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Glencore's Kidd operations hit its targets for copper, zinc and silver in 2015. "Every one of those were recovered on target and largely supplemented by surface reclamation," Badenhorst said. "Part of that could have been left to end of life, but the decision was made to reclaim some of it, process it and recover metal from that. "We produced 158,900 tonnes of copper concentrate and 63,200 tonnes of zinc concentrate last year. "In 2016, we are looking at similar volumes of production. We see ourselves producing at similar volumes until about 2018, possibly 2019. Then we will slowly start to wind down to closure in 2021."
The 9,600-foot level of the mine is currently being developed. "That's the deepest we will move to at this stage with the information we have currently," Badenhorst said. "That project was approved last year and we are in the construction phase right now for that, with the first ore from any of those stopes due for production early next year. "Consistent with what we have said the past couple of years, (the end of life) is still 2021. "What we are doing constantly, and it is a repetitive process, is saying if we can produce ore at a cost which is better than was done previously, and last year we managed to reduce our costs to a very favourable level, below $100 per tonne and if we can achieve that sustainably it unlocks ore which could not previously be mined. "That might add to the 2021 period.
The economics of extracting some of the ore we have in the body is largely based on can we do it economically. It's not just about extracting the metal. "There is ore there, but at the previous operating costs two years ago it wasn't feasible. "So, a combination of cost performance and a revenue price which is influenced positively by the exchange rate we can access some parts of the ore body we previously couldn't. "So, in 2021 what we have is a firm date, however, we are looking at these remnants throughout the body that have been left over time asking many, many questions about how we can access those."
There are a number of technologies the company has developed in the past few years that can access some of those areas, technologies like auto scoops and remote drilling operations. "We can put equipment in to areas where those tasks would have been too hazardous to put people into," Badenhorst said. "That will obviously reduce costs because a piece of equipment doesn't need a coffee break or a lunch break. The equipment can run continuously, other than needing to be refuelled and maintained. "There are benefits to putting in some of the technology we have got.
We have proven over the past two years some of that technology has given us the confidence to say let's go and access some of those previously unmined areas." The price of most base-metals, including copper and zinc, remains low. "It has basically been a flat line since about mid-2015," Badenhorst said. "It hasn't improved. We see a few cents per pound change, but it has flatlined and what it has forced us to do is ... traditionally in base metals we look at these big cycles and say the cycle we are going through is only going to last six months or maybe it will last two years ... but we aren't thinking like that anymore. "We are now saying this is the level we need to operate at to be sustainable.
If anything happens and the price might go up it will be a good time, however, we have to find a way that we can operate sustainably and not just survive. "There is a major difference in the approach. We you are doing things for survival you will be very frugal and you will hope things are going to change in a year's time. We are now saying this is probably the new norm. "We can't see, the way the analysts are looking at it at this particular moment, that there will be any significant change in the price of the commodity. "We are at the same level we were at midyear last year, which did affect our results quite substantially last year.
We didn't get anywhere near what we were expecting last year on the revenue side because of the price. "We did make a slight profit though, but it was largely because we were able to reduce our operating costs as substantially as we did." Exploration efforts designed to find a new ore body or expand existing reserves have been suspended. "Looking at the chemical characteristics or the mineralogy of the potential for another ore body being close, was putting a needle in the dark and hoping to find something," Badenhorst said. "We weren't getting a return for that.
In the prioritization of capital across the whole business, a decision was made to curb that program, however, in parallel with that we were looking at these remnants in the mine and we think there is more potential to say how can we use the existing infrastructure to possibly access some of these remnants that have been left with the benefits of the technology we have introduced over time. "It's within our means at the moment. The capital costs to access some of these others would be high in the instance of just looking for them with no guarantee of a return, but there is a much higher probability we will get a return on some of these remnants." Glencore's Kidd operations took a significant step in 2015 to reduce its energy costs. "The mine's ventilation system is the biggest driver of high energy costs," Badenhorst said. "Second to our labour costs are our energy costs.
A project called ventilation on demand was initiated last year which basically allows ventilation to be directed to areas of activity. If there is no activity, the fans switch off. "We have more than 150 fans underground and if they just ran continuously the consumption would be at record-high levels. Previously, we have very little control over why they should or shouldn't be running. "We now have a tracking system attached to every single individual working underground. Whether you are a person or a machine, the ventilation system has the intelligence now to recognize demand, saying there are three people there and it can direct air so we can keep those three people safe. We have nobody working on other levels, so let's switch those fans off. "We have this system now that is very well automated. We are in the final phases of connecting all the tracking systems on everybody's lamps, which allow people to be located and fans to be switched on. "We are already seeing the early benefits reduction wise. The plan is to get 20% energy reduction and bearing in mind that our costs are as high as they are a 20% savings runs into the millions of dollars, so it's substantial."
