through an ascending slope of 12% using 40 t trucks.

Expected production figures

During 1994 it was built a flotation line for cupriferous ore and in January this year an autogenous grinding circuit started to be operated. This circuit plus some additional investments on auxiliary facilities have increased treatment capacity to 1.6 Mt with a potential of additional expansion to 2,0 Mt. In this way installed capacity in grinding and flotation with independent circuits for complex and cupriferous ore will be able to process the ore coming from Sotiei-Migollas and Aguas Teñidas.

Table 4 - Expected Almagrera's production figures
  1998 1999 2000 2001 2002
Cu (t) 3,122 6,536 7,295 7,353 12,129
Pb (t) 4,083 4,045 4,715 6,108 7,385
Zn (t) 21,085 23,050 28,020 34,479 47,911
Sulphuric Acid (t) 284,192 286,598 286,220 285,657 285,657
Oleum (t) 10,240 10,122 10,258 10,212 10,212
Cu Sulphate (t) 655,000 627,000 580,000 577,000 577,000
Energy (Mwh) 60,816 62,540 62,012 61,636 61,636

Aguas Teñidas is expected to reach its normal production rate of extraction in the year 2002, although significative tonnage will be processed in years 2000 and 2001.

Aguas Teñidas

The Aguas Teñidas Este deposit is located 3 kilometres cast of Valdelamusa village some 80 kilometres north of Huelva in the Andevalo District of SW Spain. Access to the project area is available via main roads to Huelva and Sotiel to the south and to Rio Tinto district and Seville to the cast and Southeast. The national railway connecting Madrid to Huelva passes through Valdelamusa and Sotiel. The main electricity supply network for the district is located 21 kilometres south of the deposit at Sotiel. Water is supplied by two main reservoirs; one located 2 kilometres north of the deposit near Cueva de la Mora and the other 9 kilometres south of the deposit, in the town of Silos.

Discovery

Aguas Teñidas Este was discovered in the mid 1980's by Billiton Española, S.A. (B.E.S.A.) following detailed electromagnetic surveying of an area to the cast of the historical Aguas Teñidas mine, which produced high grade copper ore.

General Geology

The Stratigraphy in the Aguas Teñidas area is part of the volcanic-sedimentary Complex. The local stratigraphy comprises a footwall rhyodacitic tuff (URD), which is overlain by mixed argillites and ashes/tuffs (UVS) exhibiting rapid lateral facies variations. District, dark, carbonaceous/chloritic shales occur near the top of the UVS and have been used as a marker for stratigraphic correlation. The Aguas Teñidas Este deposit (ATE Horizon) is located at the contact between the URD and the overlying UVS.

The massive sulphides pass laterally southwards into red argillites and oxides at the ATE Horizon. A second, mineralised horizon of limited lateral extend (USH Horizon) occurs in the UVS between 20 and 50 m above the ATE Horizon. The UVS is overlain by massive, rhyolitic tuffs (URT) in the north, which rapidly pass laterally into thick argillites (US) to the south. These argillites are in turn overlain by dacitic and andesitic lavas and tuffs with subordinate greywackes, and siliceous debris flows at the base (UD). These debris flows are pyritic and host the historic Aguas Teñidas mine to the west of Aguas Teñidas Este.

Mineralization and reserve evaluation

The deposit has a strike length of some 1.200 m in a roughly cast-west direction, plunges at roughly 200 to the west, and is open in that direction. At its extremity the deposit lies approximately 200 m below the surface. The current western extent lies some 600 m below the surface. The massive sulphide body is between 150 and 300 m wide and wedge-shaped, with a maximum thickness of some 80-90 m on its northern margin.

Two principal types of mineralization are present; massive sulphide and stockwork, with the former being by far the dominant. The massive sulphide comprises three main styles of mineralization:

  • Polymetallic, banded, zinc/lead rich ore; fine-grained compositional banding with sphalerite/galena and pyrite bands or laminations
  • Cupriferous ore; massive, structureless massive pyrite, with chalcopyrite replacement and fracture-fill
  • Barren massive pyrite structureless massive pyrite with negligible base metals.

Copper and Zinc are the principal components, although copper and zinc grades are not correlated. This may be important in terms of mineral processing and subdivision of the ore types. Sphalerite and galena dominantly occur as fine laminations and layers within massive pyrite. Chalcopyrite is generally coarser grained, commonly occurring as blebs and coarse dissemination as opposed to fine bands/laminations. In some cases, it post-dates the sphalerite and galena, in fractures cutting these sulphides. In holes in the eastern portion of the deposit, sphalerite and galena generally dominate the upper portions of the massive sulphide, whereas chalcopyrite dominates the lower portions.

The stockwork mineralization forms a discordant, cast-west trending, funnel-shaped zone in the footwall lithologies along the northern margin of the deposit. It extends at least 70 m below the massive sulphide. Mineralization comprises a network of thin veins of pyrite, quartz, sericite and chlorite, with chalcopyrite development in places.

The massive sulphide mineralogy is relatively simple, with four main phases, pyrite, sphalerite, chalcopyrite and galena (in order of decreasing abundance), comprising more than 95% of the sulphide mineralogy. Pyrite generally forms between 50 and 80% of the ore. In addition, tetrahedrite tennantite group minerals, arsenopyrite, stannite, bournonite and native bismuth is also present. Silver predominantly occurs in the tetrahedrite-tennantite (> 10 wt % Ag in places). Gold grades of up to 2.6 g/t over 2 m intervals are recorded in some drill holes, although the location of the gold is uncertain at present. In terms of potential "penalty" elements, these are summarised as follows:

Mineral / Element Hg
(wt %)
As
(wt %)
Sb
(wt %)
Bi
(wt %)
Sphalerite tr - 0.003 - - -
Chalcopyrite tr tr - 0.06 - -
Galena - - 0.04 - 0.25 tr - 1.8
Tetrahedrite - 1.2 - 17.9 5.0 - 28.4 tr

The GEMCOM software was used for resource estimation, with three types of massive sulphide defined as follows:

  • Barren, massive pyrite-Barren Sulphide
  • Copper-rich, zinc-poor (<1.5 %) Sulphide-Cupriferous Sulphide
  • Zinc/lead-rich, in places copper-bearing Sulphide-Polimetallic Sulphide.

The distribution of the drill intersections in conjunction with the economic viability of the project, based on metallurgi-cal results and likely operating cost, put the calculated tonnage and grades in the Probable reserve category. These reserves have been calculated by both kriging and inverse distance methods for two geological models. Model (1) involved the construction of sulphide envelopes around both the Cupriferous and Polymetallic Sulphides. Cupriferous Sulphide envelopes were defined by a copper grade greater than 1.0% and zinc grade less than 1.0%. Polymetallic Sulphide envelopes were defined by a zinc grade greater than 4.0%. These envelopes were not extended more than 50 m from the relevant drill hole in the absence of further holes in that particular area. Remaining areas within the massive sulphide type, i.e. calculation of the grades in the Cupriferous Sulphide, Polymetaffic Sulphide and Barren Sulphide respectively. Model (2) used the same envelopes, however the grade within each sulphide type was calculated using all drill holes, irre-spective which sulphide type they intersected.

For the reserve calculation, 10x10x10 m blocks were used in both the kriging and Inverse Distance methods, after firstly compositing drill hole samples to 4 m intervals. Variograms for copper, zinc and lead within the sulphide type were examined in different directions, including omnidirectional, down plunge (2701-20) and down dip (360/-20). After consideration of the available information, the Inverse Distance (2) method using Model 1 is currently preferred, and summarised in the table (see below).

Cut-off Ore Type Tonnage Cu % Pb % Zn % Ag g/t
0 % TOTAL 35,394,940 1,42 0,86 3,04 32,0
Sulphide 35,394,840 1,42 0,86 3,04 32,0
TOTAL - - - - -
2,0% Cu
2,0% CuEq
Cupriferous 7,422,480 2,77 0,14 0,47 24,5
Polymetallic 70,731,240 1,07 1,71 6,08 42,1
TOTAL 18,153,720 7,74 1,07 3,79 34,9
2,5% Cu
2.5% CuEq
Cupriferous 4,329,000 3,04 0,15 0,45 25,1
Polymetallic 9,870,120 1,13 1,79 6,2B 45,8
TOTAL 14,199,120 1,71 1,29 4,50 39,5
3,0% Cu
3,0% CuEq
Cupriferous 2,162,160 3,40 0,17 0,41 27,3
Polymetallic 8,470,800 1,17 1,95 6,70 53,4
TOTAL 10,632,960 7,62 1,59 5,42 48,1
3,5% Cu
3,50% CuEq
Cupriferous 917,280 3,65 0,08 0,15 21,0
Complex 6,687,720 1,25 2,14 7,27 67,6
TOTAL 7,605,000 1,54 1,89 6,41 62,0

Mining Project Development

Preliminary investigations of the orebody indicate that it would be classified as a wide vein/massive flat dipping deposit with b ore and hangingwall characteristics. The orebody lends itself to low cost bulk mining techniques and it is anticipated that annual production will be in the order of 800.000 to 1.200.000 tonnes.

The first phase concerns ramp access to the orebody and diamong drilling. The second phase will be the total develop-ment of the mine ready for production and third phase will be the development of the down-dip extension of the orebody to the west. The ramp is being driven with a cross-sectional area of 21 square metres at a gradient of just less than 1:5 (20%) to the target position on the first sublevel at the 950 m elevation. The ramp will then continue in the footwall of the orebody at a gradient of 1:6 to the 830 m elevation where the primary ramp development will terminate. Where necessary, dump bays will be mined at 300 m intervals to permit faster face cleaning. A main ventilation raise to surface and a fan installation will be required, as mining in a single heading beyond 1,200 m is impractical.

To provide access for diamond drilling and to allow for ventilation during development of the ramp, three sub-levels will be mined in ore on the 950,890 and 830 m elevations. These sub levels will be extended to provide full coverage of the lateral extent of the orebody. Phase 2 development planning has already commenced and the current thinking is to utilise a main rock hoisting shaft with underground crushing facilities centrally located. A main haulage will be established on the 710 m level where 25-40 tonne trucks will haul from ore pass chutes to the central crushing facility. From the crusher, the rock will be transported by a short conveyor to the underground storage bunkers adjacent to the shaft. From the bunkers, the ore or waste will be loaded by feeders into the skip flasks prior to hoisting. A radial stacker or twin conveyors will be required on surface. The entire rock handling (crushing and hoisting) system will only require 4 operators. Overall mine design has been initially laid out using 30 m sub-level intervals, this being consistent with the orebody dimensions and suitable for large scale bulk mining techniques. It is anticipated that a form of sub-level open stoping will be used.

