All images: OZ Minerals.
BY ELIZABETH FABRI
THE final stage of construction has now kicked off at OZ Minerals Carrapateena copper mine, with just over a year left on the clock before commissioning begins. We chat with OZ Minerals managing director and chief executive Andrew Cole about Phase 2 of the construction campaign, power plans for the mine, and exploration potential further afield.
Q. Can you describe the work undertaken at Carrapateena to date?
Phase 1 construction at Carrapateena is on schedule and in early April, we received approval from the South Australian and Commonwealth Governments for the Carrapateena project, which cleared the way for mobilisation of Phase 2 of construction from mid-April as scheduled.
The work we’ve undertaken is as shown in the diagram below, along with some of the other main activities being progressed.
Q. What does Phase 2 of the construction plan involve?
Phase 2 – construction – was scheduled for Q2 2018 to Q4 2019 and works have already commenced on site.
Phase 2 comprises construction of the:
- Process plant
- Underground materials handling including conveyor and crusher 1
- Western Access Road
- Tailings Storage Facility
- Communications network
- Power line and substation
- All underground development to crusher 1
- Airstrip
- Handover and full occupation of the 550 bed Tjungu Accommodation Village
Q. You recently released your power strategy for the mine. Where exactly will the power supply will be coming from? It must be an exciting time to get this off the ground, and (soon) not be reliant on the BHP transmission line?
In March, we announced our power strategy to achieve reliable, secure and affordable power for our current and future assets. The strategy comprises two phases that look firstly at power transmission then power procurement and generation. Ongoing site energy saving initiatives will also be implemented to complement these two phases.
As part of our power strategy, we have assessed a range of long-term alternate supply options that will ensure security of power supply, reduction in line losses and enable mine plan execution at Prominent Hill and expansion optionality at Carrapateena.
The first phase, Power Transmission, sees our current South Australian assets remain connected to the electricity grid via a new high voltage power transmission line. Infrastructure in the region does not support our current activities and future regional expansion plans, so this new transmission line will meet our operational requirements and importantly, enable our growth strategy for the region.
The second phase will be progressively developed and includes procurement of generation capacity, to take place in the latter half of the year. Our generation strategy includes cost saving initiatives and consideration of renewable energy options.
I anticipate that with the range of additional energy solutions coming online in South Australia in the past 12 months, and the AEMO’s outlook showing many new projects planned to supplement existing generation in South Australia, we will be tapping into a mix of generation sources. However, this is what we will be looking into more detail in the second phase and we will provide an update to the market in due time.
Part of our site energy saving initiatives includes looking at a few different generation sources:
- Installation of a solar plant and storage capabilities at Prominent Hill, which is anticipated to reduce grid energy requirements and increase our understanding of and capability for renewable energy and generation sources that may be required for operations in remote locations such as West Musgrave.
- Working with a number of potential energy developers to explore and innovate new, additional renewable options across our assets.
- Looking at the opportunities solar panels provide for Carrapateena, in terms of its potential to reduce diesel consumption and lower costs during construction.
- Installing a wind mast at the West Musgrave project to assess the viability of wind generation.
Q. I understand there is a separate team looking at future options in the province to determine whether the company should commence a scoping study in 2019 for a Carrapateena phase two. What options are you looking at in this desktop study?
One of the things that you may have heard me talk about is province potential. This means instead of just developing a single asset, we look at cooper-rich provinces where initial or existing developments can work as a hub for wider extraction opportunities.
The province approach ensures we optimise the footprints we have. A good example of this is in the Carrapateena province, where we see at least three other development opportunities at Khamsin, Fremantle Doctor and Punt Hill, as well as realising the full potential of the wider Carrapateena mineralised zone.
We started a program of diamond drill holes at the Khamsin project in the first quarter of this year with the aim of testing the existing known mineralisation. A total of 2.2 kilometres was completed by the end of the quarter, with encouraging bornite mineralisation intersected in the first drill hole. Further holes are planned at the Fremantle Doctor prospect in the second quarter of this year, after Khamsin drilling is complete.
The desktop studies evaluating mining methods and infrastructure requirements on the wider Carrapateena mineralised zone will be ongoing during the year and will include consideration of throughput levels and mining methods.
Q. Can you describe the company’s approach to joint ventures, and how effective this strategy has been? Can we expect more exploration partnerships to be inked this year?
OZ Minerals has extensive exploration experience both in Australia and at international sites. Growth through exploration is a central part of our strategy to add value to the company.
We have multiple exploration earn in agreements in place with highly regarded explorers, and these agreements provide us with exploration expertise in specific geologies or locations. Our partners in turn access capital to undertake drilling programs. We typically work with our partners to oversee projects while they manage on the ground activities.
Our growth strategy involves building a pipeline of opportunities and rigorously progressing these. In line with our disciplined capital approach, if at any time it is determined that a project does not have the potential to generate substantial value, OZ Minerals will cease expenditure and withdraw from the arrangement.
