Story BelowTamaya takes punt on Chile's coastal rangesFriday, 15...

Story Below

Tamaya takes punt on Chile's coastal rangesFriday, 15 June 2007

COPPER miner Tamaya Resources may have established its credentials as a serious corporate manoeuvrer through its tilt at Iberian Resources, but on the ground in Chile the company is working on an ambitious growth strategy on several fronts. Report by Paul Garvey.

Those who have been keeping an eye on Tamaya in recent times will know about its takeover bid for advanced gold play Iberian, with that union expected to create a diversified copper-gold producer with projects in four continents and a market capitalisation in excess of $A200 million.

But what many may be unaware of is the multi-pronged approach to building a greater presence in and around its current position in Chile's coastal ranges.

For those unfamiliar with the basic geography of Chile, the nation comprises a narrow north-south strip of land hugging the southwest coastline of South America.

Running directly through the nation are two mountain ranges, the world-famous Andes and the lesser-known Coastal Range.

It is the Andes that are home to the massive, low-grade copper porphyry systems such as Escondida and Chiquicamata that have helped underpin the nation's economy and which have made Chile the world's largest copper producer.

Those world-famous deposits have also made the Andes a popular destination for miners and explorers on the hunt for the Big One.

The Coastal Ranges, however, are not as prominent as the Andes, both in terms of their physical height and their presence on the radar of international miners.

While the copper deposits of the Coastal Ranges are small and high grade in comparison to the large, low-grade mines of the Andes, the Coastal Ranges represent a major global copper production centre. It is one of the world's great iron oxide-copper-gold provinces, having thrown up world-class deposits such as Freeport's Candelaria.

According to Tamaya's Nick Lindsay, the narrow strip of land that is the Coastal Range yields around 500,000 tonnes of copper metal a year – in comparison, the entire continent of mineral-rich Australia produced just over 900,000t of copper in 2006.

It is in these ranges that Tamaya's short-term growth ambitions rest.

The potential of this area is obvious when driving north from the Chilean capital of Santiago to Tamaya's Punitaqui production centre, near the town of Ovalle.

The hills that line the sealed highway along the route are bare except for the cactus, goats and mine adits that dot them.

The adits, which can be seen almost continuously along the route from Santiago to Punitaqui, are the work of local "pirquineros", the artisinal miners who make a living hand-picking copper mineralisation out of the ground and selling the ore direct to state-owned copper smelters.

Despite the back-breaking nature of the pirquineros' work, artisinal mining is a key employer in the poorer regions outside of Chile's cities.

Under contracts with state-owned refiner ENAMI, pirquineros can mine 2000t of copper ore per month, then on-sell it direct to refineries in what is as close to a welfare system Chile has to offer for impoverished northern communities.

At the time of MiningNews.net's visit to Ovalle last month, dozens of ore-laden trucks were snaking for kilometres in a slow-moving queue towards the gate of the local smelter, ENAMI's Panucillo facility. According to Tamaya's Steve Playford, the queue seldom shrinks.

Tamaya is currently focused on improving the output of its Cinabrio mine and Punitaqui processing plant (see separate story here).

The company has also flagged the potential of yielding another 2000-3000t of copper each year through the addition of a solvent extraction and electrowinning circuit to Punitaqui.

In addition, Tamaya's first attempts at drilling long-forgotten prospects in and around Punitaqui have met with early success.

One of these key prospects is San Andres, a hill literally a stone's throw from the Cinabrio mine that Tamaya hopes could host a repetition of the Cinabrio system.

Initial drill core appears promising, but assay results are unlikely to be known until the release of the company's June quarterly report.

The miner recently announced it had advanced up the exploration food chain with the Cerrillo Tamaya project.

Cerrillo Tamaya, which sits to the northwest of Punitaqui and from which the company took its name, was for 100 years one of the world's largest copper mines.

Cerrillo Tamaya was mined on a commercial scale between 1575 and the early 1930s, and was an incredibly high-grade system – indeed, much of its early production came at the stunning grade of 25% copper.

Today, the mine is still being worked by a dedicated band of pirquineros under an arrangement with Tamaya.

While the upper reaches of the deposit would appear to have been thoroughly picked over, in the current copper price environment and given the lack of modern exploration, Tamaya is hopeful of identifying rich extensions beneath the current workings.

Away from its existing suite of assets, Tamaya sees itself becoming a key consolidator of the ground currently held by pirquineros. As Playford notes, many of the pirquineros are getting older, with the younger generation less enthused about following in the footsteps of their forebears.

The nature of the work and the slim margins on the production means that very little capital, if any, finds its way back into the pirquineros' operations.

This makes them alluring drill targets for Tamaya, which – for the right project – has sufficiently deep pockets to make the pirquineros happy sellers.

The company has already signed one such deal.

Shortly after MiningNews.net's visit, Tamaya signed an option to acquire the nearby Satan mining lease from local vendors. Tamaya will pay an initial $US100,000 to spend 12 months evaluating Satan, and can acquire the project outright at any time in that window for $US3 million.

As word of the new regime at Punitaqui has spread into the surrounding area, Playford and his colleagues have been inundated with approaches from pirquineros with projects on offer.

It has been easy for Playford and his team to dismiss much of what has been offered but it is certainly not beyond the realms of imagination that, in such a copper-rich area, one of these projects could throw up an economic system that will justify the construction of a second Tamaya processing plant in Chile. (The existing plant will reach its natural capacity when the upgrade to 3000 tonnes per day is achieved at the end of the year, with existing resources and reserves at Cinabrio sufficient to keep that plant well fed.)

Indeed, Playford says it will only take the delineation or acquisition of a deposit around 20 million tonnes to justify the construction of a new 3Mtpa plant. Such a facility would be triple the size of the facility at Punitaqui once it reaches its upgraded capacity.

As an example of its outward reach, Playford has signed on as a consultant an ex-senior manager of ENAMI to scout Chile and neighbouring nations for more potentially company-making assets. Tamaya also uses its own contacts built up over the years of experience in Chile to search further afield in the IOCG belt.

Regardless of how that search pans out, Tamaya stands to reap big rewards through the successful identification of smaller deposits. It is in a privileged position as the only international company mining and processing copper in what is a richly mineralised belt.