The TINTAYA copper mine, Peru. Photo: Xstrata

Peru's Copper Corridor a Prototype for Mick Davis

Issue 83, May 2014

In May 2006, four years after its debut on the London Stock Exchange, mining upstart Xstrata bought the Tintaya copper mine in Peru’s Cusco region from BHP Billiton for $750m.

Tintaya was producing around 100,000 copper tonnes per annum, making it BHP’s smallest producer of copper concentrate. Opened in the 1980s, it was also due to expire in 2012. “When you look at Tintaya, its geological potential is not of the same scale as some of the other BHP Billiton opportunities,” a spokesman for the group said at the time.

For Xstrata however, the mine added to its growing stronghold on Peru’s copper belt, after it pipped Phelps Dodge and BHP to the nearby Las Bambas concession in a state auction in 2004.

BHP’s president of Tintaya, Edgar Basto, was shunted to its Escondida mine in Chile, but Tintaya’s mine managers briefed its new owners on possible expansion plans. The mine hit record mining rates in the following 6 months and after an upgrade to the secondary crusher, output was squeezed above 120,000 tonnes in Xstrata’s first year of control.

By 2007, Tintaya was spitting out over $500m in operating profit each year. Aggressive work on the surrounding land package drilled-out a billion tonne resource on the bordering Antapaccay deposit and in 2010, Xstrata’s board approved a $1.5bn expansion to 150,000 tonnes, delivered on budget and dovetailing with Tintaya’s decline. The Coroccohuayco deposit, also included in Tintaya’s original land package, is expected to add a further 50,000 tonnes to production by 2018.

According to sources working with Mick Davis, Xstrata’s long-serving chief executive who left last year on its merger with Glencore, Tintaya is a showpiece for what his new vehicle aims to achieve, turning unloved assets into sprawling operations. Davis has raised $3.7bn to date and is thought to be eyeing BHP’s thermal coal division.

Now buried in Glencore’s copper portfolio, Tintaya however has also become an unpublicised exemplar of Glencore’s brownfield strategy, expanding cash flowing assets and re-using existing infrastructure, avoiding the risk of greenfield blowouts.

“The company is turning Peru’s southern Andean mountains into a mining corridor,” anti-mining activists have complained. 

“The company is turning Peru’s southern Andean mountains into a mining corridor.”

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