Exploration potential in Aguas Teñidas area

The potential for additional resources in the vicinity of the Aguas Teñidas deposit is demonstrated by a recent hole, AC-5, drilled approximately 200 m west of the current western extent of the deposit. This hole intersected 16.15 m of massive sulphide grading 11.72 % zinc, 2.84 % lead, 0.96 % copper and 156.7 g/t silver from a depth of 690.45 m. A second hole (AC-2) drilled previously some 300 m further west of AC-5 also intersected massive sulphide at the ATE Horizon from 656.0-671.9 m, underlain by vertically extensive, intense massive sulphidation of the foothall tuffs. The massive sulphide returned a best intersection of 8.85 m @ 1.54 % Cu.

Agua Blanca

Agua Blanca is located at the southern end of the province of Badajoz, some 8 Km.from Santa Olalla de Cala (Huelva), and 5 Km. from Real de la Jara (Sevilla). The area has good communication, being about 3 Km from the national Sevilla-Merida highway.

The area belongs geologically to the Ossa Morena unit (mainly early Palaeozoic) and has only been explored to locate magnetite orebodies.

The Cu-Ni mineralization in Agua Blanca was discovered during exploration in the State Reserves of "La Monaguera" and "La Remonta", through the Spanish State/Atlantic Copper Consortium. Within this Consortium, PRESUR S.A. carries out strategic and detailed geochemical exploration and Rio Tinto Minera S.A. carries out detailed exploration of anomalies and later exploration and evaluation of orebodies.

On the other hand PRESUR (State owned company) is currently running an open pit mining operation in Cala close to the Agua Blanca area producing magnetite concentrates and some copper concentrate as a coproduct. The total annual copper metal in concentrates is around 500 t.

Mineralization

The Agua Blanca mineralization was located through detailed exploration carried out in an area with a Cu-Ni geochemical anomaly, on an old exploration trial pit. On the surface, the mineralization is defined as an intensely gos~ sanized zone associated with a Gabbro outcrop (5x2 km) which in turn borders a granodioritic intrusion (Santa Olalla granite). The depth of this weathering is 8-10 m. The in-depth mineralization is in the form of intense Pyrrohotite mineralization, accompanied by Chalcopyrite and Pentlandite, associated with the actual Gabbro in contact with a zone of Skarn, with abundant Garnets and Carbonates. In some areas, the mineralization may be massive or semi-massive, with the corresponding increase in the Ni concentration in these areas, without Cu being concentrated in the same proportion.

The mineralogical paragenesis, together with the association of mineralization with darker levels of Gabbro and also the ratios for S, Ni, Cu, Co and Platinums, define this mineralization as typical and similar to the Sudbury orebodies in Canada and Norilsk in Russia, where the mineralization of sulphides associated with basic intrusions proceeds directly from the mantle.

The ore thickness in the mineralised zone is very constant 60-80 m and its lateral terminations are very sharp. At the Western end it appears to be interrupted by a fault that has moved it North where another small mineralised ore appears; and at the Eastern end the mineralization disappears rapidly but progressively over a distance of some 25-50 m, due to the appearance of a Skarn lens at the mineralization level, of unknown extent.

The deposit has previously been interpreted as a occurring in a gabbro in proximity to the contact with carbonate metasediments. However, recent examination of drillcore suggests that it may be a mineralized skarn. Mine-ralization occurs as disseminations through to semi-massive sulphide, dominated by pyrrohotite, chalcopyide and pentlandite, within a gangue of pyroxene and feldspar. The sulphides occur in two main sub-vertical bodies or lenses, trending cast-west. The southern, and larger of these lenses has a strike length of around 400 m and is between 50 and 80 m wide. It was first drilled to a depth of 450 m below surface. The smaller, northern lens has a strike length of around 125 m, is around 40-50 m wide, however appears to wedge out at a maximum depth of 175 m below surface. The rocks and mineralization are intensely weathered and oxidised down to a depth of 5-10 m from the surface.

Resource Estimation

Diamond, reverse circulation and percussion drilling have all been carried out at Agua Blanca, principally on a 50 x 25 grid. This drilling can be summarised as follows:

Year Method nº of Holes Total Metreage
1993-94 Percussion 83 2,146 m
1993-94 Diamond 30 8,205 m
1994-95 Diamond/RC 43 13,560 m
1997 Diamond 5 2,118 m
TOTAL - 161 26,029 m

Potential for Additional Resources

This can best be demonstrated by two holes drilled by PRESUR during 1997. The first hole (DDH 6758) was designed to test the depth extension to the mineralization on Section 7350 on the eastern margin of the deposit. This hole intersected 68.0 m grading 116 % nickel and 1.02 % copper from a depth of 524.0 m. The second hole (DDH 6758-R), wedged of the first hole arid intersected 34.0 m grading 1.16 % nickel and 0.92 % copper at a depth of 530.0 m, approximately, 25 m north of the first hole.

Metallurgical Testwork

Detailed testwork was carried out at the Emgrisa flotation pilot plant on the outskirts of Madrid. A ramp was sunk al Agua Blanca and a large bulk sample was taken for testwork. This was fed at a rate of 200 kg/hr to the pilot plant and the options of bulk flotation and differential flotation were studied over a range of conditions.

Flotation Scheme Concentrate Conc. Grade Conc. Recovery
Differential
Flotation
Copper 25-30% 85-90%
Nickel 8-9% 75-80%
Bulk Flotation Copper 6-8% 90-93%
Nickel 5-7% 82-85%

Tharsis Area

Filon Norte

"Nueva Tharsis S.A.L." was created as a Labour Company in January 1996 and it operates a pyrite open pit mine known as Filon Norte. It was one of the mining assets owned by the "Compañía Española de Minas de Tharsis S.A.".

Hon Norte's current pyrite production is 420,000 tonnes and it is railed to Huelva and sold to Fertiberia a fertiliser company to produce sulphuric acid for its own consumption.

At the moment "Nueva Compañía de Tharsis" is carrying out a drilling campaign whose goal is the identification and valuation of reserves in the rich Au and Co areas in the stockwork next to Filon Norte.

Filon Sur

The Filon Sur gold mine is 98,4 % owned by Caledonian Mining Corporation, with the remaining 1.6 % held by Nueva Tharsis S.A.L. The mine treats gossan and morrongos by the heap leaching process. In June 1997, plant capacity was increased from an annual throughput of about 400,000 tonnes to 1 million tonnes at a cost of US$ 8.7 million, and full production was achieved in the fourth quarter of 1997.

During 1997, Filon Sur produced 21,776 ounces of gold and 125,590 ounces of silver at an average cost of US$ 246 per equivalent ounce of gold.

The table below shows the latest 5 year production history at Filon Sur and selective 1998 year forecast.

Table 7 - Filon Sur Production History
  1993 1994 1995 1996 1997 1998
Ore Crushed (t) 355,000 380,000 545,348 494,046 728,994 984,000
Gold Grade (g/t) 2.54 2.30 2.07 2.00 1.53 1.65
Gold Recovered (ounces) 19,370 20,300 25,047 20,411 21,776 34,000
Silver Recovered (ounces) 83,850 137,000 144,065 151,056 125,590 200,000

Las Cruces

The Las Cruces discovery, carried out by RIOMIN, lies approximately 15 Km NNW of Sevilla between the towns of Satiponce and Gerena and within the council areas of Gerena, Guillena and Salteras. Topography is very subdued ranging from 15 to 50 m above sea level.

The surface geology of this area is fairly simple, it is all Tertiary. The nearest Palaeozoic, shales and granites, outcrop approximately 6 Km to the north. Aznalcollar and Los Frailes, which are the closest other deposits of the Pyrite Belt, are 15 Km to the west. Gravity surveying of the area started in mid-1993 and the final survey of this year revealed gravity high of considerable size on the eastern edge of the area covered. Further surveying in 1994 confirmed this as a major gravity feature and closed off the anomaly.

The amount of massive sulphide intersected with the first hole in May 1993 was minimal, and barren, but the hole confirmed the presence of massive sulphides and extensive stockwork mineralization in an area in which mineralization was previously completely unknown. The discovery was completely geophysical and, as in numerous recent discoveries in the Pyrite Belt, gravity was the paramount tool. Further geophysics has met with mixed results due to the presence of the highly conductive Tertiary, this effects everything from TEM to Misse a la Masse.

Geology and structure

In 1995 despite having 50 boreholes into the central area the understanding of the geology and the mineralization remains somewhat uncertain. This is due mainly to the total lack of surface geology which usually aids interpretation of drilling by giving the local strike, the surface dips, local structures and the position and strikes of major faults. With absolutely no surface information interpretation of drilling, especially of faulting, becomes extremely difficult until the drilling density is much higher.

The structure appears to be fairly simple. Strike is approximately E-W with dip generally 45 degrees to the north in the northern and eastern parts of the area. In the south dip flattens locally to as low as 5 degrees. It is not known if this is due to a monoclinal or anticlinal type of structure. Cleavage appears to dip at 60-80 degrees to the north.

Present situation

Between May 1994 and the end of 1995 over 50 boreholes in to the general Las Cruces area were drilled with a total of more than 20,000 m. These served to confirm that the gravity anomaly is due mainly to the massive sulphide mineralization and the associated stockwork and alteration zones. Drilling was planned to continue throughout 1996. Results were released to the public late in 1995, and the current reserves at that time were estimated at 10-15 Mt. of approximately 6% Cu with substantial further reserves of complex Zinc/Lead/Copper mineralization.

Evaluation of the Las Cruces deposit continued during 1996 with 180 holes drilled, preliminary engineering and metallurgical base line studies. Feasibility studies are expected to be finished at the end of 1999.

According to the published information, feasibility studies are based on exploitation through underground mining of 15 Mt of high copper grade ore. It does not regard the exploitation of the remaining resources (25 Mt polymetalic ore and 1 Mt gossan).

1 On the other hand the foreseen investment is 40,000 million pesetas (US $ 275 million). The 50% of this figure would be used for the SXIEW plant to produce 60.000 tonnes of copper cathodes per year. It means being the second most important mining copper operation in Europe after Neves Corvo.

Some Final Reflections

The Iberian Pyrite Belt is a focus of attention and interest for mining companies as well as for official institutions in Portugal and Spain. During the last years, and especially after the Neves Corvo discovery, the accumulated knowledge about Geology and Metallogenics in IPB, together with the improvement of the geophysics methods, are a group of powerful tools to establish new investigation targets in areas considered, not a long time ago, as non potential or risky because of the depth objectives or the tectonic complexity.

Although it is difficult to express optimism when a bad feeling is being extended because the financial crisis of some important economics and its deleterious effects on commodities, it seems evident that mining activity could reemerge again in the IPB. In fact, mining sector, more than any other, must be far from negative and positive joints, getting ber when market conditions are positive and developing a survival spirit when they aren't.

