Rio Tinto commits major funds to massive deep US copper project

UK/Australian mining house, Rio Tinto (RIO:L) (RIO:AX), has announced major expenditures to support pre-feasibility studies on what could be the largest ever underground copper mine in the US - and a major Tier 1 copper producer on the world scene.

The company plans to invest $652 million (of which the Rio Tinto plc share would be $341 million and Resolution Copper Mining - effectively owned 55 percent by Rio into and 45 percent by BHP Billiton -  would be responsible for the balance.) 

The Resolution project is located close to Superior, Arizona which has a long mining history mostly based around the big Magma underground copper mine which was shut down a few years ago.  It appears that the Resolution orebody is adjacent to, and deeper than, the old Magma deposits.  It appears to be a world class deposit by any standards with the most recent grade and tonnage estimates showing an Inferred Resource of 1.34 billion tonnes grading 1.51 per cent copper and 0.040 per cent molybdenum.  However, because of the depth which is more than 1,000 metres below surface, to mine this would be a major undertaking.  But the grades are good by moderns standards and the company is looking at a big block caving operation for the project.

Pre-feasibility studies are expected to be completed by 2012 with production at the new mine expected to start by 2020, eventually ramping up to 500,000 tonnes per annum of copper.

Rio says that pre-feasibility work scheduled over the next four years includes dewatering a former mine site and sinking an exploratory shaft to 2170 meters below the surface, as well as preparing numerous studies to evaluate technical, legal and environmental issues and to prepare a mining plan. The plan will include an examination of geohydrology, transportation and infrastructure needs, and will confirm the best approach to constructing the proposed underground mine.

The total cost to complete studies of the deposit,  determine the safest and most efficient mine development approach and evaluate all associated costs is put at about US1 billion. Before these studies can be completed and the mine developed, Resolution Copper needs to own and manage surface lands above the mine and in the immediate surrounding area. In return for this land, Resolution Copper will transfer to the US government over 5,500 acres of high-priority conservation lands. Passage of the Southeast Arizona Land Exchange and Conservation Act, currently under review in the US Congress, will accomplish this goal.

The Resolution deposit is located three miles east of Superior, Arizona, and was originally discovered by Magma Copper Co. and BHP Billiton via underground and surface drilling conducted from 1994 to 1998. Exploration conducted by Kennecott Exploration Co. from 2001 to 2003 confirmed a large body of copper mineralization at a depth of more than 1300m below surface. Resolution Copper Company (RCC), a wholly owned subsidiary of Rio Tinto, became manager of the project in May 2004, and resumed surface drilling in 2005.

Resolution Copper Mining LLC (RCML), which holds 100 per cent of the assets and liabilities of the project, is owned 55 per cent by Resolution Copper Company (a wholly-owned subsidiary of Rio Tinto) and 45 per cent by BHP Copper Inc. Exploration drilling and other technical studies continue in support of a Prefeasibility Study scheduled for completion in 2012.

The deposit is reckoned to be a world-class porphyry Cu-Mo system located beneath a minimum of 1,000 metres of post-mineral cover. The deposit is hosted in a sequence of sedimentary and intrusive rocks varying in age from Precambrian to early-Tertiary. It is strongly host-rock controlled with the best grades typically found in strongly altered and mineralized Precambrian diabase and limestone.

Should it proceed to production - and with the level of commitment represented by the latest investment, Rio is surely confident that it will, Resolution will become of the world's great underground base metals mines on a par with names like El Teniente, Mt. Isa and the big Zambian copper mines in their heyday, as well as with the neighbouring Magma copper mine, which had a great history.