Mine Life Cycle

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Mine Life Cycle
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Mine Life Cycle Presentation Outline

• Background
• Benchmarking in the Mining Industry
• Phelps Dodge Approach
• Case Example
• Questions

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Mine Life Cycle - Traditional Approach

• Many Companies have Approached Project
  Development with
• Methods to quantify resource
• Methods to valuate resource potential
• Methods to estimate closure costs
• Closure plan part of permitting
• Financial assurance based on permit plan
• Best plans based on NPV valuation
• Many Operations have approached end of mine life
  by
• Occasional to Frequent reviews of closure plans
  and costs
• Development of final plans near end of life (2
  years or less)
• Implementation at end of mine life

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Mine Life Cycle - Background

• Closure Costs are Skyrocketing
• Tangible Costs
• Moving dirt
• Grooming slopes
• Re-vegetating
• Water treatment
• Intangible Costs
• Changing prescriptive guidelines
• Changing stakeholders
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Mine Life Cycle - Background

• RESULT
• Annual closure/holding costs are millions of
  dollars
• Increased holding costs
• Increased closure costs
• End of mine life costs significantly different
  than originally estimated
• Additional burden to other portfolio operations
• Current cash directed into low-performing
  investments
• Reduction in competitiveness
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Mine Life Cycle - Background

• Opportunity -
• Create Value by
• Neutralizing End of Mine Life Cycle Liabilities
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Life Cycle Analysis Team Informal Benchmarking

• Other Mining Companies - Gold
• Corporate Closure Protocol (Update plan and audit
  annually)
• Performance metrics / Compensation structure
• Goal Dollar-for-dollar liability reduction
• Goal Close one property per year
• Other Mining Companies - Coal
• Prescriptive reclamation requirements SMCRA
• Corporate Closure Protocol (Update plan and audit
  annually)
• Performance metrics (Acres Disturbed vs. Acres
  Reclaimed)
• Organizational Structure (Reclamation Planner,
  Continuous Improvement)

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Mine Life Cycle Informal Benchmarking

• Universities
• No comprehensive tools for life cycle valuations
• No comprehensive programs for life cycle
• Other companies approaching universities for
  assistance
• Phelps Dodge Facilities
• Restoration planning
• Reclamation activities
• Water treatment

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Mine Life Cycle Phelps Dodge Approach

• Creation of Multi-disciplinary Life Cycle
  Analysis Team
• Develop a systematic, reproducible process to
  create value.
• Develop site specific strategic plans to
  manage/reduce liabilities and to capture residual
  asset value.
• Develop tools to measure environmental risk and
  closure costs in order to minimize potential
  liabilities.
• Develop Best Practices to minimize potential
  liabilities.
• Consider Financial, Social and Technical Issues.

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Mine Life Cycle End of mine Life

• End of Mine Life Example
• ARD Water Treatment
• Value Created by
• Cost reduction
• Revenue generation
• Risk reduction

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Acid Water Treatment Current Practice Lime
Addition
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Acid Water Treatment Why Change?

• Effluent not always acceptable
• Changing regulations

• Sludge contains metals
• Long term sludge management
• Metals lost no revenue

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Case Study BioSulfide Technology
ARIZONA
BAGDAD
MIAMI
MORENCI
AJO
BISBEE
SIERRITA
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Bisbee Copper Queen

• BioteQ Environmental - Phelps Dodge Joint Venture
  (Copreco LLC)
• Plant Commissioned - October 2004

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Phelps Dodge Copper Queen BioteQ Environmental
Project Location
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BioSulfide Process Flowsheet
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Copreco Facility
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Design and Current Operating Information
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Operating Cost Breakdown

• COST ITEM of TOTAL
• Acetic Acid (Hydrogen donor) 42.0
• Sulfur 20.0
• Labor (ops maint) 16.0
• Power 11.0
• Bioreactor Nutrients 3.0
• Flocculant 3.0
• Soda Ash 2.0
• Operating Maint Supplies 1.0
• Nitrogen 1.0
• Fresh Water Addition 1.0
• TOTAL 100

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Conclusions Bio-Sulfide Technology

• Metals can be removed to produce very low or
  effluent dischargeable concentrations in water
• Metal recovery and sales offset treatment costs
• Reduction or elimination of sludge production
• Better quality of treated water
• Bio-Sulfide plants can stand-alone or be
  integrated with other treatment processes

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Mine Life Cycle -

• CHALLENGE Two Fold
• DESIGN AND MANAGE FOR END OF MINE LIFE FROM
  CRADLE TO GRAVE
• CHANGE LIABILITIES INTO ASSETS
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