THE Mining Officer of Glencore Copper Assets in North Queensland, Matt O’Neill, discusses the company’s plans for exploration in the region, how its operations will run after the copper smelter closure and why it is worth continuing to invest in the North West Minerals Province.
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He also discusses tough decisions made a year ago that has helped support the company during low copper prices in the global market, which were described at the meeting to be at levels seen in the global financial crisis.
This is Mr O’Neill’s interview with North West Star reporter Chris Burns:
Q) First of all, I think you said you were investing $11 million in exploration in the North West Minerals Province? What’s that going to be doing?
Mr O’Neill: At the moment we’re chasing round about 15,000 m of drilling of core sampling we’re looking at. We’ve got some targets. We’ve got 7 targets related to Ernest Henry and about 8 targets related to Mount Isa within 100 kilometre radius of those two operations where we hope to find some mineralisation that we can potentially in the future turn into a mine.
Q) Why within 100 kilometres? Why not a little bit further apart?
Mr O’Neill: With the strategy we’ve got at the moment, obviously there’s a lot of money in our assets, the processing plants and the operations in Mt Isa and Ernest Henry. We think that within that 100 kilometres we can economically transport that ore into our existing infrastructure and turn it into copper metal. Outside of that, we are doing some exploration in limited areas there and what we’re looking for there is a stand-alone ore body that could host a mine on its own right.
Q) If you find something, and you say ‘alright, that’s a project’, and if the Mount Isa copper smelter closes in 2020, will that mean you would ship off the raw material?
Mr O’Neill: The product from Ernest Henry goes to Mount Isa and goes through the copper smelter. Any of the projects that we find through this exploration – and Ernest Henry’s got a mine life until 2026 – if the copper smelter was not there we would sell the concentrate. We wouldn’t refine it through and do that value add process into an anode. That’s what we’re looking for at the moment. We think the ore bodies we’re looking for can sustain either of those two processes and that’s where we’re headed.
Q) Why does Glencore think it’s still worth mining in the North West Minerals Province?
Mr O’Neill: So, we are pretty confident that given the mineralisation that has been found. So Ernest Henry was a result of the funding the state government did in state geological studies. The North West Minerals Province right through into the north east of the Northern Territory, the geology of that area is exciting for people looking for minerals, not just copper, so there's silver, lead, and zinc. We really do believe there are other ore bodies like Ernest Henry. Hopefully another Mount Isa just waiting to be discovered, investing that money is somewhat of a gamble but I think it’s one that could pay off handsomely if we find those ore bodies.
Q) You said you were going to perhaps help or work closer with junior miners to help them develop as well. Are you able to tell us a little bit more about that?
Mr O’Neill: We’ve done a number of joint ventures with companies in the region. And depending on the commercial arrangement, we either lead or take a supporting role in trying to explore that (tenement?) we’ve got, so we’ll enter a joint venture with that company and work out what that drilling program is, we’ll use airborne magnetics and some high technology that we’ve got to try and find that ore body. We don’t just automatically put holes in the ground, we’ll actually do a magnetic survey by plane or helicopter first and identify some anomalies and then go and target the drilling into those anomalies. We work with the juniors to go and do that as well.
Q) It was mentioned in the meeting Glencore has been sharing resources like the railway line, and example like Cudeco, helping in terms of processing the copper [belonging to Cudeco].
Mr O’Neill: We’re doing that. We’ve got capacity in some of our processing assets that we would like to, we could use that to join with a junior, helping them process their ore or processing their concentrate through the smelter, and that opens up some of the ore bodies in the region or sustain the amount of capital that would be required to build new processing plants, and because we’ve got existing ones we think we can utitlise that and come to an arrangement that allows them to mine that ore body and us to put it through our processing plants and both parties to get a win out of it.
Q) It seems to me that Glencore is in a position where eventually, if they really wanted to or were ruthless, they could shut out the North West Minerals Province just for themselves, because you’ve got the railway line, you’ve got a lot of things, but what’s the benefit to helping the other miners?
