us100 million a year in revenue

Jolting life into Punitaqui
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MEET the copper miner that is establishing itself as a mid-tier miner in a forgotten corner of copper-rich Chile. Report by Paul Garvey.

When Tamaya Resources managing director Michael Fischer says his management team was starting from a comparatively low base when they took control of the Punitaqui copper mining complex late last year, it is important to note exactly how low that base was.

Fischer widely uses the analogy that Punitaqui has just been through major surgery. Right now, the project – which has been on the receiving end of 10 intense months of overhauls, upgrades and improvements – is in the early stages of its rehabilitation.

By the end of the year, when its 3000 tonne per day production capacity target is reached, Punitaqui will be fitter and healthier than ever before.

But Punitaqui's improving health is a stark contrast to the state in which the project found itself in mid-2006. If it is recovering from major surgery now, then it was on life support then.

Hanging on a wall in the office at Punitaqui is an old, undated, sepia-tone photograph of the plant dating back to the early days of the operation, which first came into production in the 1930s.

According to the company's current management, the plant was little changed when they took charge in the second half of 2006.

Looking at the overhauled plant that exists at the project at present, there are still components – albeit now decommissioned – visible in the old photograph.

In that intervening time frame since new management took charge at Punitaqui, much of the old plant, which was capable of processing just 800t of ore a year, has been removed or decommissioned. Along the way, the plant's capacity has improved from 800tpd to 1400tpd.

At the time of MiningNews.net's visit in early April, Tamaya was in the final stages of commissioning a brand-new 3800tpd three-stage crusher that will replace the outdated unit currently in place.

The new crushing unit, installed at a cost of $US2 million ($A2.4 million), is capable of crushing up to 4000t of ore a day – well above the current daily plant throughput capacity.

Should everything go to plan, that extra crushing capacity will be put to use before the year is out as the throughput capacity cranks up to 3000tpd.

Recent news that Tamaya has begun studying the potential of the oxide resources at Punitaqui's associated Cinabrio mine suggests Tamaya may eventually use that spare crushing capacity to support a solvent extraction and electrowinning component.

The new crusher is but one of the improvements being installed at Punitaqui.

Two new Larox concentrate presses will be installed alongside the unit already in place, while preparations are being made to add another thickener.

On top of that, two new floatation cells will be added before the year is out.

The two flotation cells, together with the one already being used, were all purchased from BHP Billiton's Escondida mine (indeed, the concentrate that was left in the bottom of the cells helped the mine's cash flow while the unit was being installed).

In addition, one of Tamaya's Chilean managers is currently in Europe overseeing the relocation of three second-hand ball mills out of Spain.

But the turnaround at Punitaqui goes far beyond the easily visible improvements at the plant.

Beyond the new equipment, arguably the biggest improvement has been in the management team assembled over the past year.

The management changes at Tamaya began in June 2006 when the company – then under its former moniker of SMC Gold – recruited Hugh Callaghan to the chairman's role.

Callaghan himself came to the company after a lengthy career within Xstrata and Rio Tinto. Prior to joining Tamaya, he was also responsible for taking Riversdale Mining from a cash shell into a profitable coal miner worth well in excess of $A100 million.

Since then, Callaghan has recruited a team of executives and managers who have spent the bulk of their long careers working together.

The first recruit was Fischer, a veteran mine manger who had spent time at the Tolukuma gold mine in Papua New Guinea and CBH Resources' Endeavour lead-zinc-silver mine in New South Wales.

Drawing on his experiences, Fischer helped recruit former Tolukuma colleagues Steve Playford and Peter Gilligan out to Punitaqui. Today, Playford serves as Tamaya's general manager – Chile, while Gilligan oversees the mining operations.

Nick Lindsay, who since December last year has held the post of Tamaya's director – exploration and business development, was a classmate of Fischer's at university more than 20 years ago, and worked with Fischer at CBH. Along the way, he spent almost a decade in Chile as Anglo American's South American exploration and business development executive.

More recently, Tamaya has engaged the consulting services of geologist ex-Pasminco chief geologist Colin Lutherborrow. He also has a CBH connection, having worked as an independent consultant for the miner.

The crux is that despite having only been together less than six months, the senior management is acutely aware of the strengths and weaknesses each member brings to operation.

Playford in particular has been a boon for the fortunes of Punitaqui. Fluent in Spanish, he is permanently stationed in Chile and does not see himself leaving South America.

