Anglo American copper mine problems and platinum production at Unki in Zimbabwe

Two bits of news about the old darling Anglo American yesterday, one good, one not too bad, but better as a whole for the industry. The first one is that the production targets at Collahuasi copper mine in Northern Chile will NOT be met this year. Anglo have a 44 percent stake in the mine, Xstrata have 44 (remember the merger of equals) and Mitsui have the balance.

This is the third largest copper mine in the world, producing about three percent of global production. Last year as a result of strikes (33 days last year) the mine produced six percent less copper, with output at 504 thousand metric tons. 44 percent to Anglo, that is just shy of 222 thousand metric tons. Collahuasi contributed about 41.3 percent of EBIDTA to Anglo's copper division. It is the most profitable of their three copper operating segments.

The reason for the production miss is twofold. First, heavy rains have caused floods in Northern Chile. Rain in Chile? I remember reading somewhere that the Atacama desert receives about as much rain as Mars. It is the worlds driest desert. But Chile is a country of contrasting climates. This mine as far as the website can tell me is located at 4400 metres above sea level, near the Bolivian border, in the northern part of Chile, away from the driest spot on the planet.

Wait, 4400 metres above sea level? Mafadi is the highest mountain in South Africa, with an elevation of 3450 metres. This copper deposit is nearly 1 kilometre higher than that. Wow. In fact, the height at which this mine is, would be the same height at which the highest point is on the US mainland, Mount Whitney.

Stopped marvelling at the height of some mountains and the height at which this mine operates yet? OK, heavy rains disrupted two months of production, both January and February were poor months, Anglo said in a press conference on Friday. And that they would try to catch up production as the year progresses. The second reason is completely beyond their control, a fatal accident in December at the port nearby, Patache port, saw the mine, Collahuasi declare force majeure. The port has just been repaired and the force majeure has been lifted. "Fancy Frenchie words" is what my favourite Eastern Cape friends would say.

But will this really affect Anglo that much? I suspect so, but the much higher copper prices so far this year will offset a lot of the production shortfall, plus there are many projects on the go in the background with production at several coming online soon. Los Bronces expansion sees production ramp ups next year. But the one that I am concerned about is the Collahuasi phase one that is supposed to come online this year. Anyone know more about this?

And the second piece of news which I got by the by is that the Unki platinum mine in central Zimbabwe has starting producing. According to the last Anglo Platinum ore reserves and mineral resources 2010 document "The total estimated PGM Resources of the Great Dyke are in excess of 2,000 million tonnes at a maximum depth of 350 metres." The Great Dyke of course is that freak of nature formed between 2.7 and 2.4 billion years ago. Before Oxygen, you know, that era. And wow, that is shallow. 350 metres?

I can't find too much reference to the mine on the Anglo Platinum website. But the wires suggest that at maximum production, the mine will be producing 150 thousand ounces per annum. A sizeable operation by all counts. But little reference on the Anglo Platinum website, perhaps they do not want to draw too much attention to it.


What about the indigenization "issues" raised over the last few weeks? Well, according to their website, these were addressed, check it out: "In March 2008, an agreement was entered into with the Government of Zimbabwe (GOZ) in terms of which 31.3% of the PGM mining claims have been released to GOZ in return for empowerment credits. The agreement is expected to become effective during 2009." So, as I understand it, the Zimbabwean government agreed to give Anglo Platinum empowerment credits for a direct swap of mining claims. That was then. This is now.

Remember the Government Gazette Extraordinary? I am mindful that the clock is ticking on this one, there must be over 30 days left to submit your plans. Again, there was a mistake on the document, it was meant to say a business with an enterprise value of over 1 million US Dollars and not 1 Dollar. I don't know what the right answer is, but I always believe that private capital almost always does a better job than public capital.