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. 
 
----------------------- 
Palabora Mining Complex 
----------------------- 
 
¶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. 
 
-------------------------- 
Palabora Geology is Unique 
-------------------------- 
 
¶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 
------------------------------- 
 
¶4. (SBU) Palabora operates an integrated underground mine, 
concentrator, smelter and refinery complex.  The mine was 
 
PRETORIA 00002250  002 OF 004 
 
 
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 
------------------ 
 
¶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. 
 
 
-------------------------------- 
Extracting the Valuable Products 
-------------------------------- 
 
¶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 
 
PRETORIA 00002250  003 OF 004 
 
 
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 
------------------------------- 
 
¶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. 
 
----------------------------------------- 
A Big Mine with a Huge Positive Footprint 
----------------------------------------- 
 
¶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 
----------------------- 
 
¶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