Mr O’Neill: See, the mining industry is not really about competition from a mining point of view. The benefit for us is we can reach a commercial arrangement without investing significant capital in that ore body. The mining game is a risky game by nature, so investing the money in mining that ore body doesn’t always have the return that you want it. There are some good returns you see, and people talk about those, there’s also some that didn’t go so well, so by helping others and coming to a commercial arrangement putting it through our processing plants, it reduces Glencore’s risk of exposure to spending a lot of money and not having the return, but it also does help the infrastructure that’s here, and other things are here, not just because of Glencore, a large part of it is here by other operations in the region help to attract some of the investment and infrastructure and other people and resources and that’s helpful for us as well.
Q) In opening that up further [the North West Minerals Province] it would help you even more?
Mr O’Neill: I think it would, being able to attract and retain high skilled staff, they can have a more liveable place for people to stay and want to bring up a family and all those things, that’s the attraction for us. As a company that does benefit our employees but benefits the region at the same time.
Q) Since the transition to underground with the ceremony in June last year, how’s the last six months been?
Mr O’Neill: It’s been really successful. We’ve managed to bring the operation up to full production capacity in that six month period. It’s a really good achievement for bringing a new mine online within six months and having it operating at full capacity. You would also see the stats we talked about tonight, the safety performances improved significantly over that period as well, the workforce stabilised, people gare etting more confident in what they do -
Q) That’s because [the number of] contractors have gone down as well too?
Mr O’Neill: The contractors have gone done as well, but we’ve also got a stable workforce not bringing in a workforce for four weeks and then flying them out , so we’ve got a more stable workforce that are understanding our values around safety a lot better.
Q) So when you say four weeks and then out, they are never coming back there [on site?]
Mr O’Neill: That’s right, some of them would come on four weeks to do a task on the project that might be to fix that wheel or put this motor in and then they leave. So we had a transient sort of workforce.
Q) Surely they would be educated in other mine sites, and you would think they wouldn’t be complacent, they would think ‘new mine site, wow.’
Mr O’Neill: It doesn’t always work that way. So some of the contractors don’t always bring someone experienced onto site, they don’t necessarily have mine site experience and we found there were a number of inexperienced contractors that were coming on site for a short period and causing a few problems, they didn’t understand our culture around safety. The construction industry is quite different to the mining industry, the safety is really important in the mining industry, it’s a really big focus, it’s the first thing you talk about, it’s the first thing you think about, and those guys weren’t used to that culture and didn’t necessarily buy into it at occasions.
Q) It was mentioned [in the community engagement meeting] that copper was down to Global Financial Crisis prices, and there was a mention too that you had to make some tough decisions to make sure you can continue on until the proposed closure. Can you elaborate a little bit more on what they were and what the copper prices mean for you guys?
Mr O’Neill: So independent of the copper prices, when we went through the merger with Glencore and Xstrata, there was a number of activities we looked at that weren’t necessarily supporting themselves, so we made some decisions at Ernest Henry. We closed the Mount Margaret Open Pit Mine and we ended up closing the magnetite processing stream both of which were not contributing significantly to the financial success.
Q) How long ago?
Mr O’Neill: Towards the end of 2013, first quarter of 2014, and those decisions what they did was secure and made more sustainable our operations. We took away the loss making section of the business and what’s that’s meant that is as the copper prices have done what it’s done we have been able to sustain, we have not had to make knee jerk operations to a lower copper price…lower copper prices mean lower incomes, so we haven’t had to change our fixed costs, cost basis in direct response straight away, we’ve given ourselves the ability to ride through some of the cycles in the industry.
Q) What about employment?
Mr O’Neill: Yes, the same sort of set up, because we’ve made the business sustainable, we can continue to offer the employment that we’ve got.
Q) The same amount?
Mr O’Neill: The same amount. If we hadn’t made some of those difficult decisions in 13-14 we may have had to take a different course of action now.
Q) Why were they difficult, the closures?
Mr O’Neill: They were difficult because they involved people, and they involved making sure we made the right decision. They were significant decisions in the future of Ernest Henry and the future of sustainability of the business. They were the ones we wanted to make sure they weren’t taking lightly. They do also involve people and people’s lives and that’s why they were difficult.