Copper miner wins prestigious PDAC award
Capstone's track record of strong leadership and management at Minto and Cozamin copper mines impresses BHP Billiton, industry
Last updated 3/30/2014 at Noon
The Prospectors and Developers Association of Canada bestowed its prestigious "Viola R. MacMillan Award" on Capstone Mining Corp., owner and operator of the Minto Mine in central Yukon Territory at its annual convention in Toronto on March 3.
The award is named in honor of the PDAC's longest-serving president and is given to a person or company demonstrating leadership in management and financing for the exploration and development of mineral resources.
Capstone, a Vancouver-based base metals miner focused on copper, won the recognition for demonstrating leadership and management in the nearly simultaneous development of the Minto copper-gold-silver operation, and its Cozamin copper-silver-zinc-lead mine in Zacatecas State, Mexico and in its 2013 acquisition of the Pinto Valley copper-molybdenum mine in Arizona as well as for transforming itself into an intermediate copper producer.
The company is also pursuing two development projects; the large-scale 70 percent-owned Santo Domingo copper-iron-gold project in Region III, Chile, in partnership with Korea Resources Corp., and its Kutcho copper-zinc-gold-silver project in northern British Columbia, as well as exploration properties in Chile and Mexico.
The PDAC award also capped several other honors, including "Mid Cap Deal of the Year" for the US$650 million acquisition of the Pinto Valley Mine at the Mining Journal Outstanding Achievement Awards in London on Dec. 4. Nominated and selected by the mining and investment community, the Mining Journal Outstanding Achievement Awards recognize and reward, excellence, innovation and courage from across the globe.
Capstone was singled out for this honor because of the purchase deal it struck with former owner BHP Billiton Ltd. to acquire Pinto Valley and an associated railroad. The Pinto Valley Mine is located some 125 kilometers (78 miles) from Phoenix.
Just over five months after closing the deal Oct. 11, Capstone reported March 26 that it has completed the "Pre-Feasibility Study - Mine Life Extension," which adds eight more years to 2026 from 2018 to the mine life of Pinto Valley.
The mine's annual production is expected to average 128.4 million pounds of copper contained in concentrate and 6.6 million pounds of copper cathode for the first five years and life of mine annual output of 119.5 million pounds of copper contained in concentrate, plus 6.3 million pounds of cathode copper, 1.4 million pounds of molybdenum and 235,000 ounces of silver credited to concentrate.
"The Pinto Valley PFS has validated the purchase price and confirms our position as a leading intermediate copper producer," said Darren Pylot, president and CEO of Capstone. "Completion of the PV2 PFS extends the mine life to 2026 and provides us with the platform to stabilize operations, gain efficiencies and gives us the opportunity to take a longer-term view towards the future of the Pinto Valley Mine in Arizona.
"The PV2 PFS does not include all the projected impact of the process improvements that are under way at the mine, which we expect to generate cost savings in the years ahead," continued Pylot. "As well as pursuing operating efficiencies, we have started the work required to evaluate a possible mine life extension beyond 2026 and a potential increase in throughput."
Achievements in Mexico
The PDAC award also highlighted the company's successful management and development of both Minto and Cozamin.
"I think (PDAC) recognized our ability to make measured decisions in managing the mines," Cindy L. Burnett, Capstone's vice president of investor relations and communications, told Mining News March 21.
Capstone's creativity in financing, and management's ability to study how to de-risk the operations as they evolved, along with the company's flexibility and conservatism also likely factored into the awards committee's decision, Burnett added.
As an example, she cited the reaction of BHP officials to the company's operations at the Cozamin mine during a visit after Capstone offered to purchase Pinto Valley last April.
"We weren't necessarily the highest bidder for Pinto Valley. As part of their due diligence, BHP went to Cozamin and came away very impressed with the way we operate the mine, praising the safety culture and mining culture at the mine," Burnett said. "We're pretty proud of that."