We anticipate spending $10-$15 million on exploration in 2018, which excludes expenditure on our West Musgrave project ($20-$30 million) and the Carrapateena district ($8-$10 million).
Q. When do you anticipate West Musgrave could be developed into a mine and what do you need to complete before a final investment decision is made?
The Pre-Feasibility Study (PFS) for West Musgrave is underway, and we have a $4 million exploration program focusing on district potential including the One Tree Hill and Yappsu prospects, as well as the Succoth copper deposit running in parallel.
OZ Minerals will be managing the PFS, which will focus on improving metallurgical recoveries, lower cost non-process infrastructure, and resource conversion. Cassini Resources, our joint venture partner on this project, will manage the $4 million dollar exploration program on the regional potential.
Once the PFS is completed, we will be able to make a decision on whether to progress to the next study phase and eventually a final investment decision if results indicate that it is a value accretive project for OZ Minerals.
In Cassini Resources’ Further Scoping Study, production commencement is estimated to be July 2022. This is based on the timeline prescribed under the Earn-in Agreement between OZ Minerals and Cassini for a decision to mine being made around July 2020. Following a positive decision to mine, the estimate assumes an 18-month construction period and a pre-production capital requirement of $730-$800 million.
We decided to proceed to the next stage of our earn-in agreement with Cassini Resources, following their November 2017 release of the further scoping study results. Under this agreement OZ Minerals can earn 51 per cent of the project by spending $19 million within 18 months and up to 70 per cent by spending a total of $36 million.
Q. In your full year financial results webcast you mentioned OZ Minerals was pursuing copper rich provinces both in Australia and internationally. I understand the company already has exploration partnerships in Portugal and Mexico, but is there any other provinces both here and abroad that you would be open to exploring in the future?
We are open to new geographies and take an agile approach to portfolio management to get the right mix of projects. There are a few geological districts in the world that we’re interested in because of their pedigree and our targeting criteria is based on the quality of resource and operating at the bottom of the cost curve. One of the most recent examples of a target province that we are looking at is the Carajás province in Brazil, where we are hoping to establish a foothold via the acquisition of Avanco Resources.
Q. By looking at current global copper fundamentals- what is your outlook for copper for the next decade? Will OZ Minerals consider hedging or are you confident prices will continue to climb?
Copper as a commodity has fundamentals that haven’t really changed over the past several years. We’re starting to see the forecasted long term copper supply deficit start to show, as demand for copper and primary resources climbs. This gap is good for resources companies generally, and especially for us with our strong portfolio of copper resources in our asset base.
The average head grade of copper mines is also projected to decrease, and this is something that will become more and more evident in the next decade.
The other thing we’ll see into the next decade is demand for copper continue to be driven by diversified drivers from infrastructure and technology; copper is needed for houses, infrastructure, electric vehicles, wind turbines, electric trains among others.
As a copper core company, we don’t hedge the long term price of the commodity. We prefer to look at the long term fundamentals of supply and demand for our growth pipeline and respond accordingly. Also, we keep our operations in the lower cost quartile to mitigate operational risk during cycles and fluctuations, and manage commodity price volatility.
Q. Can you describe some of the technology/innovation drives OZ Minerals has implemented or planning to roll out, and how they have driven efficiencies?
Technology is transforming rapidly which is blurring the lines between our physical and digital worlds for industries and society in general. It’s all about connectivity and integration. There is opportunity in every element of the supply chain. The real crux is in embracing and nurturing an innovative culture.
The resources industry, like a lot of other industries, is going through a rapid digital transformation with I think some of the biggest untapped possibilities are associated with data insights. It is these data insights that will change the way in which we work today; helping us keep operating costs low or lower, our people safer, improve transparency and collaboration across our business, and provide faster and stronger insights into our exploration growth opportunities to name a few.
This is an evolving capability that will help transform OZ Minerals. And to build it, we have deliberately looked outside our industry to learn from companies like Amazon – lessons in technology and culture that could be adapted and used, lessons that would enable better use our data and help us make faster and better informed decisions in all facets of our business – so we are not bound by traditional approaches and perspectives.
An example of how we’ve leveraged technology to increase efficiency is when we moved our enterprise system into the Amazon Web Service cloud, making OZ Minerals one of AWS’ first customers in Australia to do so.
However, for real efficiency improvements, I believe technology must go hand-in-hand with a mindset of innovation, as how we do things is just as important as what we do. A culture of innovation and a strong focus on behaviours are both very important attributes of what a Modern Mining Company like OZ Minerals is. By focusing on both the ‘what’ and ‘how’, we’ll see more optimised and sustainable outcomes in a culture that brings out the best in everyone at OZ Minerals.
We will continue to seek innovation in areas that drive results. This is the core that helps us deliver on our strategy.
