Louisville, Kentucky (Platts)--3Dec2012/617 pm EST/2317 GMT

Congressional foot-dragging on a crucial land swap proposal has forced Resolution Copper Mining to curtail all shaft development and drilling activities for a new Arizona mine the company says would be the largest copper producer in the US.

London-based Rio Tinto is slashing Resolution's 2013 budget to $50 million, a 75% cut, because Congress has not approved the company's proposed exchange of 2,400 acres of US Forest Service land, containing what Resolution says is one of the largest undeveloped copper resources in the world, for more than 5,300 acres of conservation lands controlled by the company, a Resolution official said Monday. Resolution is a subsidiary of Rio Tinto and Australia's BHP Billiton.

Land swap legislation has been considered since 2005. "It did pass the [House of Representatives] last October, and it has been in the Senate ever since," said the official, who asked not to be identified. "So, we're still hopeful that something will happen in the lame duck session right now."

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But with all the uncertainty, Rio Tinto decided not to wait and reduced Resolution's budget from a previously proposed $200 million for 2013.

"They've elected to use some of the dollars we've had in the past and use them elsewhere where there is more certainty," he said. "The money has been set for 2013."

In a Friday statement, Andrew Taplin, the mine project director, said "to justify further development, we need more certainty around legislative and regulatory activity affecting Resolution Copper. Specifically, approval of the land exchange we've been seeking since 2005 constitutes the critical path forward."

Taplin noted that 11 versions of the bill have been introduced in Congress in the past seven years. The most recent, H.R. 1904, was passed by the House of Representatives in 2011.

Arizona's two Republican senators, John McCain and Jon Kyl, are strong supporters of the project and urging their Senate colleagues to consider the legislation before the Senate adjourns later in December.

In the meantime, though, Resolution is suspending work on the No. 9 shaft at the end of December, resulting in a layoff of 175 people. Once ongoing work on the No. 10 shaft is completed in late March or early April, another 225 people will be furloughed.

Under any scenario, the new mine will not be in production anytime soon. If the legislation passed and everything fell into place, "we're looking at about a 10-year period of permitting, engineering and construction," the official said, with the mine in operation early next decade.

The mine would produce "just north" of 1 billion lb of copper annually, he said.

--Bob Matyi, newsdesk@platts.com
--Edited by Keiron Greenhalgh, keiron_greenhalgh@platts.com

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