Considering the already mentioned copper, lead and zinc production figures and taking into account the production forecast for the three deposits on which advanced feasibility studies are in progress (Aguas Teñidas Este, Las Cruces and Agua Blanca), it is justified to conclude that there is a tangible future in the IPB. Annual production of copper, lead and zinc metal recovered would reach new maximum ratios, being in the first years of the next century 210,000 53,000 and 173,000 tonnes respectively. On the other hand, the direct workforce in the current operations (2,800 direct employees) would increase to 3,470. Although these potential figures, to a medium term, are important, any increase of production activity in the IPB is also important because it would result in a better efficiency and dynamism in the utilisation of accu-mulated knowledge regarding the location of new deposits.

Operational and design efficiencies are critical due to IPB's complex nature of common mineralization since this complexity has a negative effect on the net value of sales and so, it is a competitive disadvantage in terms of cost per unit of recovered metal. In this sense, it is necessary to recognise that successes got in the 70s, regarding the adaptation of the differential flotation process to the difficult nature of this kind of mineralizations, were possible thanks to mining companies interests in the IPB and official institution's help. However, I think that the development and the industrial availability of competitive extractive metallurgical processes better adapted to the nature of complex concentrates, are needed to promote the huge potential of the Iberian Pyrite Belt. On the other hand, I think that the industrial availability of such processes require to reach a certain "critical mass" of mining activity in the IPB as well as some co-ordinated actions between both countries, keeping in mind the importance of this metalogenic province as a source of base metals in Europe.

 

 

Exploration Strategies in the Iberian Pyrite Belt: A Young, Mature, or Senile Mineral Exploration Province ?

D. Carvalho

Empresa de Desenvolvimento Mineiro (EDM)

Introduction

The subject which the author have been asked to discuss is both interesting and provocative. Conscious of the amount of difficulties he had to face, the author welcomed the kind invitation and the challenging proposal of the WIVIC Com-mittee. Once someone has said that difficult issues are the most interesting ones. That is probably true. So, here is a modest perspective on what, the author believes, is a major concern for many of those who are nowadays interested in the polymetallic massive sulphide deposits (VMS-Volcanic Massive Sulphides) of the Iberian Pyrite Belt (IPB). In short, that is: the remaining potential of the IPB as an old mineral exploration province.

As a matter of fact, the record of mineral exploration and discovery in the IPB (Figure 1) during the second half of this century has been impressive, indeed. But, now, this raises the question on how to maintain, or even improve, this out-standing record in the next decades. This is a major challenge that deserves adequate discussion within proper forum. This meeting is just one opportunity for that purpose. A starting point may be.

As it is well known, the economic constraints in mineral exploration play an increasingly role and are generally determinant in strategies, especially nowadays with metal prices at such low levels. This makes real attractive to be developed only the very high grade or the large-low-cost deposits. The long-term decline in metal prices, especially copper, has turned the VMS type very vulnerable in respect to porphyry coppers deposits (PCD).

Figure 1: General geology of the Iberian belt and location of select massive sulphide deposits

Figure 1: General geology of the Iberian belt and location of select massive sulphide deposits
(adapted and modified after Carvalho et al., 1997)

Due to geological factors, such as, geotectonic setting, structural pattern, age (erosion level), surface or near surface signatures, size, and also the outstanding progress in model definition of PCD, the risk to find attractive copper ore bodies favours more the PC1) rather than the VMS. In fact, many of the shallow VMS have already been discovered and largely exploited; so the remaining potential for VSM lies now at greater depths. Probably, data from Figure 2 reveal some hints of what may be the beginning of a new phase in the exploration history of the IPB.

Figure 2: IPB (Portugal) - Exploration Drill Holes.

Figure 2: IPB (Portugal) - Exploration Drill Holes.

In spite of that, the fact those very high-grade deposits (Cu, Sn, and Zn) have been proved to occur in the IPB turns this province particularly attractive. Besides this, once some minerallurgical problems to optimise quality of concentrates and recove-ries of zinc, lead, silver and gold being solved, the VMS of the IPB offer good perspectives for the future. On a world context, and in relative terms, copper is not very difficult to find and potential resources are relatively high, but this is not exactly the case for zinc. Global analysis suggests that in the future the MW will not account for major world tonnage of zinc, as it was the case in the past. Being so future sources of zinc will be largely dependent on Sedex type deposits. However, these deposits also pose serious ore processing problems requiring ultra-fine grinding. In this context it seems reasonable to predict new scenarios where the VMS will certainly emerge in a more competitive position in the zinc market. Accordingly, the importance of zinc (plus gold, silver and minor metals) from VMS may lead copper resources from these deposits to a second priority.

General Approach

The IPB (Iberian Pyrite Belt) is a world famous mineral district for its Massive Sulphide Deposits (VMS), some of them mined for copper and noble metals since more than 3 millennium. The IPB was generated during the Upper Palaeozoic (Devonian - Carboniferous) and is one of the best-defined metallogenic provinces of the Earth's crust. Total original sulphides in the deposits is estimated at more than 1.7 billion tons; ore metal tonnages (ore mined plus resources and reserves) exceed: 20 Mt Cu, 34 Mt Zn, 12 Mt Pb, 44000 t Ag and 850 t Au.
Being the locus of the biggest known VMS and with current resources exceeding 1.1 billion metric tons of polymetallic sulphides, the IPB is arguably the largest and the most important metallogenic province for this type of deposits in the world (see Table 1). It is also the largest stock of base metals in Europe and its largest mining district. Those resources are about equally divided between the Portuguese and Spanish parts of the belt. Major deposits include: AIjustrel, Tharsis, Sotiel-Migollas, La Zarza, Azinalcollar-Los Frailes, Aguas Teñidas, Concepcion, Valverde, Las Cruces, and the world-class Rio Tinto and Neves-Corvo orebodies.

Table 1 - Comparison of ore Tonnage (Ore Mined plus Resources and Reserves)
From Massive Sulphide Deposits of Canada, Australia and IPB
Country Ner
dep
Tonnage
(Mt)
Cu
(Mt)
Pb
(Mt)
Zn
(Mt)
Ag
(Mt)
Au
(t)
Australia (Archean to Permian) 30 318 4.1 4.1 12.8 13345 486
Mount Read belt - Tasmania (Cambrian) 6 149 1.5 2.5 6.1 7423 156
Canada (Superior Province - Archean) 87 696 12.4 0.9 26.6 30621 669
Abitibi (Archean) 40 476 9.5 0.3 17.3 17284 575
Rouyn - Noranda + Val d'Or (Archean) 20 233 5.1 0.0 4.3 3995 528
Iberian Peninsula IPB (Dev. to Carbon.) 88 1 725 21.5 12.1 34.1 44707 898
Neves Corvo 1 270 4.3 0.4 3.8 2 664 ?
Mt - Million metric tons; t - metric tons
(Adapted and modified after Leistel et al., 1998)

Geologically, the mineral deposits are of volcanogenic origin and closely associated to submarine felsic volcanism. Ore-forming process were highly efficient in this province, having generated the world's largest concentrations of giant and super-giant polymetallic sulphide deposits, some of them with extremely high grades of copper and tin ores; unique, so far, with respect to other similar VMS elsewhere.

The sulphide deposits are stratabound and form lenses or sheets that may range up to 4-5 km long, 1.5 km wide and 80-100 m thick, and tonnage ranging up to 500 million tons (Rio Tinto, original). About 90 individual VMS are known in the IPB and most of them occur in clusters within the same volcanic centre.

The deposits occur within sequences of volcanic and sedimentary rocks. This rock-unit is underlain by phyllites and quartzites, and it is overlain by a thick monotonous flysch sequence of shales and greywackes. This flysch and the com-plex structural patterns, sometimes both neglected or misunderstood, pose major constraints in mineral exploration. The stratigraphic sequence, the physical properties of different lithotypes and the generally mild topography provide unique conditions that explain the outstanding performance of gravimetric methods in the IPB. As a matter of fact, most, if not all, known VMS give clear gravimetric response.

Mineral Exploration and Discovery

Mineral exploration in the IPB dates back to the Roman and pre-Roman times. This was a very successful period leading to the discovery of almost all the outcropping deposits. Practically all the mines operating until the start up of Neves-Corvo (1989) were worked previously by the Romans. Since the second half of the 19th century a renewed interest for these mineralizations turned them object of exploration and exploitation. Large reserves of polymetallic massive sulphides and secondary enriched copper were found. S. Domingos in Portugal, Rio Tinto and Tharsis in Spain were then rediscove-red and put in operation. After that phase it follows a long period of highs and lows, until the present.
From 1950 up till nowadays the exploration activity in the IPB led to the discovery of 30 deposits, totalling more than 1.1 billion tons of sulphides (Table 2). This outstanding performance corresponds to an average of 1.2 dep sits every two years, or about 25 Mty (Table 3). This success is tightly connected to the better understanding of the very complex geology and ore genesis, and through the application of improved geophysical techniques, especially gravimetry and, on a lower degree, electrical methods. Indeed, the gravimetric method has played a decisive role in most of the discoveries that took place since the 60's. Obviously, gravimetry is not a panacea as can be deduced from the fact that among several hundreds of detected anomalies only very few of them correspond to mineral deposits. Geochemistry did not give meaningful contribution to discovery so far, but the potential applicability of this method has not been fully tested and deserves adequate development (e.g., rock geochemistry, biogeochemistry and hydrogeochemistry).

The tremendous impact of the new geological approach concerning VMS genesis - the volcanogenic theory - being developed since the early 60's, played a major role in exploration strategies. Meanwhile, mining companies and government agencies were increasingly employing teams of highly qualified and trained geologists and geophysicists. Time and money was saved, and the accuracy in target selection and discovery efficiency enormously improved. The outstanding results (see Table 2) most of them well known from the literature, are clear enough to speak for themselves and no further considerations are justified here.

Table 2 - VMS Discoveries in the IPB (1950 - 1998)
Period Portugal Spain
Ner Deposits M. Tons Ner Deposits M. Tons
1950/60 2 60 1 > 50
1960/70 4 150 3 > 60
1970/80 4 > 300 6 150
1980/90 0 0 7 300
1990/98 1 10 (?) 1 > 40 (?)
TOTAL 11 > 520 19 > 600

Table 3 - Exploration Performance in the IBP
1950-1998
VMS M. Tons
30 > 1120
Average: 1,2 VMS 12 years


Of the referred discoveries, the Neves-Corvo orebody is perhaps the most notable (see Figure 3), not only because of its size (270 Mt; 4.3 Mt Cu; 3.8 Mt Zn), the anomalous high grades of Cu and Sn, but also the depth (250 up to more than 1000 m), and its implications for exploration in the IPB and other similar provinces. The discovery, in 1977, of such worldclass deposit, produced a great enthusiasm among the exploration community and soon a big rush took place, both in the Portuguese and the Spanish parts of the belt, involving several major mining companies. So, mineral exploration in the IPB received a tremendous impetus.

