TORONTO (miningweekly.com) – Vancouver-based Amerigo Resources, which produces copper and molybdenum from mine tailings at a facility in Chile, is in the process of commissioning its own heavy-fuel-oil power generators and hopes to start-up in the next few days, president Klaus Zeitler said on Thursday.
The firm had spent about $20-million by the end of 2008 to install generators with a capacity to produce 20 MW of power, and expects to be substantially energy self sufficient by the second quarter of this year.
The nature of the tailings recovery operation means that electricity accounts for a significant percentage of operating costs, and so the high price of power bought from the Chilean national grid has weighed heavily on margins, particularly in light of copper's sharp decline over the last six months.
Amerigo produces copper and molybdenum concentrates from the world’s largest underground copper mine, Codelco’s El Teniente operation, and also has the right to treat higher grade old tailings from a large abandoned tailings impoundment nearby.
For the fourth quarter of last year, the company reported cash costs of $1,99/lb, but sold copper for an average of $1,31/lb, before smelter and refinery costs and settlement adjustments to prior quarters' sales. A year ago, the selling price was $3,00/lb.
The firm reported a loss of $12,18-million for the quarter, compared with net earnings of $1,82-million a year earlier, as lower prices for both copper and molybdenum affected revenue for deliveries made during the quarter, but also resulted in significant pricing adjustments to prior quarters’ deliveries, that were provisionally priced at significantly higher prices.
The company has suspended dividend payments until market conditions improve, and “cash continues to be tight”, chairperson Stephen Dean told analysts and investors on Thursday.
However, with the benefit of its own power generators, together with operational changes that will target higher-grade tailings and enable better recoveries, Amerigo believes it can bring cash costs down to between $ $1,20/lb and $1.25/lb over the course of 2009.
Electricity costs alone are expected to be between $15-million and $20-million lower year-on-year, Zeitler said on a conference call.
In 2008, the company paid $0,2103/kWh for electricity, compared with $0,1732/kWh in 2007.
If crude oil trades in the $40/bbl to $50/bbl range, the company will probably be able to generate power for about $0,10/kWh, Zeitler said.
Shares in Amerigo declined 2,86% on Thursday, to C$0,34 apiece by 15:59 in Toronto.