For that reason, his future is tied to the success of the mine in more ways than many of his expat mine manager peers elsewhere in the world.

According to Playford, the new management at Punitaqui has introduced a focus on basic systems, protocols and safety policies that had previously been lacking.

As an example, he says, the Punitaqui complex now ranks as one of only two mines in the region where miners are equipped with self-respirators.

On top of that, the mine has had two firsts that are extraordinary only because the mine operated for so long without them.

Punitaqui now has a mining plan for the first time in its history. And in early April, Tamaya handed down the first reserve statement in the mine's history.

That reserve of 4.3 million tonnes grading 1.1% copper gives Tamaya the confidence to pursue the Cinabrio ore body, and the geologists onsite are firm in the belief that further tonnes will be added at depth.

The reserve covers only the top 100m of the ore body but limited deeper drilling has identified what appears to be ore body around 200m beneath the reserve's deepest cut-off point.

Promisingly, the ore body appears to be getting richer with depth. Limited drilling targeting depth extensions at Cinabrio have returned grades in excess of 3% copper.

The reserves, coupled with exploration success at depth, suggest Tamaya will have little problem sourcing the feed for the expanded plant down the road at Punitaqui.

According to Gilligan, the main impediment to upping the mine's output will be ventilation.

Ventilation had long been neglected within Cinabrio, with the result being a wait of at least two hours after blasting before operations can resume.

Work on a life-of-mine return airway system began recently.

Alternatively, there's an outside chance Tamaya may make the belated move of mining Cinabrio as an open pit. The ore body itself sits within a small hill, and the base of the reserve is well above the valley floor at the foot of the hill.

Since Gilligan began at the mine at the start of the year, Tamaya has reported an improvement in both operations and conditions underground.

His task has been aided by the delivery of a new Tamrock twin boom Axera jumbo and the refurbishment of an existing jumbo.

Tamaya expects the two jumbos to reach and open up the 3000tpd rate by the end of the year.

While the mine adjusts to meet the newfound capacity in the plant, Tamaya is churning through the more than 60,000t of stockpiled ore that was previously too large to process through the original plant.

As part of the upgrades, even the road linking the Punitaqui plant with Cinabrio will receive attention.

With 1400t of ore being moved each day, an average 150 trucks pass along the road between the mine and the plant – directly through the centre of the small town of Punitaqui.

In a move motivated as much by safety as efficiency, Tamaya will spend $US200,000-300,000 building a haul road around the town in readiness for the doubling of traffic that will come with the move to 3000tpd.

So what has Tamaya got to show for all these initiatives?

During the March quarter, the Punitaqui complex yielded its fifth consecutive quarter of increased copper output.

The rise to 1245t copper-in-concentrate for the March quarter represented a 20.1% improvement over the previous quarter.

Gilligan's immediate impact on the mine's output was reflected in a 9.5% gain in ore mined.

C1 cash costs, considered by many a key indicator of a mine's efficiency, fell 22.1% on the previous quarter's result to $US1.52 per pound.

In the context of a copper price hovering between $US3.00 and $US3.50/lb, those cash costs can generate some decent margins.

However, Fischer and his team can see continued room for improvement on that front.

First and foremost, the repeal of the treatment and refining charges inherited from the previous management should become visible in the bottom line from the June quarter onwards.

While Tamaya has not specified the amounts likely to be saved from the new TC/RC regime, do not be surprised to see savings in the realm of 30c/lb copper.

Additionally, the recent commissioning of a rougher re-grind mill at the end of April is expected to transpire into improved recoveries, while tonnages through the mill will be boosted by two months worth of ore from the newly installed crusher.

By the time the year is out and the expansion to 3000tpd is complete, Fischer expects cash costs to fall to as low as $US1/lb.

In moving the operation from 800tpd to 1400tpd, Tamaya turned Punitaqui from a decrepit drain on cash flow into a handy earner.

At 3000tpd, Tamaya will be producing at an annualised rate of 12,000-15,000tpa of copper-in-concentrate. Should copper hold above $US7000 per tonne, Punitaqui could be generating more than $US100 million a year in revenue.

But that is by no means the end target for Tamaya.

In part two of MiningNews.net's in-depth look at Tamaya's Chilean asset base, we will look at the strategies that Tamaya hopes will ensure it has a foothold in Chile for a long time to come.