Figure 3: Size and grade characteristics of selected copper deposits

Figure 3: Size and grade characteristics of selected copper deposits
(adapted from Jansen and Bateman, 1981, in Carvalho et al. 1997).

After two decades since the Neves-Corvo discovery several inferences can be pointed out from results and statistics. Among them it turns out clear that in spite of the relatively high investment in the 80's, no discoveries occurred in Portugal. On the contrary, this was the exploration golden period in Spain, where 7 new deposits were discovered with a total of more than 250 Mt of polymetallic sulfides. Portugal also had a golden phase, but this occurred before, during the 70's, with 4 new discoveries, including the super-giant Neves-Corvo (see Figure 3 and Table 2). This fact deserves a careful analysis and raises the question on the reasons that justify such unsuccessful period in mineral exploration on the Portuguese side of the Iberian Pyrite Belt, but such analysis is beyond the purposes of the present article. Indeed, the author believes that the arguments, or complains, that may be presented to explain that fact, have more to do with lateral and external reasons rather than to the geological potential of that segment of this mineral province.

New Paths

Taking into account, on one hand, the occurrence of deposits with high grades in base metals and that practically all the most favourable areas of the IPB have already been explored and tested, in general to moderate depths (200-400 m), and, on the other hand, the fact that seldom an area or prospect, in any province, may be considered exhaustively studied, the author points out the following:

  • For practical purposes, three main groups of potential areas should be considered (Table 4): 1) "Normal" (VS outcrops or sub-outcrops); 2) Tertiary Covered; 3) Deep Flysch, that is more than 200 m thick (easy feasibility means that no especial problems will be met to discover a deposit, if present, by current methods already proved in the IPB; by difficult it is meant that more sophisticated methods are needed and the accuracy in interpretations is considerably lower than in other prospects).
Table 4 - Exploration Potential Areas in IPB
Depth (m) "Normal" Tertiary Sed.Basins Deep Flysch
< 200 0-3/A 2-4/B-C 0/-
200-500 3-4/B 4/B-C 3-4/B-C
> 500 4-5/C 4-5/C 5/C
Potential: 0 - Null, 1 - Very Weak, 2 - Weak, 3 - Fair, 4 - Good, 5 - Very Good
Feasibility: A - Easy, B - "Normal", C - Difficult
  • Each of these areas has specific features that pose particular problems to be solved for target selection, mainly concerning structural control, tectono-stratigraphy, and physical volcanology.
  • There still remains a considerable potential for targets between 200 and 500m in all the above mentioned areas, but the highest potential is beyond this lower limit in all the three group of terrains, particularly in the Deep Flysch domain. Surely, very few promising targets at depths shallower than 200m still remain in "Normal" areas; better possibilities may be offered by some Tertiary Covered sectors (Sado and Guadalquivir Basins).
  • The relation "exploration cost versus probability" is, about two and three times higher, respectively in the Tertiary Covered and Deep Flysch domains than in the "Normal" areas, Figure 4 (see also Table 4).
Figure 4: Probability vs. Cost in Exploration
Figure 4: Probability vs. Cost in Exploration (Adapted from Wolfe, 1986).
  • Exploration planning should take into account, since the beginning, that the final targets correspond to bodies of peculiar composition that may reach several hundreds of metres (in some cases a few kilometres) of extension, and that they behave as stratiform and stratabound units that make part of terrains which have been subjected to different stages of complex folding, thrusting and, in some cases, extensive overthrusting. Surprisingly, even now, cases are known where these parameters seem to have been ignored leading to invest in areas which a priori could be easily eliminated.
  • Management that imposes strict pre-determined depth limits for drilling selected targets, although supported in reasonable economics criteria, is very risky. Some tolerance and a certain degree of flexibility, crediting the exploration team, is the best way to avoid premature target abandon and, eventually, the missing of important discoveries just because a few meters more of core drilling. This situation is, unfortunately, not so rare as it may be supposed.
  • Ore processing improvements may turn the IPB deposits preferential targets for Zn, Au, Ag and, eventually, for some high technology metals.
  • Mainly because of what the author calls the Neves-Corvo effect a clear tendency for going deep is already taking place. This tendency has to be reinforced in the future in order to improve current discovery rate.
  • No places are left in the IPB today which offer readily identified prizes (see what happened in Portugal after the Neves-Corvo discovery).

Summing up all the above, it is author's opinion that a successful exploration strategy in the IPB requires, among others, the following:

  • Five to ten million US dollars;
  • A multidisciplinary approach and a high qualified team of professionals;
  • The application of up-to-date conceptual models;
  • Avoid large number of prospects, as much as possible;
  • Consider interpretations open to all possibilities;
  • Wise interplay of conventional and lateral thinking;
  • Think big and go deep;
  • Luck.

Concluding Statement

Common sense tells us that we should never say 'no' in exploration, especially for those who believe in Science and R, D&D. Simple facts such as the generation of a new model, the discovery or development of a new tool, may turn out an explored area in an under-explored set of prospects. Taking into account all the referred above and additional data from published and unpublished sources, and trying to answer the initial question raised in the title of this talk, it seems no risky to assume that, in spite of the long history and the tremendous amount of work already done, the Iberian Pyrite Belt, as a whole, is, in terms of exploration, probably at mid term between the so-called young and senile stages. As a matter of fact, vast Deep Flysch sub-areas and several segments of the Tertiary Covered still are, no doubt, at the earlier phases of the young stage. Therefore, it seems reasonable to conclude that the Iberian Pyrite Belt still offers interesting potential for exploration, although the risk and costs are now considerably higher.

Acknowledgements

The author gratefully acknowledges Paulo Jorge Ribeiro and Conceição Chamusca, EDM, for graphic computing work.
Thanks are also due to IGM for providing statistical data.

Bibliography

Barriga, F.J.A.S. & Carvalho, D., (eds.), 1997. Geology and VMS Deposits of the Iberian Pyrite Belt. SEG Neves-Corvo Field Conference 1997, Society of Economic Geology Guidebook Series, Volume 27, 207 p.

Carvalho, D., 1982, New paths to massive sulphide exploration in the Iberian Pyrite Belt, Serviços Geológicos Portugal, Comunicações, v. 68, t 2, pp. 149-162.

Carvalho, D., 1991, A case history of Neves-Corvo massive sulphide deposit, Portugal, and implications for future discoveries, Economic Geology Monograph, v. 8, pp. 314-334.

Carvalho, D., Barriga, F.J.A.S. & Munhá, J., 1999. The Iberian Pyrite Belt of Portugal and Spain: Examples of bimodal-siliciclastic systems. In: Barrie T. and Hannington M. (eds) Volcanic-Associated Massive Sulphide Deposits: Processes and Examples in Modern and Ancient Settings", GAC-MIDD-SE6 short course. Ottawa, 1997. Reviews in Economic Geology, V.8 (in press).

Gaspar, O.C., 1996, Microscopia e petrologia de minérios aplicadas à génese, exploração e mineralurgia dos sulfuretos maciços dos jazigos de AIjustrel e Neves-Corvo. Est. Notas e Trabalhos.IGM, t-38, 195 p.

Grimes, D1, and Carvalho, D., 1994, Geochemical exploration studies in the Portuguese Pyrite Belt, In Berger ed. VS Geological Survey Bulletin 2081, pp. 53-77.

Leca, X, 1990, Discovery of concealed massive-sulphide bodies at Neves-Corvo, southern Portugal a case history. Transactions Institution Mining Metallurgy, v. 99, section B, B pp. 139-152.

Leistel, J. M., Marcoux, E., Thiéblemont, D., Quesada, C., Sánchez, A., Almodóvar, G.R., Pascual, E. & Sáez, R., (1998) The volcanic-hosted massive sulphide deposits of the Iberian Pyrite Belt. Review and preface to the Special Issue. Mineralium Deposita v. 33, ner1-2, pp. 2-30.

Leistel, J.M. Marcoux, E., Deschamps, Y. Joubert, M., 1998, Antithetic behaviour of gold in the volcanogenic massive sulphide deposits of the Iberian Pyrite Belt. Mineralium Deposita, v. 33, ner 1-2 pp. 82-97.

Marjoribanks, R., 1997, Geological Methods in Mineral Exploration and Mining. Chapman & Hall, 115 p.

Pinedo Vara, I., 1963 - Piritas de Huelva. SUMMA, Madrid. 1003 p.

Sáez, R. Almodovar, G.R. and Barriga, F., 1997, Mineral Exploration in the Iberian Pyrite Belt. SGA Newsletter ner. 3. 6 p.

Schermerhorn, L.J.G., 1970, The deposition of volcanics and pyritite in the Iberian Pyrite Belt, Mineralium Deposita, v. 5, pp. 273-279.

Strauss, G.K., Madel, J., and Fernandez Alonso, F., 1977, Exploration practice for strata-bound volcanogenic sulphide deposits in the Spanish-Portuguese Pyrite Belt: geology, geophysics and geochemistry, Time and Strata-Bound ore deposits, Springer Verlag, pp. 55-93.

Strauss, G.K., and Beck, J.S., 1990, Gold mineralizations in the SW Iberian Pyrite Belt, Mineralium Deposita, v. 25, pp.237-245.

Wolf, J.A., 1986, Taking the Speculation out of mining. E.M.J., February, pp. 15.

 

 

Geomist: Geological and Mining Information System

Luis Torres; Jorge Lopes

Instituto Geológico e Mineiro

Introduction

Geomist, the EC Esprit project nº 24481, aims at building a demonstrator capable of providing a geological information service to mining companies operating in the Iberian Pyrite Belt (FPI, fig.1), as well as other interested entities and regional bodies in charge of land planning in the area, on a transnational framework. The service is based on Web servers installed at the Spanish and Portuguese geological surveys, in Lisbon and Madrid. Users will be able to access the institutional databases through those Web servers.

Fig. 1:  Geographic location of FPI
Fig. 2: Mining Companies permits at Portuguese FPI
Fig. 1:  Geographic location of FPI.
Fig. 2: Mining Companies permits at Portuguese FPI
(1965 - 98).

The Geological surveys of Portugal (IGM) and Spain (ITGE), will build such a demonstrator, by harmonising and reorganising their respective geological, geophysical and mining databases on the FPI; enhancing their internal LAN and internet connections, building a metabase in co-ordination with the recommendations of the Geological Electronic Information Exchange System (GEIXS), another Esprit project, to better implement an object-oriented model, improve interactivity and providing a coherent graphical user interface; creating the interfaces between the browser and the geographical information, incorporating not only 2D retrievals based on the GIS tools, but also 3D views and data exploitation tools.

