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NEWS-LEADING DEVELOPMENTS JUNE 2016 • E&MJ; 5 www.e-mj.com resumption of underground development assumes a fve-year construction period, with frst underground production around 2021. A fve- to seven-year ramp up peri- od will follow. At full production, the underground mine will produce 95,000 mt/d of plant feed, and the Oyu Tolgoi plant will pro- duce more than 500,000 mt/y of copper in concentrate. Underground mining will be based on the Hugo Dummett North deposit, which contains probable ore re- serves of 499 million mt at an average grade of 1.66% copper—more than three times the grade of open-pit ore—and 0.35 g/mt gold. Processing of underground ore will utilize the existing concentrator and in- frastructure. Capital cost to complete the underground development program is es- timated at $5.3 billion. Rio Tinto Deputy Chief Executive Jean-Sébastien Jacques stated, "Today's investment decision takes Oyu Tolgoi to another level and will transform it into one of the most signifcant copper mines globally, unlocking 80% of its value. Long-term copper fundamentals remain strong, and production from the Oyu Tol- goi underground will commence at a time when copper markets are expected to face a structural defcit. China Moly Will Acquire Freeport's Tenke Fungurume Interests Freeport-McMoRan announced on May 9 it has entered into an agreement to sell its interests in TF Holdings Ltd. to China Molybdenum for $2.65 billion in cash and contingent consideration of up to $120 million, consisting of $60 mil- lion if the average copper price exceeds $3.50/lb and $60 million if the average cobalt price exceeds $20/lb, both during the 24-month period between 2018 and 2019. TF Holdings is a Bermuda hold- ing company that indirectly owns an 80% interest in Tenke Fungurume Mining. Freeport has a 70% interest in TF Hold- ings, giving it an effective 56% interest in Tenke. Tenke Fungurume is an open-pit cop- per-cobalt mining and processing oper- ation in Katanga province, Democratic Republic of the Congo (DRC). Lundin Mining has a 24% effective interest in Embattled South African gold producers could face up to $3.4 billion in liabili- ties if they lose a lawsuit fled on behalf of tuberculosis and silicosis victims. In May, lawyers for the mineworkers won a court action allowing a class action suit on behalf of 69 claimants to proceed. While class action is commonplace in the U.S., Canada and Australia, it is rare- ly applied in South Africa. The mines had argued that claimants should fle suits individually. Due to its novelty, the South African frm, Richard Spoor Attorneys, fght- ing the case brought in a U.S. law frm, Motley Rice, as consultants. "It's not common here at all—there have been very few class action suits to date," said Georgina Jephson, an attorney with Rich- ard Spoor Attorneys in Johannesburg. "This one will be the biggest ever in South African legal history." Silicosis is a respiratory disease caused by breathing in the crystalline silica dust that is released during mining operations. Lungs are scarred and the condition is progressive over time. There is no cure. The court also included claims relat- ing to tuberculosis, another respiratory illness. Silicosis sufferers are three times more likely to contract tuberculosis than unaffected people, the court found. The court set 1965 as the starting date for claims, when health and safety legislation surrounding respiratory illness was put into effect. Companies affected are 32 gold mining frms with 82 indi- vidual operations, including Anglo Ameri- can, AngoGold Ashanti and Sibanye Gold. The mines will now have an opportunity to appeal, which means the process could be lengthy, Jephson said. The case delivered the worst possible outcome for the mines that now poten- tially face billions of dollars in claims go- ing back decades. According to Investec Securities, the eventual payout could top $3.4 billion, based on an earlier settle- ment offer in a separate case of $30 mil- lion that Anglo American and AngloGold Ashanti agreed to pay 4,388 miners af- fected by silicosis. How many will ultimately join the class action suit is unclear, but the court also ordered that notice of the action be widely disseminated around southern Africa, including rural areas from where many of the migrant workers originate. The court also said that former and current employees could join the action, as could the surviving heirs of deceased workers. The provision for heirs is espe- cially signifcant as most silicosis suffer- ers are now in their 60s, and of course many have since died. Mines had to place notices to this effect at prominent plac- es around worksites, on the basis that mineworkers would have direct contact with far-fung rural communities, and so ensure word fltered back to these areas. Peter Major, mining analyst at Cadiz Corporate Solutions in Cape Town, said the gold industry had already shrunk drastically and a lawsuit would put the survivors in peril. "If you bankrupt the remaining six to eight gold mining companies in South Af- rica—what does that do for the current 120,000 men employed on them?" Ma- jor said. For this reason, the mining frms were likely to fght the class action "every step of the way." At its peak, the industry employed 400,000 men and produced 600 tons per year, while now it mines perhaps 150 tons annually, Major noted. Also, during their prime, the gold mines were well- run, well-fnanced companies, owned and overseen by large mining houses. Now they function as a shadow of what they were, Major added. "None of them now are held by a large mining house." However, attorney Jephson said that any settlement would have to be agreed upon by the courts as well as all parties involved. "The mines won't agree to a settle- ment that puts them out of business. Neither will the court that has to rule on a fnal agreement," Jephson added. Looming Lawsuit Threatens South African Gold Industry More than 30 South African gold producers are facing a miner health-related class action lawsuit that could cost them up to $3.4 billion. (Photo: Gavin du Venage) (Continued on p. 33)