Capstone commenced production at Cozamin in 2006 with average mill throughput of 2,000 metric tons and three years of projected mine life. Currently, the mine is producing 3,300 tpd of copper concentrates with zinc lead and silver by-products.
Cozamin operates without expatriates and a 100 percent Mexican work force of 800 employees.
"It runs extremely well. It is a similar size to Minto, but the costs are low and will become extremely low when our silver streaming contract with Silver Wheaton expires in a few years," Burnett said.
The underground mine is situated about 1.5 kilometers (0.8 miles) from Zacatecas, Mexico, a beautiful city in the historic silver district that dates from the 1500s.
"The district has a strong mining culture, well-trained work force and good schools, so it has been easy to attract mine workers," Burnett said.
Mining currently occurs along 1.5 kilometers and Capstone this year is testing other targets along strike on the five kilometers of property that it controls at Cozamin.
Burnett said the visitors from BHP specifically cited the culture of continuous improvement that they observed at Cozamin. This was due in part to Capstone bringing in a consulting group a couple years ago to look at process improvements, and the degree to which Cozamin's work force embraced the changes suggested by the consultants.
"That has been very successful," she added.
One of the Minto HR people seconded to Pinto Valley and finance people from Cozamin helping out. We're getting to a size where we're starting to populate best practices.
Flexibility at Minto
For Minto's contribution to the recognition, the Yukon mine is justifiably proud, according to Ron Light, Minto general manager.
"I think we participated in (earning) our portion of the honor," Light told Mining News.
He cited the open pit and underground mine's history, which involved development in phases as more and more copper-rich deposits have been discovered on the Minto property as an example of Capstone's management style.
Minto produced its first copper-gold concentrates in May 2007, and began trucking them to Skagway for shipment by oceangoing barges to smelters overseas. Within a year, two new copper-gold systems were discovered on the property, and the mine commissioned a phase II mill expansion, increasing throughput to 2,400 metric tons per day from 1,800 tpd.
In early 2009, Capstone discovered Minto North and reached Phase III mill throughput of 3,200 tpd. In November 2009, Minto East was discovered and the Area 2/118 extension was identified the following spring. Later in 2010, Minto's exploration team discovered the Wildfire and Inferno deposits, and December 2011, the Fireweed deposit.
During more than six years of operation, Capstone has added substantially to its resources, extended Minto's mine life to 2022, and increased mill throughput to more than 3,840 tpd. The mine currently has roughly 440 million pounds of copper in reserves.
On March 20, Minto's mill set a new record for output, producing 5,034 wet metric tons, or 4,000-plus dry metric tons, of copper-gold concentrates, without adding equipment or increasing its footprint, according to Light.
The mine currently employs 240 workers.
Capstone is currently working under phase V of the Minto mine plan, having recently completed open-pit mining in the Area 2 pit and initiated development in the 118 extension for underground mining.
The initial plan for underground development at the mine got off to a slow start in the 118 extension in 2012 for a variety of reasons, including difficulty in hiring an underground contractor and recruiting miners with significant underground experience.
Before actually filling the Area 2 pit with tailings from open-pit mining at Minto North, Capstone decided to extract underground ore from a portion of the phase IV reserve known as the M Zone earlier than originally planned. The M Zone is accessible from the bottom of the Area 2 pit by collaring a portal in the west wall of the Area 2 pit.
"We saw an opportunity for a bigger pillar and safer operation in mining the M Zone," Light said.
Dumas Mining came on board, and the M Zone project gave Minto additional time to clear hurdles related to completing the main underground ramp.
"We've (recently) started getting the meters budgeted," Light said. He added that underground mining in the 118 extension is currently scheduled to commence in 2015, once the main ramp is completed.
Development of the M Zone, meanwhile, began in January and underground mining in that section is scheduled to begin in April and be concluded six months later in October. Some 250,000 metric tons of ore at 1.81 percent grade could be extracted using an uphole retreat mining method.