Geomist presents an opportunity in Europe to combine transnational geo-datasets beyond the catalogue and metadata levels (fig.3), by no means a trivial task.

Fig. 3: Geixs Data Triangle Model
Fig. 3: Geixs Data Triangle Model.


The goals of the project

Major impacts of the development of the demonstrator are expected at two levels:

  • The mining companies, which invest in this important mining district, both in exploration and mine development. Chances of new deposit discoveries will increase, because new tools for information search and analysis will be provided, allowing the companies to fully exploit the data available and readily incorporate new data. Level of interest in the FPI is high (fig.2 and 4).
Fig. 4: Investments in Portuguese FPI (1990 - 97), excluding mine development
Fig. 4: Investments in Portuguese FPI (1990 - 97), excluding mine development.
  • Land planners, who will readily access geological information that is of general interest for deploying infrastructures, managing ground water, and preserve and exploit natural resources. This will benefit regional development.

Exploitation of the results will take place, by an appropriate dissemination strategy, involving the organisation of user groups, participation in seminars and local events and user support through the web server itself. Upon project completion, the demonstrator should evolve into a full fledged service, and be extended to other geographical areas and mining districts, based on the same user and graphical interfaces, software tools, browsers, data and metadata models.

System architecture

To improve accessibility to the existing geographic data a set of tools will be designed to allow for remote data access and querying of different databases at a time, using a user friendly and platform-independent interface (Fig. 5).

Fig. 5: General GIS - WWW gateway architecture
Fig. 5: General GIS - WWW gateway architecture.

The Gateway Mediator

Because a different access level exists, the user is recognised as an ordinary GIS user, with all restrictions. The API - Application Programming Interface is the call interface and data structure provided by the GIS-API to the application programs. At this point is defined the access level of the user and he is granted the facilities associated to this level.

To ensure the accessibility to the data each application checks the permission with the authentication password introduced. The programming interface language chosen to implement this functionality is the Practical Extraction and Report language (PERL 5) developed by Larry Wall.

PERL 5 can be defined as smart glue between Web pages and GIS or Database engines (DHTML>CGI>PERL>GIS/DB). The main feature in PERL 5 is to provide a simple and general interface to the operating system below and is able to communicate with other programmes, printing on different programme shells and devices. In this way, the gateway system can exploit the existing GIS and Database interfaces to the Operating System and the PERL ones to connect CGI applications with GIS/DB engines. The PERL also allows for a modularised and object-oriented system design.

GIS Engines

The GIS engines - ArcView, Arc/Info - have been implemented. These GIS engines are widely applied to the management of large datasets, and were selected among a number of different solutions, for a variety of reasons. Firstly, related with ArcView 3.x, is the easy-touse set of software tools upgraded with add-on programs, named extensions that provide specialised GIS functionality. One of these extensions, named ArcView Internet Map Server, enables to put maps and interactive mapping applications on the Web. Secondly, related with the interchange facilities between ArcView and Arc/lnfo, based on specific macro-languages supported by both. Finally the capability to integrate these engines with an independent database management system, such as Oracle.

Fig. 6: Example of GEOMIST interface with GIS interaction
Fig. 6: Example of GEOMIST interface with GIS interaction.

Database Engine

There is a database management system implemented over an Oracle engine. The interaction with this database engine is granted with front-end applications designed to run in multiple personal computer platforms. Additionally there is a specific development layer supporting a set of functionality to make available the information through the Internet. This software, named Oracle Web Application Server, will be integrated with GIS engines to allow users to access alphanumeric data from GIS queries and vice-versa.

To allow independent queries at different access levels, the GIS-API interface is implemented in a set of layered modules, with the lowest used to communicate with the GIS engine and database engine, and the highest to provide a transparent function call interface to the user application. All intermediate modules allow transferring the general query function request to the specific engine and get back the results.

Fig. 7: Example of GEOMIST interface with database interaction
Fig. 7: Example of GEOMIST interface with database interaction.

The graphics or alphanumeric results produced by a query are returned back to the caller in a standard format: graphic image file (.gif) or hypertext mark-up language (html). These objects are displayed inside a query result page on the client browser window without any need for plug-ins (Fig. 6 and 7). The system is available at Uniform Resource Locator (URL) http://geomist.igm.pt. This is a preliminary version still under construction.

 

 

A Perspective on Neves - Corvo Mining Project Development: A Success Against an EU Trend

Fernando Real

Industrial Director, Somincor

Abstract

The Neves-Corvo underground copper and tin mine is the largest operating mine in Portugal and probably the most significant base metal mine in Western Europe. The mine is operated by Somincor (Sociedade Mineira de Neves-Corvo, S.A.) and produces copper and tin concentrates. The concentrate ore shipped to smelters overseas.

Somincor has been in operation since October 1988 and has enjoyed considerable success. Copper and tin ore production has increased virtually every year and the 1998 target is 2,3 million tonnes ofore to be processed to 490 000 tonnes of copper concentrate containing 119 500 tonnes of metal - ranking Somincor as one of the world's most significant copper mines.

The success of the Neves-Corvo project has brought significant benefits to the local and regional communities in the Lower Alentejo - one of the poorest in the European Union. Backing for the project has been b from the European Union with, for example, an important part of the loan financing being provided by the European Investment Bank.

Neves-Corvo was brought into production at a time when the global environmental movement was gaining strength. Somincor's management and shareholders have always strived to apply environmentally responsible measures.

Neves-Corvo can be seen as a new generation European mine: the discovery was mode using sophisticated geophysical techniques and modern mining methods and equipment ore employed. Somincor's economic success and proactive environmental and social attitudes are in contrast to those prevalent at older European mines. Public opinion on mining has been shaped by negative aspects of these older generation mines. Neves-Corvo shows that mining is like any other industry - with the right approach it con be run in a modern, responsible fashion for the benefit of a wide range of stakeholders.

Introduction

The Neves-Corvo mine is located in the Baixo Alentejo region of southern Portugal towards the Western end of the metallogenic province known as the Iberian Pyrite Belt (IPB), one of the largest metallogenic provinces in the world. The mine is approximately 220 km Southeast of Lisbon and 80 km north of Faro (Fig.1). The nearest towns are Castro-Verde and Almodôvar, approximately 20 Km from the Mine.

Operated by Somincor (Sociedade Mineira de Neves-Corvo, S.A.), the mine produces copper and tin concentrates by processing massive sulphide ore and smaller quantities of shale-hosted ore in two on-site concentrators. The concentrates are transported by rail to Setúbal Port and are then shipped to smelters overseas.

Figure 1: Location of the Neves-Corvo Mine and Simplified Geology of the Iberian Pyrite Belt
Figure 1: Location of the Neves-Corvo Mine and Simplified Geology of the Iberian Pyrite Belt.

Production started in October 1988 and Somincor has enjoyed considerable success since then, with ore production increasing virtually every year. Currently mine annual output is 2,3 million tonnes of ore with an average grade of 5,9% copper. This allows for the production of 490 000 tonnes of copper concentrate containing 119 500 tonnes of copper metal and 6 000 tonnes of tin concentrate containing 3 300 tonnes of tin metal. Most of the concentrate produced (around 80 to 90%) is sold on long term contracts to smelters throughout the world, with the remaining being for sale on the spot market.

In terms of safety and environment, one of Somincor's major objectives is to have an industrial site which meets, and where possible exceeds, the best world-wide mining practices and standards.
Currently the mine employs around 1100 people, being an important contributor to both local and national economies.

Discovery and Company Background

The Iberian Pyrite Belt is a metallogenic province of volcano-sedimentary origin of Upper Devonian to Lower Carboniferous age, that is located in the southern part of the Iberian Peninsula and has a long history of mining for iron pyrites, copper and gold stretching back to pre-Roman times.

In 1972, a consortium of Portuguese and French companies began a systematic exploration programme of a large area of the Iberian Pyrite Belt located in the Lower Alentejo. Initial geological and geophysical work, including review of available data, resulted in the identification of several promising gravimetric anomalies. One of these anomalies, located close to the Neves village, was first drilled in 1973. Since the drill hole did not encounter mineralisation and the stratigraphy intersected appeared to be very complex, the consortium halted drilling at 244 m and moved on to examine other anomalies.

However, later study of the drill cores and re-evaluation of the gravimetric anomaly led the consortium to deduce that if any ore was to be found it would be as a deep lying body at about 300 m below surface. In 1977, reinforced by further geological and geophysical evidence, the consortium returned to the site with the objective of drilling deeper. That year, two mineralised intersections were made: the first in the orebody known today as Neves, at 350 m, and the second in the orebody known as Corvo at 500 m below surface. Further drilling led to the discovery of the Graiça orebody in 1978 and the Zambujal orebody in 1979. Later in 1987, the Lombador orebody was discovered.

Figure 2: Geological cross section through Corvo and Graça orebodies
Figure 2: Geological cross section through Corvo and Graça orebodies.

The orebodies are located at depths between 250 to more than 1000 meters (Fig. 2). They are on top of a pile of acid volcanic rocks and intercalated shales. The overlying rocks consist of a sequence of flysch-type sediments (greywackes and shales) of Lower Carboniferous age. Due to the depth of location and the grades, especially of copper and tin, the deposit is regarded as one of the first deep, concealed orebodies ever to be discovered and is characterised by exceptional reserves and grades.

The company Somincor - Sociedade Mineira de Neves-Corvo, S.A. - was formed in 1980 after preliminary evaluation showed the copper rich deposits of Corvo and Graça to be economically viable. The company's original shareholders were the members of the discovery consortium: EMMA (Empresa Mineira e Metalurgica do Alentejo) with 51%, representing the Portuguese state, Peñarroya and BRGM (Bureau de Recherches Géologiques et Minières) both with equal parts of the remaining 49%.

The project work started in 1981. In the early years work concentrated on surface drilling and metallurgical testwork, and gaining access to the orebodies. The principal underground infrastructure elements of the mine, namely the ore-hoisting shaft, spiral ramp for man and equipment access to the mine and the main haulage way, were constructed during these initial years.

In August 1985, Rio Tinto acquired the 49% share holding held by Peñarroya and BRGM. The remaining 51% of the company is still owned by the Portuguese state company which has been renamed "Empresa de Desenvolvimento Mineiro" (EDM).

Following the change in shareholders, a detailed re-assessment of the project was carried out confirming the basic scope, concepts and criteria. Nonetheless, changes to the stoping and haulage methods were introduced. In early 1986, detailed engineering design and construction contracts were awarded to Kaiser Engineers and Boliden WP-Contech AB, respectively.

Capital expenditure to production totalled approximately USD 350 million.

