Business Maverick

RODENTS AND ROCKS

Chinchilla conundrum may drive Gold Fields underground in $1bn Chilean mine project

Chinchilla conundrum may drive Gold Fields underground in $1bn Chilean mine project
Northern viscacha (Lagidium peruanum), a species of rodent in the family Chinchillidae. (Photo: Wikimedia) | Gold Fields logo. (Image: Supplied)

Gold Fields’ Salares Norte mine project high in the Chilean Andes may take a detour underground because of a colony of highly endangered chinchillas. It is the latest twist in a saga of mines and rodents but the company sees the upside to going down.

Gold Fields, as we reported exclusively last month, has been given the green light to resume its translocation of a colony of highly endangered chinchillas which have played an outsized role in its $1-billion Salares Norte mine project in the Chilean Andes.

Read more in Daily Maverick: Rodents and Rocks – Gold Fields gets green light to resume Chile chinchilla relocation 

But in the two and a half years that the translocation project was placed on hold by Chilean regulators — in response to the deaths of two of the first four of the critters that were captured — Gold Fields was busy cooking up a plan B.

“While the delayed relocation has not impacted construction or the project schedule, the team has advanced a study on the option to mine the Agua Amarga orebody from underground (as opposed to the original open pit plan). The pre-feasibility study will be completed during H2 2023, at which point the team will decide on the best way to progress the mining of the Agua Amarga orebody,” the company said on Thursday when it unveiled its interim results. 

The mine, which is almost complete with first production expected late this year, is comprised of two open pits. The second contains the Agua Amarga orebody and is obviously the one closest to the colony of chinchillas, which number around two dozen. 

But Gold Fields’ acting CEO, Martin Preece, told Daily Maverick in an interview that while an underground option raised costs on the one hand, it also reduced them on the other, while at the same time cutting the company’s carbon footprint.

“As good miners, while we were still waiting for the permitting approved for the relocation; we wanted to start thinking about alternatives if we weren’t granted permission to relocate. So we commenced a study to see how do we mine Agua Amarga from an underground perspective rather than an open pit,” Preece said. 

“We are quite pleased with the outcomes. It’s at the conceptual study level, we are going to advance that to the feasibility level. Initial indications are that the economics are fairly similar because you save a lot in strip ratio.” 

“Strip ratio” refers to the amount of waste that is dug up compared with the amount of ore to be extracted. In the open pit in question, the ratio is about 20 to 1. But Preece said going underground through the side of the mountain would go directly into the orebody “so you are not mining mountains of waste… You are able to do it without mining a whole mountain away.”

This route also has an upside on the carbon footprint front, Preece said, because less waste removal meant less diesel consumption.

“One thing that is giving us food for thought from an ESG [environmental, social and governance] perspective is that while the economics are the same, going underground will burn a whole lot less diesel, and so from a carbon-burn perspective we see some benefits there. So we’re going to progress the study and see where we land towards the end of the year,” Preece said.

The pre-feasibility study has been completed and the feasibility study should be done by November. 

“When we have done the feasibility we will have much better visibility on the economics and the costs and then we can see if it keeps on the timeline of keeping with continuous production,” Preece said.

If Gold Fields decides underground is a viable option for the second pit, it still needs to go through a permitting process for that, which may also take time. 

Going down unexpected rabbit holes

Asked if the potential detour underground was purely because of the chinchilla situation, Preece responded: “Definitely.”

The company has always said it might have to reconfigure the original plan if the relocation project remained on hold. The potential move underground literally takes things to new levels.

There can be few other cases where a group of rabbit-sized rodents have been the subject of such attention in a mining company’s C-suite. To Gold Fields’ credit, it has always striven to do the right thing on this front and probably never expected to go down such rabbit holes. 

The original relocation was estimated to cost about $400,000, but that figure has unquestionably climbed. Feasibility studies don’t come cheap, and the move underground will initially add to costs which calculations currently suggest will be balanced out afterwards. 

Gold Fields can easily absorb such costs. The company’s normalised earnings for the six months ended June 2023 fell to $454-million, a 9% drop compared with the same period last year.

However, Gold Fields is still making money, it has generally contained costs better than its peers, and gold has not taken the battering that other commodities have. At around $1,900 an ounce, it remains extremely high by historical standards.

As to the resumption of the chinchilla translocation, it can commence in September and the timeframe is 36 months. Gold Fields, for obvious reasons, wants to proceed with caution. 

“We are very comfortable with the relocation programme we have put together; we have taken lessons from the previous relocation. We are going to be very measured about how we do it,” Preece said. 

On the surface, the task does not seem arduous. The original relocation attempt in late 2020 involved luring the animals with bait into an enclosed trap, with the door closing behind an animal when it entered. The animals were then moved a few kilometres to their new home and placed in a wire-mesh enclosure for a few weeks to get used to their new surroundings, which hardly differed from their original stomping grounds.

The critters live in rocky, treeless terrain at high altitude, and so appear to be pretty low maintenance. There is none of the drama of, say, translocating an elephant herd. And short-tailed chinchillas are endangered because they were so easy to hunt. Evolving so high above sea level where at even moderate latitudes it can get bloody cold, they have a fur coat that fetched extremely high prices. 

But the project hit unexpected turbulence when two of the initial four animals that were captured died. One of the survivors suffered a leg injury and was flown to Santiago for treatment, underscoring how seriously Gold Fields’ executives took its condition. 

But the two deaths brought the project to a screeching regulatory halt and put the translocation high on the radar of Chilean conservationists and animal rights activists. So, three years after the initial attempt, Gold Fields clearly wants to get this right. It may now involve a previously unplanned move underground. This colony of chinchillas is probably worth more than its weight in gold. DM 

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