Kennecott: Landslide to lower 2013 production 50%
Kennecott Utah Copper has told customers to prepare for the worst.
That could be bad news for Utah's economy as well as the hundreds of workers whose jobs are being threatened by last week's massive landslide that sent about 165 million tons of rock tumbling into Kennecott's Bingham Canyon Mine, destroying equipment and forcing the company to shut down ore recovery operations.
In a letter to customers, Kennecott said shipments of refined copper will continue as planned through April but next month's shipments will be smaller. "Thereafter," the company said, "we do not anticipate the ability to make further shipments for the foreseeable future."
When production does resume, the company expects it will be at a significantly reduced level.
"Based on what we've seen, our estimated 2013 production will be roughly 50 percent lower than last year," Kennecott spokesman Kyle Bennett said.
In 2012, Kennecott produced 163,200 tons of refined copper, 9.4 tons of molybdenum and 279,000 ounces of gold from ore dug up by its giant shoves and trucked out of the Bingham Canyon pit, which is the world's largest excavated hole. The open-pit mine annually accounts for between 1 percent to 2 percent of the world's mined copper production, or approximately 25 percent of the copper used in the U.S.
While the projected decline in production from Bingham Canyon this year is expected to have only a minimal impact on world copper supply, the fallout closer to home promises to be much more intense as the effect of the slowdown gradually ripples through the Utah economy.
"If production is cut by 50 percent, it is going to be a big hit to our economy," said Pam Perlich, senior research economist at the University of Utah's Bureau of Economic and Business Research. "And it won't just be felt by the company. They have a lot of outside contractors that do work for them as well."
In 2011, spending in Utah by Kennecott Utah Copper and its parent company Rio Tinto, topped $1.2 billion, a figure that included $270 million in wages, salaries, benefits and pensions, $765 million in purchases with Utah firms and $140 million in taxes and other payments to state and local governments, according to the economic bureau.
On Monday, Kennecott asked its 800 mine employees to voluntarily take accrued vacation or unpaid time off as it deals with the aftermath of the landslide.
And while the company has yet to indicate how many of its workers accepted the offer, the spectre that Kennecott may be forced to shut down production by the end of May due to a lack of ore to refine suggests far more employees than just those working in the pit could be affected.
On the other hand, Perlich pointed out that if Kennecott commits its resources to removing the material that slid into the pit from the northeastern wall of the mine it could produce additional work. "That's the economist in me looking at the glass as half full," she said. "But somebody is going to have to do that work."
Attempts to reach a representative of the United Steelworkers of America for comment were not immediately successful Tuesday. The union represents approximately 1,500 Kennecott employees.
Although the slide was anticipated and all employees were evacuated ahead of time, its size and scope were much larger than expected.
The fall took out three of Kennecott's 13 shoveling machines, 14 of its 100 ore-hauling trucks and ancillary equipment that included bulldozers and graders.
"The good news is that 90 percent of our equipment remains intact," Bennett said, noting that company experts are evaluating where in the mine copper ore is most readily available once production can begin again.