After a three month start up period in late 1988, commercial production from the Upper Corvo and Graça orebodies started on 1 January 1989 with 1 million tonnes of ore production being achieved in the first year.

Important reserves of tin, intimately associated with the copper ores, were identified during the mine construction phase. This prompted the rapid construction of a tin plant that was inaugurated in May 1990 at a capital cost of approximately USD 70 million. The annual ore production that year totalled 1,5 million tonnes of which 270 000 tonnes were processed in the tin plant.

By this time, the Neves-Corvo mineral resources inventory, was:

Neves-Corvo Mineral Resources
December 1988
Metal Ton X 103 % Cu Metal Cu
Ton X 103
% Sn Metal Sn
Ton X 103
% Zn Metal Zn
Ton X 103
Copper 30897 8.03 2481 - - 1.40 -
Tin 2866 13.39 384 2.37 68 1.30 -
Zinc 32640 0.46 - - - 5.72 1867

Mineral Resources

The deposit is similar to others in the IPB in many ways. However, it is atypical in high grades of copper and tin, and the b zonation of metals present. There are several types of mineralization recognised, massive sulphide, rubané, fissural, and breccia (Fig.3).

Figure 3: Ores Types in Neves-Corvo
Figure 3: Ores Types in Neves-Corvo.

Most of the massive sulphide mineralization consists of pyrite. The main orebodies are composed of rocks which are 60-100% sulphides. Near the contacts with the surrounding rocks they usually contain discontinuous shale lenses and partings. There are also some irregular segregations of silica and silicates within the lenses. The b metal zonation enables further sub-division into separate ore types. These are dependent on concentrations of the minerals containing the metal, such as chalcopyrite, sphalerite, galena, cassiterite and accessory amounts of tetrahedrite-tennantite. Three main ore types are defined as, copper, tin and complex zinc depending of the main economic metal present (Fig. 4).

Figure 4: Metal Zonation
Figure 4: Metal Zonation

The present mineral inventory, after 10 years of operation, and as a result of more resources being added to the inventory, from exploration activity on the mine lease area is:

Neves-Corvo Mineral Resources
December 1997
Metal Ton X 103 % Cu Metal Cu
Ton X 103
% Sn Metal Sn
Ton X 103
% Zn Metal Zn
Ton X 103
Copper 32761 5.14 1683 0.18 - 0.91 -
Tin 2051 10.79 221 2.42 50 2.15 -
Zinc 50387 0.48 - 0.10 - 5.97 3013

From the above inventory, the mineral reserves, according to the SEC definition (United States Securities and Exchange Commission), with "proved and probable" reserves, were on 31 December 1997, 23,6 million tonnes of copper ore with 5,1% Cu, 1,9 million tonnes of copper and tin ore, with 9,6% Cu and 2,2% Sn. For the purpose of estimating mineral resources, geological cut-off grades, were 2,0% Cu and 1,0% Sn.

Mining Strategy and Development

When the project started, the aim was to develop a 1,0 million tonnes per year mine based on the copper rich sulphides of the Corvo orebody while retaining option for further expansions.
In 1986 most of Corvo and Graça were already delineated by a grid of 100m by 100m of surface drill holes, and a regular infilling by underground drilling in the centre, down to 25 m by 25 m spacing. This drilling gave a reasonable understanding of the mineral zonation and allowed an Indicated resource to be estimated in terms of the USBM system. The drill cores obtained supplied representative samples for mineral processing and geomechanical testwork. Furthermore, the resulting geological interpretation provided the information for siting the basic mine infrastructure, and gave warning of the possible presence of complicated faulting.

Thus, the access ramp was positioned between 20 and 50 m below the footwall of the Corvo orebody and an intermediate haulage level was laid out at about 500 m below the surface. It also identified the site where the vertical ore hoisting shaft - which was to be at the centre of the orebodies - should be sunk. However, the decision to position the haulage, crushing and hoisting facilities was also greatly influenced by the minimisation of the capital required (Fig. 5).

Figure 5: Underground Infrastructure
Figure 5: Underground Infrastructure.

It was realised from an early stage that the high grade of the ore, and consequently its high unit value, would make it imperative to select a mining method in which high recoveries would be obtained. On the other hand, the structural complexity of the orebodies and the dubious geotechnical quality of the hanging wall demanded the use of a very flexible stoping system. As a result, two main methods were studied: blast hole stoping with delayed fill and longitudinal cut and fill. However, it soon became obvious that cut and fill would be the most appropriate method (Fig. 6).

Figure 6: Drift and Fill Mining Method
Figure 6: Drift and Fill Mining Method.

In the meantime, the geological, engineering and financial data generated led to the modification of the scope of the project with the mining rate being increased to 1,3 million tonnes per annum. Initial production was to come essentially from Graça and the upper part of Corvo followed in later years by lower Corvo and Neves.

Production Phase 1989 - 1998

As already mentioned, commercial production began in 1989 using the drift and fill mining method and one concentrator with a design capacity of 1,3 million tonnes per annum.

In 1990 total production increased to 1,5 million tonnes per annum with the commissioning of the second concentrator to treat tin and copper-tin ores at a rate of 0,3 million tonnes per annum.

The constant search for improvement, coupled with the expansion of the mine into new areas with more regular orebody geometry, lower grades and lesser requirements for selectivity, led to the introduction of a new mining method - sub-level benching (Fig. 7). This has resulted in an increase in the production capacity of the mine and productivity gains - although average ore grades are less than those of the early production years. Current production is 2,3 million tonnes per annum with 2,5 million tonnes per annum being planned for 1999 and subsequent years.

Figure 7: Sub-level Benching Mining Method
Figure 7: Sub-level Benching Mining Method.

In addition to sub-level benching a series of other improvements have been introduced over the years.

The construction of a 32 Km railway spur to join the mine to the national railway network was of great importance. The railway is used for the outward transport of copper and tin concentrates, and to bring major consumables to the mine, principally back fill sand. An important aspect of this investment, besides costs, was the elimination of the negative impact of total road material transport of more than one million tonnes per annum.

Modifications, with only minor capital expenditure, and continuous improvements in the concentrator flow sheets have allowed processing capacity to be raised to 2,5 million tonnes per annum, from the original design capacity of 1,6 million tonnes per annum.

The main operating statistics over the past 10 years are as follows:

Total ore processed (M ton) 14,8
Copper average grade (% Cu) 8,76
Till average grade (% Sn) 1,84
Copper metal produced (K ton) 1.200
Tin metal produced (K ton) 30
Sales (MUSD) 1993
Profit before tax (MUSD) 517

Safety and Environment

One of Somincor's key permanent objectives is to have an industrial site which meets, and where possible exceeds, the M best world-wide mining practices and standards.

Neves-Corvo was developed in the mid-1980's, a time when awareness of environmental issues was rapidly increasing. Somincor's track record of environmental matters reflects this timing since it was one of the first Portuguese companies to take a comprehensive stance on the environment - with the mine construction incorporating state-of-art environmental features of the time and b Board level support being given thereafter on a continuous basis to environmental studies and measures.

An environmental impact assessment on the project was carried out in 1984, as part of the feasibility stage, and complemented in 1989 with the establishment of the key environmental indicators, in and around the industrial site.

The principal potential impact activities of the company are the discharge of treated effluent into a nearby river, the management of the tailings dam, and dispersion of dust from site and concentrate transport.

All of these aspects are treated as high priority matters by management. Somincor works closely with international and national authorities and experts to ensure that company actions and policies are the best possible.

In terms of safety, the company is committed to minimise, and if possible to eliminate, all injuries and illness due to unsafe acts or working conditions, as well as, property damage or operational interruptions caused by incidents. Somincor adopted the NOSA Safety System in 1990, and has made steady progress, with improvement of the safety indices since then, to a level on a par with those reported by other underground operations elsewhere (Fig. 8).

Figure 8: Lost Time Injury Frequency Rate
Figure 8: Lost Time Injury Frequency Rate.

The progress achieved to date, considering the workforce had little or no previous mining experience, can be considered good. However, this is an area of continuous improvement, and there is still a long way to go, prior to the elimination of accidents.

Community Involvement

Somincor has an important role in the local and regional economy, being responsible for the direct and indirect employment of about 25% of the total working population in the region.

Most (75%) of the workers who today work directly for Somincor in Neves-Corvo were hired in the region. Only when the company needed technical specialists whose skills were not available locally were people from outside the region hired.

The presence of Somincor is bly felt in the region, principally in the following domains:

  • Employment generated by the company - about 1 100 direct jobs and 1 000 indirect jobs;
  • The income of the company's employees and those of companies contracted by Somincor has a major impact on the local economy;
  • The income derived by local councils from the taxes paid by the company;
  • Greater dynamism in social and cultural activities caused by having a young and active population resident in the area. This population has higher purchasing power and higher technical qualifications than the regional averages;
  • Significant improvement in some infrastructure elements with regional impact (water supply road and rail network: other public social and cultural facilities).

In addition to these economic links to the well being of the local and regional community, the Company also recognises that it has the responsibility to support plans, projects and initiatives aimed at improving the quality of life of the community.

Such support comes in diverse forms, including direct sponsorship of repairs to local architectural heritage, assisting local authorities and N60's with specific projects of community interest, based on principles of mutual respect, partnership and long term commitment.
Mine closure plans, both on physical and social aspects have been developed, and being proactively discussed with stakeholders.
Somincor has always tried to keep the public and media fully informed of developments at Neves-Corvo. Public opinion of mining in Portugal has traditionally been of a dirty, unsafe, pick-and-shovel industry. Hopefully, Somincor has been able to show in the past 10 years that modern mining is a sophisticated and responsible industry which can bring considerable benefits to the entire community.

Future Development

In common with all mining companies, Somincor is a price-taker and has to look primarily to its production levels and costs to ensure its economic health.

The copper grade of the run-of-mine ore has been dropping steadily in recent years and, although grades are expected to be stable at 5-6% Cu until the end of mine life, this grade is half that of ten years ago when the mine began production. The contribution from tin ores will be greatly reduced in about 3 years when the known reserves of the high grade tin ore are expected to be exhausted.

To attenuate the revenue losses from producing less metal in concentrate, Somincor has been building up ore production levels from the initial 1,6 million tonnes per annum to the current annual figure of 2,3 million tonnes per annum and a target for 1999 of 2,5 million tonnes per annum.

This increase has required a co-ordinated effort involving rescheduling of reserve definition, mine development to open up new areas quicker, re-organisation of the underground workforce and introduction of new/or revised mining methods and alterations in the concentrators. Somincor is committed to continuously looking for better ways of conducting its business.

Somincor has also devoted much effort to reducing unit costs through introducing new technologies and working methods.