Glencore's Kidd operations made big strides to improve safety during the past year, resulting in a marked reduction of injuries. "We don't see any injuries as being acceptable in the workplace," Badenhorst said. "Every program we have is to address why did we have a head injury yesterday, why did this injury result in hospital treatment. "Over time, we categorize these into different degrees of severity. Our measure we use, which is an industry benchmark, is the recordable injury frequency rate.
Our measure on recordable injury frequency rate last year was 3.4. "To get to single digits in the underground mining industry is almost unheard of and the result of that performance and in many other areas where we are seeing these reductions in trends, also saw a reduction in the number of injuries we had, not just recordables. "Our trend this year is to actually continue that reduction. The result of last year allowed us to be nominated and receive the John T. Ryan award for Ontario. "Two weeks ago, as well, we got awarded a Workplace North safety award for continuous improvements in safety. "It is good to get the accolades, but we are still not seeing an injury-free workplace, but we are seeing an improved, reduced injury workforce compared to previous years.
The past year also saw Glencore's Kidd operations continue its role as a solid corporate citizen. "It was very significant year in terms of setting up the relationship with the Ontario Trillium Foundation," Badenhorst said. "Projects between now and closure in 2021 need to be geared towards the theme of closure and the legacy we want to leave post closure. We cannot be the philanthropy type giver sustainably post 2021. When 2021 comes, we are going to be a different kind of organization. "Leading into that though, we need to start looking at programs that do things to sustain the community, sustain our workforce with reskilling and things like that.
The benchmark we achieved last year with the OTF is the start of other things like that. "In terms of dollars spent, I don't think we are going to move into huge value contributions to big projects in the community in the future. "Whatever we spend, whether it is a large value or not, will be related to the legacy we are going to leave post closure. "Closure, for us, is not close the gate in 2021 and walk away from the site. "There are legacies in terms of the scar we might have left to the surface here that might need to be rehabilitated. Rock piles will need to be moved. Pipelines need to be removed. Infrastructure needs to be changed.
At the met site there is a large amount of work that is being planned. "For many, many years, there will be reclamation work and then post that reclamation work there will be monitoring work. "Forever and a day, we will remain on site, but with a much smaller footprint, monitoring things, fixing things, repairing earth walls, managing the melt annually and making sure water diverts correctly around areas so it does not get contaminated with previous mine tailings. "We will still have a footprint in terms of people, but it won't be the same size workforce we have today."
QUICK FACTS: Glencore's Kidd Creek Mine is the deepest base-metal mine in the world; It extracts 2.25 million tonnes of ore (copper, zinc and silver) per year. Ore from the mine is transported 27 kilometres to the concentrator site; Approximately 6,165 tonnes per day is processed; Copper concentrate is shipped via ONR to the Horne smelter in Rouyn, Que., zinc concentrate is shipped to CEZ in Montreal by ONR and CN Rail; Kidd operations (mine to met site) employs 840 workers, including 40 embedded contractors. Mines - Katanga, caught between concerns and new projects African Business 1227 words 12-Jun-2016 By African Business The stand-off between the government and mining operators continues in the context of falling commodity prices.
Though some have packed their bags, others are settling down and still others are investing in the modernisation of their production tools. November 2015: the administrative reorganisation, under which Katanga has been divided into four provinces, has shaken its capital Lubumbashi. The city's mayor has banned demonstrations but young opposition activists have defied the ban. The result has been arrests and some looting of property and public buildings. Economic activity stopped for several days, at a time when it was already slowing. "With falling commodity prices and the increase in production costs due to lack of electricity, it is hard to keep up," says one operator. "The miners have left, the sub-contractors are starting to close, we are starting to get seriously worried." Since 2011, copper prices have plummeted, from $10,000 per tonne to $4,400 in January 2016. The decision of the Swiss giant Glencore, present in the region through Kamato Copper Company (KCC), to suspend its copper activities in DR Congo and Zambia - officially, to raise its stock price and reduce its debt - caused panic in Kolwezi. Glencore was the main employer, producing 450 tonnes of copper a day. Although the company has pledged to retain 80% of the workforce, its departure will inevitably have consequences for the sub-contractors that sustain the local economy. Record copper and cobalt production continues. In 2014, DR Congo produced more than 1m tonnes of copper and more than 66,000 tons of cobalt, making it the biggest African producer. However, the international situation, with reduced margins, already limited by charges and taxes, impacts heavily on mining. "Between the national taxes, provincial taxes, additional taxes, we are suffocating," continues the operator. "Because the state gives nothing, we have to pay for building schools, hospitals and roads ... And the political tensions between the province and Kinshasa do not help."
