VZCZCXRO5940
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHSA #2250/01 2890810
ZNR UUUUU ZZH
R 150810Z OCT 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 6000
INFO RUCPDC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHDC
RUEHBJ/AMEMBASSY BEIJING 0860
RUEHSG/AMEMBASSY SANTIAGO 0203
RUEHBY/AMEMBASSY CANBERRA 0736
RUEHLO/AMEMBASSY LONDON 1610
RUEHMO/AMEMBASSY MOSCOW 0865
RUEHFR/AMEMBASSY PARIS 1446
RUEHOT/AMEMBASSY OTTAWA 0702
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHZO/AFRICAN UNION COLLECTIVE
UNCLAS SECTION 01 OF 04 PRETORIA 002250
SIPDIS
SENSITIVE
STATE PLEASE PASS USAID
STATE PLEASE PASS USGS
DEPT FOR AF/S, EEB/ESC AND CBA
DOE FOR SPERL AND PERSON
E.O. 12958: N/A
TAGS: EMIN EPET ENRG EINV EIND ETRD SENV SF
SUBJECT: Palabora Mine - Still Churning Out Copper Next to Kruger
National Park
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Summary
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1. (SBU) Palabora mine is South Africa's largest copper mine,
producing 148,000 tons of copper per year at its peak in 1998 and
about 4.5 million cumulative tons since the start of full production
in 1966. The open-pit was one of the world's biggest and lowest
cost copper producers but it closed in 2002 after reaching a depth
of 819 meters. The orebody is known to continue down to at least
1,800 meters and mining operations have been successfully extended
underground to mine ore below the pit. This has given Palabora an
additional 20-30 years of life. The mine has been a significant
growth engine for the region and also produces by-products of
magnetite, nickel, precious metals, and sulfuric acid. Palabora
also operates two open-pits adjacent to its copper operation where
vermiculite is mined and processed. The mine shares a boundary with
South Africa's famous Kruger National Park and on a September 30
visit, Minerals/Energy Officer and Specialist were impressed with
seeing elephant, African buffalo, and antelope walking freely around
the mine property. End Summary.
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Palabora Mining Complex
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2. (SBU) The Palabora copper mine is located in the Limpopo Province
of South Africa, approximately 560 kilometers northeast of
Johannesburg. It shares a boundary fence with South Africa's famous
wild-life reserve, the Kruger National Park, and lies only some
eight kilometers from a park's main entrance. This gives the mine
and town an ambience shared by few other mining communities in the
world. Palabora Mining Company's major product is copper rod,
mainly used for making electrical wire and cable. The company is
South-African listed and is 47.2 percent-owned by the
multi-national, diversified mining company Rio Tinto. The mining
complex consists of a large underground mine, concentrator, copper
smelter with anode-casting facilities, sulfuric acid plant,
electrolytic refinery tank house, rod-casting plant, and by-product
recovery plants. By-products include magnetite, nickel, anode
slimes and sulfuric acid. Palabora also operates two open-pits
adjacent to its copper operation where vermiculite is mined and
processed for sale worldwide. Vermiculite is a versatile industrial
mineral with many uses based on its unique insulation, inertness,
and thermal expansion properties -- on heating it expands some
thirty times its original volume. Adjacent to Palabora's operation
is state-owned Foskor company that mines phosphate minerals to
produce phosphoric acid used in the manufacture of phosphate
fertilizers for local sales and export. The two companies cooperate
by exchanging phosphate and copper, which are waste products in the
respective operations.
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Palabora Geology is Unique
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3. (SBU) The unique Palabora deposit is a cylindrical-shaped
volcanic plug that was intruded into the granitic terrain some
two-billion years ago. It consists mainly of carbonate minerals and
Qtwo-billion years ago. It consists mainly of carbonate minerals and
is known geologically as a carbonatite. Its central core contains
most of the copper and is surrounded by a number of concentric rings
of differing mineral composition, hosting a unique variety of
minerals such as copper, nickel, phosphates, magnetite, uranium,
zirconium, and precious metals. Carbonatites are fairly rare
occurrences and Palabora is unique in that it is the only one in the
world mined solely for its copper. Others tend to be mined for rare
earths and rare metals such as niobium and tantalum.
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A Carbonatite Yields its Riches
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4. (SBU) Palabora operates an integrated underground mine,
concentrator, smelter and refinery complex. The mine was
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established as an open-pit operation and commercial production began
in 1964, reaching full production in 1996. The mine reached peak
output between 1977 and 2000, and declined thereafter as the pit
deepened and narrowed. The open-pit ore graded at about 0.5 percent
copper, making it one of the lowest-grade, but still profitable
copper mines in the world. It produced 100,000 to 148,000 tons of
copper per year during its peak years from 1977 to 2000. Over its
forty-year life to date the mine has produced for sale a total of
about 4.5 million tons of copper and 13 million tons of magnetite
concentrate. In the process it also accumulated some 240 million
tons of magnetite-rich ore, which have been stockpiled for future
sale.
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Moving Underground
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5. (SBU) Deep drilling had shown copper ore to exist to at least
1,800-meters below surface. As the pit approached its economic
limit, two shafts were sunk near the pit edge to a depth of 1,280
meters each. The total cost of the shafts and mine development was
$410 million. By the time the new mine reached designed output of
30,000 tons of ore per day in 2005, the now non-economic pit had
reached a depth of 819 meters. This made it the deepest and biggest
circular pit in Africa and one of the largest in the world.
Underground operations have since yielded nearly 300,000 tons of
finished copper and 3.3 million tons of saleable magnetite
concentrate.