Special attention is given to projects with beneficial environmental aspects. This has been the case with the Pastefill Project where, as a result of several years of work, a plant will soon be opened where part of the concentrator's tailings will be mixed into a paste as a partial substitute for the current sand-based backfill. This will impact in a much wider way, on tailings disposal management, increasing the capacity of the existing tailings dam, due to reduced tonnage to store.

Another example of a project where the implementation of new technologies is expected to bring substantial benefits in terms of improved efficiency is dispatching of underground mobile equipment and personnel. Although computer assisted dispatching has long been used in open-pit mines, it is only the past year or so that its application in complex underground operations such as Neves-Corvo has been developed.

Apart from copper and tin, Neves-Corvo also contains about 3 million tonnes of zinc metal in medium grade resources distributed in several orebodies. Somincor has studied the zinc resource since the time of the original discovery. Currently it is thought that the best way to develop the zinc resource, while at the same time extending mine life, is to run an operation where zinc is recovered in the copper concentrator when there are insufficient copper ores to fill the copper concentrator. The remaining tonnage of copper ore would be treated in the tin plant. This long-term plan is subject to the results of economic and technical studies (Fig. 9).

Figure 9: Long Range Plan: 1998-2024
Figure 9: Long Range Plan: 1998-2024.

Somincor also runs exploration programmes in the mine lease area and in an exclusive prospecting area immediately adjacent to the mine lease area. Encouraging results have been obtained - with both extensions to known copper orebodies and new orebodies being discovered. These new discoveries are at greater depth than current mine workings and are further from existing infrastructure. However, it is likely that future work will result in the definition of more reserves.

Outlook

Neves-Corvo has the potential to remain Europe's major copper producer for many years, and probably to become an Ii important zinc producer towards the end of mine life. The initial years of operation have been very successful, both technically and financially, helped by a favourable environment of metal prices. The Company is aware that it cannot be complacent, with the predominant trend of the copper industry towards ever larger, more efficient, low cost operations making competition ever harder. Management is confident that Somincor's current position on the world copper production cost curve can be maintained and improved through better use of people and technology, keeping the momentum for innovation and continuous improvement on the operation, bringing further benefits to all stakeholders in Somincor.

 

 

Mining Investment and the Former Planned Economics

Robert Wilson

Chairman, Rio Tinto Plc

Introduction

First, I would like to thank our host, the Portuguese Organising Committee, for giving me this opportunity to address the World Mining Congress today.

The subject which I have been asked to discuss is "my perspective on the implications for the mining industry of the process of globalisation and the spread of the market economy to the former planned economies".

That is a particularly appropriate topic as many of you here today come from the former planned economics.

Obviously, you know a great deal more than I do about the challenges that your countries and mining industries face as a result of the opening up of your economics over the last 10 years. What, then, can I tell you that perhaps you do not already know?

It appears to me that a key difference between a market economy and a planned economy lies in the role of investment. What I want to talk about today is investment, and I would like to do this by considering three questions:

(1) Why Rio Tinto does not have a single mine in a former planned economy. (Nor indeed have many of our competitors.)

(2) Why I think that is a bad thing.

(3) What we - and I mean all of us - can do about it.

(1) Rio Tinto's experience in former planned economies

Before I start on this topic, I would like to emphasise that although Rio Tinto does not have any operations in the former planned economics, we do have exploration programmes in a few countries. In the first half of the decade we investigated specific resources in a number of the former planned economics.

Clearly, we are working for success in the countries where we are still exploring and we believe that the conditions for success exist. The observations I am about to make are generalised and do not all apply to all of the former planned economics. Indeed the countries of the Former Soviet Union and of Eastern Europe have changed and developed in such different ways during the 90's that my task today is well-nigh impossible. I must ask you to forgive me when I oversimplify in order to try to make my point.

In order to understand the decisions that Rio Tinto makes you have to understand two fundamental principles about the way we work.

  • The first is that Rio Tinto is driven by investment.

This investment process has two stages: first, our shareholders invest in Rio Tinto: and second, we invest their funds in mineral resources.

Our shareholders are mainly pension funds, investment funds and, to a lesser extent, private individuals. No single shareholder controls Rio Tinto. The largest of these institutional investors owns only a few per cent of our shares.

Because of the range and quality of our portfolio of resources, many of our shareholders hold our shares as their principal investment in the mining sector.

Our shareholders expect us to maximise the value of their investment and that is our goal.

  • The second is that investment is a rational process

Before we make any investment we assess the benefits we expect to receive and the risks we will incur. Of course, that involves many areas of uncertainty but we aim to reduce the uncertainties through our technical, commercial, economic and financial skills.

It follows from these two principles that when we make decisions about investment in former planned economics, we are engaged in a transparent and logical process. We can seek out investment opportunities and we can analyse them but at the end of the day it is the quality of the investment opportunity, which determines the outcome of the investment decision. All we do is apply our analytical skills and judgement to the information, which is available to us.

What then are the factors, which we look at?

  • First, the geological potential for large scale mineral resources in locations which are logistically feasible.
  • Second, a stable and predictable legal framework for investment.
  • Third, a fair tax regime.

What do we find in the former planned economies?

(a) Geological potential

First, we find that the geological potential for large scale mineral resources in locations which are logistically feasible is much more limited than many people in the West and in the former planned economics thought 10 years ago. Indeed, the geological potential is much more limited than many people think today.

There was a widespread belief in the Former Soviet Union that they had valuable natural resources which Western markets needed and which Western companies were desperate to get their hands on. Perhaps that was so in the case of oil and gas. In minerals, though, the truth is very different.

In Russia, the Central Asian Republics, China and Mongolia there are large areas which are so remote from any infrastructure that it is simply not economic to develop anything other than gold or diamonds (which have exceptionally high value: density ratios).

There has also been extensive and systematic exploration in many areas of the Former Soviet Union, especially around the major mineral resources. That exploration has yielded a number of deposits which are well known to the international mining community. The Sukhoi log gold deposit in Russia and the Vasilkovskoye gold deposit in Kazakhstan are examples. But even among the best-known resources, there appears to have been little progress towards development.

There is, of course, the potential for new discoveries but, in this respect, the former planned economics are competing for a diminishing pool of exploration dollars with many other parts of the world.

The difference between Rio Tinto's appraisal of the geological potential of the former planned economics and the more traditional view that these countries have great mineral riches is to some extent a question of geology: more fundamentally, it is a question of investment. There is no disputing that mineral resources exist, the issue is whether they can be economically extracted.

In my experience, based on a few visits to Russia in the easy 1990s, there is a very big gap between a view of project viability as tempered by orthodox communist education and that of the Western mining industry, as exemplified by Rio Tinto. Let me explain.

For Rio Tinto, a decision to invest in a mining project involves an assessment of the capital cost of development and the environmental issues associated with it. It involves estimating operating costs and understanding the markets for the product and the prices to be obtained. All of this leads to an estimate of the expected returns from the investment and a decision to proceed requires that the returns are sufficient to compensate for the cost of capital and the disks that would be taken, whether risks relating to the capital costs, technical risk, commercial or political risk. All this determines the viability of the project.

This contrasted with the attitude towards investment of many of the Russians 1 met in the early 1990s. For them it was more straightforward. An orebody exists. The technology exists to recover the minerals. Therefore it is viable. In other words, investment was an entirely production-focussed decision process, which tended to ignore capital costs, operating costs, markets, return on investment and risk.

(b) Legal framework

As with any investment decision, such geological potential as there is can only be explored in a country, which offers a secure legal framework.

Many former planned economics fall at the first post because they have no mechanism for mining companies to turn exploration permits into mining licences. A mining company could carry out exploration for five years, spend millions of dollars, and be successful in finding an economic resource. The resource is then put out to tender. Another company, which has contributed nothing, puts in a higher bid and all the investment is lost.

When we discuss this problem with governments, one or two have said, "Oh, that is not a problem under our law, all you need to do is to advertise the tender in one newspaper. Advertise your tender in a small local newspaper, and no one else will know about it. You can put in your bid and you will win."

But we are not prepared to gamble millions of dollars on whether or not our competitors read that small local newspaper.

Also, we find it very difficult to conform with the letter but not the spirit of national laws in this sort of way. Law needs to be fair and transparent. Otherwise it all too easily leads to corruption.

Several countries have taken steps to address this kind of problem by putting in place a new mining law. But even when a new mining law is in place, we have to have confidence that the law will not be changed fundamentally at some point in the future. Mining projects last 25 years or more. We are probably all aware of one or two instances where, for exam-ple, a simple presidential decree has resulted overnight in the imposition of huge export taxes on gold, thereby crippling the economics of any investment.

The process of building confidence in a host country takes time. The contacts that we have with host governments, the mining industry, geological institutes and businessmen all give us a picture of the country. In some cases, the picture, which emerges, encourages us to begin exploration.

But in other cases, we find that we simply cannot do business at all. 1 can think of one country, which offered a particular resource for tender and then, in the middle of the tender process, announced a deal with another company.

If a country is prepared to abandon an international tender because of a perceived short term benefit, then what confidence can we have that such a country will not abandon any other commitments it makes if there is a short-term advantage to be gained by so doing?
1 should add that the resource in question remains undeveloped and, to the best of my knowledge, there is little prospect of it being developed in the foreseeable future.

(c) Tax regime

In a planned economy, taxation is more or less irrelevant because there is no concept of ownership or profit. Investment decisions were driven primarily by the need to achieve production targets.

In a market economy, economics determine investment decisions. Rio Tinto does not have a Five-Year Production Plan. We invest in projects, which can generate an acceptable rate of return for our shareholders. Taxation determines the proportion of the profits from any investment, which will be enjoyed by those who undertake the risks of investment.

The former planned economics have learned a great deal since the collapse of communism, including about the relationship between taxation and investment But the process is not yet complete and expectations of the governments of the former planned economics still sometimes seem unrealistic to the Western investor. Part of the problem is one of trust. Governments of the former planned economics often fear that they will be exploited by Westerners. This may encourage not only excessive tax demands but also indirect taxes such as royalties and free carried interests. These problems, incidentally, are not unique to the former planned economics. They are also seen in some of the emerging nations elsewhere in the world.

Unfortunately, these measures distort the economics of the resource because they do not relate to the cost of extracting it. Too often, the result is not that the country maximises its revenues. The result is that the resources are not developed.

In a study last year, we looked at the effects of different tax regimes on a portfolio of 36 resources. We evaluated the return investment of each of the 36 resources in 45 different tax regimes found around the world. We then applied a minimum rate of return to see which of the projects would be acceptable to Rio Tinto. The results were stark.

In the best regime, which was Sweden, 33 out of the 36 resources would have been developed by Rio Tinto as economically viable. In the worst case, which was Russia, only seven out of 36 would be developed. And this take no account of the higher risks associated with investment in Russia.