A new arrival: Necotrans The political tensions are between Katanga's former governor, the influential businessman Moise Katumbi, and President Kabila, his former ally. Katumbi became President Kabila's political opponent when he joined the opposition to a possible third term for the head of state, and he is pushing for presidential elections to be held before the end of 2016. He had previously led the movement for the provinces to have 40% of their contribution to tax revenue to be reimbursed, as had been constitutionally mandated. With this as a context, a new player has emerged in the sector: the logistics group Necotrans. Present in 31 African countries, Necotrans is an increasingly powerful player in port and land logistics: it took over the management of the multipurpose terminal in the port of Kribi, Cameroon, in September 2015. The Necotrans group was formed in DR Congo 30 years ago. Its return is part of its aim to consolidate its position in Africa. "Due to its geographical position, its size and its economic dynamism, DR Congo is a priority country for Necotrans," stated the group's chairman, Gregory Querel, in a press release. Querel also expressed his interest in the projects undertaken by the Congolese authorities in the port sector. Pending new port developments, the group took its first steps in the local mining sector by acquiring Mining Company Katanga (MCK) in November 2015, owned by Moise Katumbi. Specialising in logistics services and civil engineering for the mining sector, MCK was one of the market leaders, with 1,900 employees and a fleet of 500 vehicles and trucks.
Necotrans has set up in business amid industrial and political concerns in the mining sector. A mining code on standby "2015 was focused on plummeting commodity prices," explains Albert Mbafumoya, advisor to the Prime Minister and mining specialist. "Due to energy constraints, operators cannot produce at full capacity to address the effect of the global economic conditions, much as they would like to. But 2015 was relatively stable - contrary to what people say. SNEL (the National Electricity Company) managed to operate with the limited resources at its disposal, and production levels were maintained." "Those who come out best are those who have invested in modernising their equipment," observes Mbafumoya, citing Glencore as an example. "For example, in copper, the company restored Gecamines' facilities, which were old and had not been rehabilitated; and in cobalt, the company undertook major modernisation work, and there have been no problems." The global investment plan to improve production infrastructure and increase profitability will cost $880m. Despite this, the group decided to suspend cobalt production. In response, the national authorities stated that Glencore must "respect its commitments", particularly regarding employment. They downplayed the disturbances in the mining sector, noting that profit margins remained substantial.
The government refused to yield to pressure from the mining industry and retained the expected increase in taxes. "We listened, we suspended the proposed Mining Code, but it is necessary to review operating condi- tions in the light of our resources, so that they con- tribute more to the socio-economic development of the country. This is undoubtedly not the case today," says a source close to the government. Gold rush Even though at 20% the mining sector is the largest contributor to GDP, Matata Ponyo's government has decided to increase its contribution to tax revenue to 25% in 2016, against 9% in 2010. "Mining companies paid more than a billion dollars to the Treasury in 2014, despite the fall in raw material prices," says Simon Tuma-Waku, president of the Mining Chamber at the FEC, the employers' federation. He urges the government to maintain the current tax system in the 2002 Mining Code.
One particular activity arouses the interest of those in power: gold mining. Until recently this was marginal, but it seems to be developing positively. "The gold mine in Kibali boosted production," confirms the advisor to the Prime Minister. "They only started in 2013, but they are very determined - they immediately positioned themselves in 12th place in the mining rankings, and today they are fourth." "They" are British company Randgold Resources, which owns 45% of the Kibali project.
This covers 10 licences over a total of 1,836 km2 of the Moto goldfield, owned in partnership with AngloGold Ashanti (45%) and the Congolese company SOKIMO (10%). For 2015, the production objective was to achieve 600,000 ounces of gold. In addition, the consequences of the Glencore departure will be limited by Sicomines. The Sino-Congolese mine is a joint venture between Gecamines and a group of Chinese companies.
It forecasts 125,000 tonnes of copper cathode a year during the project's first phase of operation and 250,000 tonnes in the second phase, in return for a total investment of almost $3bn to develop the mine. Sicomines produced its first copper cathode in November 2015. Gecamines, the state-owned former market leader, continues its painful restructuring process. The company targeted production of 3,000 tonnes of copper a month for 2015, and 5,000 tonnes this year, thanks to new plants in Shituru in Likasi and to a concentrator in Kambove, which has a production capacity of 25,000 to 30,000 tonnes a year. In the medium and long term, the company intends to attain a consistent output of between 80,000 and 240,000 tonnes of copper a year.
This will be achieved in the most part by the Kipushi mine in the Copper Belt, of which the company owns 32%. "Due to energy constraints, operators cannot produce at full capacity though they would like to, to address the effect of the global economic conditions. But 2015 has been relatively stable."