Capstone, meanwhile, is awaiting permits for the open-pit mining at Minto North, which it hopes to obtain by October.
"We're going to use the longhole method in the M Zone, which means we can mine more ore at a faster pace," Light said.
The project is a good example of how Capstone employs flexibility in its mining approach, Light said.
"In 2013, we looked at the mine plan, did seven different iterations and chose the option that works best. But we still have six others in our back pockets, and we will make changes if things work" better a different way, Light said.
Burnett said this demonstrates Capstone's "nimbleness," and a consistent practice of repeatedly reviewing operating plans and strategies in an ongoing search for the best path forward.
"We don't get married to a particular course of action, if it no longer makes senses," she observed. "This is something that Capstone is good at."
Light said this winning approach is also reflected in regular weekly teleconferences held by the general managers of the three Capstone mines to go over their problems together and discuss potential solutions.
Minto has shelved plans for additional surface exploration until it completes the underground ramp in the 118 extension area.
"We haven't done any surface exploration recently, and we didn't budget for any such work in 2014," Light said. "The targets we have now are largely deeper. We won't look at them until we get the ramp down and until it makes sense."
Developing a work force
Since he took the helm at Minto in 2012, Light said the mine had increased its community involvement, working with its First Nations partners and Yukon College on developing surface and underground mining programs, an initiative focused on training locally. In addition to lending his expertise to numerous community efforts, Light said Capstone has supported the programs with funding and in-kind contributions and by hiring the trainees.
The mine has also assisted an initiative to train local residents in the trades that traditionally offer their services to mining operations.
In recent years, Minto has boosted its employment of First Nations members to more than 20 percent of the mine's 240 workers, up dramatically from the 6-7 percent it formerly employed.
"One of biggest problems we've encountered is turnover at the mine," Light said. "In past years turnover has averaged 25 percent at Minto, and we've reduced that to less than 10 percent. We're offering a better retention package, and we have a new camp opening in May."
The company also installed a new microwave system and Internet last year that has given employees the ability to regularly communicate with their families from the remote site.
"It was one of our retention tools," said Light.
The mine is also working to interest employees who live as far away as New Brunswick to move to Yukon. Light said three families have made the move in the past 18 months, and another three families are expressing interest in relocating, including one family that recently visited the northern territory on the company's dime.
"We try to promote what Yukon offers," he said.
When asked if the Minto Mine had any brag-worthy innovations, Light told Mining News that his work force has learned how to operate the mine in a cold weather environment.
"We don't shut down the pit when it gets down to minus 35 degrees like some mining operations," he said.
Of Yukon's three producing mines, one is currently on care and maintenance due to low prices and the other "keeps cutting back and moving forward and cutting back," Light said.
"We're the only one that has consistently operated since we started," he said.
The single toughest challenge that the Minto operation has faced, so far, is negotiating Yukon's permitting regime
Light said the Yukon regulatory process is not as flexible as those of some other jurisdictions.
"I told the minister at PDAC, that on the one hand, you have the economic development doing everything they can to promote mining, but on the other hand, you have things getting bogged down in permitting," he said. "Part of your system is broken, and you need to fix it."
Capstone, meanwhile, has nearly tripled its copper production with the Pinto Valley acquisition, a move that also propelled the company to the top of its peer group among mid-tier copper producers.
"Capstone has been a kind of 'sleeper' company and quietly moved into that space," Burnett said. "We don't want to be the biggest company. We want to preserve the entrepreneurial culture of the company."
Still, size offers some advantages. Pinto Valley, for example, has benefited from the expertise of a human resources manager from Minto, and that of a controller and finance executive from Cozamin.
"We're getting to a size where we're starting to populate best practices," Burnett explained.
Describing the inner workings of Capstone to be "more like a family," she said the company employs only 50 people in its Vancouver office and plans to keep its corporate organization lean, even if it continues to grow.
"Everybody's part of the mining decision-making process, and we can make them quick," added Light.