While a modest achievement amongst the giant global copper miners, a mid-tier company nevertheless impressed the market earlier this year when it resumed production of the base metal at its South Australian project.
In February, Hillgrove Resources Ltd announced it had produced its first copper concentrate from ore sourced from its Kanmantoo underground operation, which is located in the Adelaide Hills around 55 kilometres from the state capital of Adelaide.
In doing so, the company became one of the few pure-play copper producers on the Australian bourse.
Between 2011 and 2020, Hillgrove produced 137 kilotonnes of copper and 56,000 gold ounces from several open pits at Kanmantoo, with mining of the main open pit — Giant — completed in May 2019 as the final ore from the depth extensions of the West Kavanagh lode was exhausted.
The processing of the stockpiled material was then concluded the following March.
After this, in mid-2023, the company started exploration and economic studies to evaluate the potential for the development of the underground operation with a single decline towards the base of one of the pits.
Primary ventilation and secondary egress were then established a few months later followed by stopping and the growth of ore stockpiles.
Earlier this year, the processing plant was recommissioned.
Before underground mining started, Kanmantoo had a total resource (from the Kavanagh and Nugent project areas) of 6,405 kilotonnes of copper at 1.09 per cent and 0.12 grams/t gold for 69.6kt of the base metal.
In late April, Hillgrove said it had completed the project’s second production campaign, with output ramped up from 239t in February to 589t in March.
The production capacity will continue to increase as additional work areas are established, enabling multiple stops to be mined concurrently.
During his address to shareholders at the end of May, Hillgrove chairman Derek Carter said the operation’s reopening had come at an opportune time given the market was seeing record prices for the red metal, having traded above US$11,000t and, more importantly, hitting $16,000t more recently.
“This compares to the $13,500t assumption used in our updated economic assessment,” he noted.
“Not only does this increase the company’s operating margins, but enables us to examine mining at a reduced cut-off grade to feed the processing plant, which has latent capacity and ultimately increases free cash flow generation.
“Regarding higher annual production and/or mine life extensions, we will be drill-testing mineralised zones below and adjacent to the pit.
“Of initial interest will be Kavanagh Deeps, where we have identified a large geophysical anomaly 1km in strike length, potentially representing a faulted extension of the Kavanagh ore body.”
At a conglomerate scale, BHP reported that its copper production for the last quarter had increased by 10 per cent (to 1,360kt), partly helped by a strong operational performance from its three South Australian operations (Olympic Dam, Prominent Hill and Carrapateena).
Overall, the average realised price for the mining house was US$3.72 per pound, an increase of 5 per cent, while for the half year of FY2024, this was US$3.66/lb.
Production increased by 49 per cent due to the addition of volumes this year from Prominent Hill and Carrapateena, the two projects BHP obtained when it acquired Oz Minerals last year, while a strong underlying operational performance at Olympic Dam included the highest quarter of material mined in over 10 years during the quarter.
Strong smelter performance at the latter was supported by ongoing transfers of concentrate from Prominent Hill and initial transfers from Carrapateena during the three-month period for processing to higher margin cathode.
In addition, the latter’s crusher two was commissioned and is on track to ramp up moving forward.
BHP said total production guidance for FY24 remained unchanged at between 310 and 340kt.
“We are continuing exploration drilling across the Copper South Australia province to enhance our resource knowledge in support of our growth studies,” it said.
“At Oak Dam (an iron oxide-copper-gold deposit 65km southeast of Olympic Dam), we are progressing the external approval process for an underground access decline to enable faster and lower cost resource definition drilling of the mineral deposit, and we expect to be able to provide an inferred mineral resource for Oak Dam later this calendar year.”
Another copper giant, the Chilean-based Antofagasta Plc, said its production of the metal during the first quarter of 2024 was 129,400t, some 11 per cent lower than the first three months of FY2023, primarily due to lower grades and increased ore hardness at Centinela, one of the company’s key operations in Chile.
This, however, was in line with the mine plan, as was the maintenance and cleaning activities on the Los Pelambres (also in the South American country) concentrate pipeline that delayed moving product to the company’s port facilities.
The pipeline has recommenced operations, and around 27,000t of accumulated copper-in-concentrate will be rescheduled into future quarters as production and sales.
Antofagasta’s cash costs before by-product credits in the March 2024 quarter were $2.67/lb, representing a 7 per cent increase year-on-year.
This was principally related to lower production at Centinela and Los Pelambres during the three months and was offset by lower unit costs for key consumables and the depreciation of the Chilean peso.
On a quarter-on-quarter basis, cash costs rose by 29 per cent, primarily as a result of the lower output.
While these issues may only be temporary, one thing remains certain — the strong demand for copper, due primarily to its applications in energy transition technologies such as electric vehicles (EVs), will remain healthy and robust in the next several years.
While each internal combustion engine uses around 23 kilograms of red metal, each EV on average utilises more than 60kg.
Furthermore, demand is expected to grow to build EV charging points and to upgrade the distribution network.
On the supply side, dwindling copper reserves and lower ore grades at some of the world’s largest mines have meant that a new deposit only replaces an existing one, leading to a long-term supply deficit forecast for the base metal.