Because so many more projects would proceed, the study showed that the tax revenues for Sweden would, as you might expect, be more than three times the tax revenues for Russia. But the most important factor was the non-tax revenues which Sweden would cam and Russia would not: wages and local supplies, for example. In terms of non-tax revenues, Sweden would gain revenues worth more than 10 times those that Russia would gain. Investment in mining can be an important motor for economic development.

Even if a resource can be developed, royalties and carried interests reduce the overall benefit to the country because they reduce the overall size of the resource, which can be economically extracted. A royalty is simply another fixed cost, which increases the cut-off grade of the resource and reduces its life.

Consequently what Rio Tinto is looking for is a fair, profits-based tax regime in which we can use our skills to maximise the resource for the benefit of the host country and our shareholders.

In summary, then, the reason why Rio Tinto does not have any operations in the former planned economics is that to date we have not been able to identify any opportunity, which offered a satisfactory return on investment.

It appears that we are not alone. There have been only a handful of investments by intentional mining companies in the former planned economies in the past few years. What is more, if exploration expenditure is an accurate guide, things will not improve much in the next few years. Exploration expenditure in the Former Soviet Union is running at well below $100 million a year - about two per cent of worldwide exploration expenditure.

Perhaps of most concern is that there has been so little progress in the past 10 years. An article in the joule Mining Engi-neering in January 1992 commented on the "many factors" which were then prompting overseas mining companies to remain "cautious" about investing in the former Soviet republics. Many of the observations in that 1992 article are equally applicable now. For example that the former Soviet Union is currently moving through the most critical period ever in the restructuring of its national economies. Other factors identified in 1992 as barriers to investment included:

  • uncertainty over ownership rights to mineral resources;
  • difficulty in obtaining detailed geological data;
  • an unclear decision-making hierarchy;
  • a failing banking and currency system;
  • an untested legal and taxation environment;
  • poor infrastructure;
  • and, a availability of predominantly small, low-grade and remote ore deposits to the overseas investor community.

Many people in the former planned economies are now doubting the benefits of the economic reforms of the past 10 years. Looking at the state of some of these economics, we can all understand that reaction. But it may be that the problem is one of too little reform, rather than too much. In the minerals sector in many parts of the Former Soviet Union, there has been virtually no reform. Without reforms there will be no investment. Time is not being kind either. The potential for economic discoveries is a moving target. Resources that were economic yesterday may not be economic today. The following table shows selected metal prices in January 1990 and August 1998.

  Jan 1990 Ago 1998 Change
Aluminium (c/lb) 69,3 59,5 -14 %
Copper (c/lb) 107 74 -31 %
Gold ($/oz) 410 284 -31 %
Lead (c/lb) 32,0 24,3 -24 %
Nickel ($/lb) 3,21 1,85 -42 %
Platinum ($/oz) 497 372 -25 %
Zinc (c/lb) 58,7 46,7 -20 %

Prices have declined by between 14 per cent and 42 per cent over the eight years. Over the same period the dollar's purchasing power has fallen by about 30 per cent. In real terms, therefore, prices of these commodities are 40 to 70 per cent lower than they were in 1990. These are not just cyclical movements: they reflect a long-term decline in metal prices.

With metal prices at these levels none but the most exceptional mineral resources can be economically developed. Inevitably, this means that overall expenditure on exploration will fall and the competition for the "exploration dollar" will increase. Only those countries, which can offer outstanding exploration potential - and the right investment climate - will be able to attract exploration investment in the next few years.

(2) Why the lack of investment is a bad thing

The goal of all countries is sustainable development. In pursuing that goal any country needs natural resources and human resources, supported by financial resources.

In the long-term it is the people of a country who make its development sustainable. They do that through the wise use of natural resources, through the development and adaptation of technology and the ability to invest in their own future. Sustainable development is a cycle of wealth creation and re-investment.

Some countries have been engaged in this cycle for a century, even two. Many other countries are only now emerging into it. The question for these countries is: how do we begin the cycle of wealth-creation and investment ?

In my view, one answer is through the development of mineral resources. Mineral resources can generate wealth, which can then be reinvested in people. Exploitation of its natural resources was an essential part of Britain's economic development. More recently, and more importantly, it was also a major element in the development of the US economy, as indeed it has been in many other parts of the world. Mining can aid development in several ways:

  • First, it can provide revenues for education, training, infrastructure and healthcare in the broader economy.
  • Secondly, it can provide training and experience for its employees, not only in technical skills, but also in the commercial and economic disciplines, which are necessary in a market economy.
  • Thirdly, it can create a demand for local products and services, which can themselves, become the source for broader economic development.
  • And, of course, it provides export income and an important source of foreign exchange.

These benefits derive not simply from the development of the resource but from the way in which the resource is developed. Only a mine, which is run to the highest international standards and has to compete for investment with other similar operations will introduce the disciplines which are necessary for sustainable competition in the world economy. When I talk of the highest international standards in mining development, I am referring to:

  • commercial, financial and technical disciplines;
  • the introduction of the latest technology; and,
  • the application of best practice in health, safety, environmental management and community relations.

Health, safety, the environment and communities' issues are integral to the way in which we evaluate investment opportunities and they are also integral to the way in which we manage our operations.

As a result, I believe that Rio Tinto mines achieve environmental standards, which are beyond anything, which has been seen, in the former planned economics. Of course, we are learning and we are improving all the time - but that is the point. The investment discipline in which we work requires us to achieve constantly higher standards in everything we do, because that is what our investors expect of us.

By contrast, there appears to have been little pressure on environmental standards in the mining industries of the former planned economics, in part for ideological reasons and in part practical reasons. Ideologically, production was seen as the goal of the mining industry and environmental concerns played little role, if any, in that ideology. Practically, state-owned mining companies are protected from the consequences of their actions because they are part of the state. This has left a legacy in the countries: people see the mining industry as crude and environmentally damaging because that has been their experience. But it need not be so.

Consequently, I believe that the lack of investment in the former planned economics over the past 10 years has been seriously detrimental to these countries:

  • First, it deprived them of valuable revenues and jobs.
  • Secondly, it has deprived them of the introduction of new technology, new technical skills and higher environmental standards.
  • Thirdly, it has deprived them of an opportunity to build up their capacity for sustainable development

In Russia, mineral resources have in the past been regarded as a strategic weapon. Information on diamond and gold resources has been treated as a state secret. I believe that natural resources are indeed a strategic weapon - but not in a military sense. They are a weapon, which can be deployed for the long-term success of the nation, which owns them.

(3) The way forward

The delegates gathered in this room represent many elements of the world mining industry. I hope therefore that you will agree with me when I say that our industry can contribute to the sustainable development of the world economy.

I hope that you will also agree with me that a company like Rio Tinto has an important role to play in the strategic development of the mineral resources of the former planned economies. I believe that we are uniquely positioned to be able to help those countries to obtain the maximum benefits from their natural resources.

I have already explained why we have not so far been able to invest in mining ventures in the former planned economics. Whatever the geological potential of those countries, we will not be making any major investment in them until the right legal and fiscal conditions are in place and are going to stay in place.

This is not a new message: for the last seven years at least, we have been explaining the basic principles of our concept of investment to decision-makers in the former planned economies. I hope we have not been arrogant but, for what-ever reason, we have made little progress.

Perhaps one explanation is that there is a fear among some of these countries that foreign investors can only gain at the expense of the host country. Would like to end, therefore, by describing an investment undertaken by Rio Tinto, which shows that this is not the case.

In March 1995, Rio Tinto entered into a landmark agreement with an American mining group, Freeport Copper and Gold. Freepost's principal asset was its 86 per cent interest in the Grasberg copper/gold mine in Irian Jaya, Indonesia and about 29,000 square kilometres of exploration properties in the area. The proven and probable reserves at that time were some 13 million tonnes of copper and 1, 130 tonnes of gold. Production was in the order of 500,000 t/y of copper and 42.5 t/y of gold.

Freeport did not have the financial resources to expand their production. Freeport therefore looked for a partner and found Rio Tinto. The agreement we reached was a $1.3 billion investment with three main elements:

  • First, we bought a share of Freeport's equity for $450 million, thereby enabling them to refinance their company.
  • Secondly, we agreed to fund the first $100 million of exploration expenditure in order to am a 40 per cent interest in new exploration discoveries, including expanded reserves of the Grasberg mine.
  • Thirdly, we agreed to loan up to $750 million towards expansion of the existing mining operations in retime for 40 per cent of the expanded production. Under the agreement, Rio Tinto would receive all of the cash-flows from the expansion until the $750 million was repaid.

As a result of our investment, the Grasberg operation has been expanded from a milling rate of 115,000 t/d to approximately 220,000 t/d. In addition we have been able to help Freeport to improve its operations by contributing our experience in large-scale open-cast mining. In copper alone, we have three other major open-pit operations: Utah Copper in the United States, Palabora in South Africa and Escondida in Chile.

I believe that this agreement has been a success for Freeport, Rio Tinto and Indonesia. Rio Tinto has secured a significant share in what is probably the world's largest copper and gold resource. Freeport has benefited both from our financial resources and also our experience and expertise.

But the people of Irian Jaya and Indonesia are the main beneficiary of the successful development of this resource. Freeport employs 16,000 people and paid over $200 million in taxes and royalties in 1997. In fact, more than 85 per cent of revenues from the operations remain in Indonesia by way of taxes, wages and local supplies. Freeport also provides heath care, training and education for its employees and local communities.

This agreement is an example of a "win-win" investment which is equally achievable between Rio Tinto and any country which would like to see its resources developed to best advantage.

In conclusion, I would urge the former planned economics to take effective steps to encourage inward investment in mining. This is not simply a question of changing mining laws and tax regimes it is a question of creating an investment culture.

In return, I believe that the international mining industry can and will contribute not only to the development of your mining industries but also to the sustainable development of your economics.

Unfortunately, the environment for mineral exploration and development is probably as tough now as it has ever been. With metal prices generally at around their all-time lows, there will inevitably be a much lower level of exploration and investment in the next five years than the last five years. It is going to get harder to attract investment in mineral resources. There can be no guarantee that even with the right investment conditions in place, investment in mineral resources will follow. What is certain, however, is that without the right investment conditions there will continue to be very little investment in the mining sector.


COMO CITAR ESTE ARTIGO (HOW TO CITE THIS ARTICLE):
Robert Wilson (1999). Mining Investment and the Former Planned Economics. Mining Development Strategies With a Focus on the Case of the Iberian Pyrite Belt. Technical Journey 25th September 1998 Lisbon, Portugal
Versão Online no site do INETI: http://e-Geo.ineti.pt/geociencias/edicoes_online/diversos/mining_develop/indice.htm