6. (SBU) The move underground reduced ore production by 60 percent,
but this has been partially offset by an increase in grade to about
0.7 percent copper. The new mine uses a bulk-production "Block
Cave" mining method because it is safe and cost effective and uses
natural stresses to break the rock with minimum blasting. The
majority of capital was expended early in the mine development
sequence. The 450-meter thick rock mass lift being mined hosts 245
million tons of copper ore, including that still at the base of the
pit. The next planned lift of 400 meters will take the mine to a
depth of 1,700 meters and the two lifts will extend the mine's life
by between 20 and 30 years, given present conditions. Deeper mining
is likely to impact the shaft system, and the cost to re-enforce or
re-establish the infrastructure will determine its viability. The
ambient rock temperature at 1,250 meters is 48-50 degrees Celsius
and provision for costly refrigeration will also be a decision
factor.
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Extracting the Valuable Products
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7. (SBU) Ore processing at Palabora uses a conventional
crushing-milling-flotation concentration circuit followed by
smelting and electrolytic refining to produce copper cathodes and
copper rods. Palabora produced about 92,000 tons of refined copper
in 2007 of which 67,000 tons were copper rod. This supplied some 85
percent of South Africa's copper needs with the balance being
exported. Palabora concentrate contains 30 percent copper and the
Qexported. Palabora concentrate contains 30 percent copper and the
mine blends high-grade copper concentrate from Chambishi in Zambia
containing 43 percent copper to improve process economics. Palabora
also produced in 2007:
-- 1.31 million tons of magnetite concentrate, mainly exported to
China to be used in their coal and steel industries, and also
supplied to the local coal industry;
-- 108 tons of anode slime from the refining process, containing
12.2 tons of precious metals of gold, silver, platinum and
palladium;
-- 154,000 tons of sulfuric acid for own use and sale;
-- 200,000 tons of vermiculite concentrate;
-- 36 tons of nickel-sulfate; and
-- 95 tons of nickel metal in a concentrate.
8. (SBU) Palabora's stockpiles hold about 240 million tons of raw
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magnetite, but magnetite exports are constrained by limited rail
capacity. Management is evaluating the feasibility of reviving
plans for a 10-million ton per year slurry pipeline to transport
magnetite to Mozambique for export to steel mills in Brazil. This
was first mooted decades ago, but turned down because of the cost of
routing the pipeline around the Kruger National Park. The current
high price of iron ore has rekindled the company's interest in this
project.
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Living in Harmony with Wildlife
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9. (SBU) Palabora Copper Mine is South Africa's only major copper
producer, but it is a relatively small producer compared to the
giant mines of the Central African Copperbelt. The mine comes close
to satisfying a reasonable standard of sustainable development in a
rural environment. Wildlife from the adjacent Kruger National Park
freely winter in the mine concession area, seeking grazing and
watering during the dry winter months. Minerals and Energy Officer
and Specialist toured the mine on September 30, and were privileged
to see herds of elephant, African buffalo and antelope roaming the
veld near the mine offices. The team also saw "evidence" of minor
destruction of trees and structures that had got in the way of
advancing elephants. Despite these slight "inconveniences", the
animals appear neither threatened nor threatening and their presence
is generally enjoyed by the locals.
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A Big Mine with a Huge Positive Footprint
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10. (SBU) Far from being a "Resource Curse", the Palabora mine
appears to have been a blessing to the local community and the
region. The Palabora mine:
-- completed a seamless conversion from open-pit to underground
mining with little disruption to economic activity and a significant
injection of capital;
-- has grown a small rural settlement into a modern thriving town of
200,000 people;
-- enables South Africa to continue to be virtually self-sufficient
in copper;
-- allows the town to use its proximity to the Kruger Park to ensure
its socio-economic sustainability through tourism when the mine
eventually ceases production in 20-30 years;
-- with Foskor contributes 80 percent of the area's GDP;
-- constitutes the single largest employer in the region and
provides employment to 2,200 people;
-- contributes millions of rands per month to schools, clinics and
numerous social and upliftment programs;
-- spent 90 percent of the recent $410 capital expenditure to
establish the underground mine in South Africa, of which more than
11 percent was been spent in the town of Phalaborwa.
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Some Outstanding Issues
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11. (SBU) Some issues and concerns confronting the Palabora mine
include:
-- a possible future land claims from local inhabitants, which
management may seek to convert to equity to meet the Mining Charter
requirement for 26 percent black ownership;
Qrequirement for 26 percent black ownership;
-- an ore dilution and related grade decline caused by a pit wall
collapse could result in a 30 percent loss of the block cave ore
reserve;
-- a shaft infrastructure is too close to the pit and may prevent
development of a life-extending third lift;
-- a severe skills shortage due to emigration of white staff and
loss of trained black staff who are highly marketable (there was a
33 percent loss in 2007);
-- the need to complete negotiations with neighbor Foskor for a
buy-in of a western extension of the concession that would give
Palabora an additional three-year life;
PRETORIA 00002250 004 OF 004
-- an on-going search for buy-in of copper concentrate to maintain
concentrator tonnage and process economics. Fortunately the needed
copper concentrate is readily available from Zambia and the DRC.
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Comment
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12. (SBU) A view from the top of the mine shaft shows a defunct
open-pit with collapsed and crumbling pit walls, and other scars
inevitably associated with mining. The open-pit is not a pretty
sight, but the mine has made a significant socio-economic
contribution to the area. The presence of substantial wildlife is
testimony to the environmentally sustainable approach taken by Rio
Tinto and its mine management. Current copper prices provide reason
to believe that the mine will continue to contribute to the
Palaborwa community for the next 20-30 years. End Comment.
LA LIME