* Slow ramp up of waste system has hit Caserones mine
-consultant
* Says inexperienced workforce also a problem
* But Pan Pacific CEO plays down issues at site
* Head says on track to reach full output next month
* Chile copper industry battling to get ore from remote
deposits
By Rosalba O'Brien and Yuka Obayashi
SANTIAGO/TOKYO, Aug 26 (Reuters) - The slow ramp up of an
ambitious waste disposal system and an inexperienced workforce
have been key factors curbing output at a remote Chilean mine
built by Japan's top copper smelter Pan Pacific Copper to
bolster its supply of concentrate.
Those are among the main conclusions of a consultant's
report commissioned by the company and seen by Reuters, which
details troubles at the Caserones plant, one of only a handful
in the world's top copper producer churning out high-quality
concentrate.
Output on the project has been behind schedule since it
started producing in May last year in the arid mountains of
northern Chile, and its problems highlight the challenges facing
miners in the country as they scrabble through far-flung
locations after more accessible deposits have largely been
tapped out.
Faltering Chilean output of the metal, used in everything
from wiring to air conditioners, could help support
international prices CMCU3 languishing near six-year lows.
But the head of Pan Pacific, owned by JX Holdings 5020.T
and Mitsui Mining & Smelting 5706.T , played down the problems
contained in the report and said the mine remained on track to
reach full capacity next month, even as some industry analysts
said that could be tricky.
"The Caserones concentrator is going through a severe crisis
in the operation of its facilities," Canadian mining consultant
Hatch said in the report, dated April but updated in May,
referring to critical equipment used to process crushed ore that
has not been running as expected due to the waste problems.
The consultancy did not respond to requests for comment on
the report, a summary of a so-called technical assessment
conducted around March. Reuters was shown the report by somebody
with direct knowledge of Caserones' operations.
"The conclusion of the Hatch report was that there were no
major problems (at Caserones)," Pan Pacific President Yoshihiro
Nishiyama told Reuters.
"The report suggested there were various reasons why the
(plant's) utilisation rate has not risen, but those issues were
solvable."
Forecast to produce 150,000 tonnes of concentrate a year at
full operation, Pan Pacific developed Caserones to cut its
dependency on major miners for supply.
It is also partly owned by Mitsui & Co 8031.T , a trading
house in the world's No.2 concentrate importing nation, making
it the first major Japan-owned copper mine. ID:nL3N0ZJ2ZY
But costs on the project have already doubled to over $4
billion since construction began in 2010.
CONCENTRATE HARD
Hatch blamed the under-utilisation of the concentrator on
issues such as problems with the mine's "bold and aggressive"
tailings dam system, where waste is stored after concentrate is
extracted.
The plant's topography means it has two tailings dams - one
for sand and one for mud - as the typical single, larger dam
would be difficult to accommodate.
Hatch said some sand had been deposited in the dam that
would usually only be used for mud, risking spillage and
potential "environmental type sanctions" from the government.
The company said that was a temporary measure while
adjustments to the operations of the sand tailings dam were
finalised. Nishiyama said work would be finished this month and
that there was "no environmental problem".
The Hatch report also said only about 30 percent of mine
staff had sufficient experience, suggesting many should be
replaced. Nishiyama said the quality of workers was similar to
other Chilean mines, with experienced staff recruited by Nelson
Pizarro, who led the project until its inauguration and now
heads Chile's state-run miner Codelco.
He added that the concentrator would reach full utilisation
in September, from 70 percent in late-July. An industry source
with knowledge of Caserones said that would be very difficult.
CRU Group copper consultant Erik Heimlich also said there
was scepticism in the market about the target.
Problems like those at Caserones, as well as delays from
labour disputes and weather, led Chile's state copper commission
to downgrade its 2014 output estimates twice, and it has already
twice lowered its 2015 forecast, now at 5.88 million tonnes.