Volume 11 | Issue 6 | Year 2008

The Caraíba mine was discovered in 1874, where today sprawls the township of Jaguari, in the Brazilian state of Bahia. In 1944 the National Department of Mineral Production (DNPM) identified it as a potentially productive mine. In 1969 Francisco Pignatari, also known as Baby Pignatari, started feasibility studies with the intent of building a mining and metallurgy complex.
Baby Pignatari was one of the most colorful entrepreneurs in Brazilian history, not only because of his innovative business initiatives – he built the first Brazilian airplane factory – but also because of his lifestyle. He raced in Le Mans and in Silverstone, had a private plane of the same model as the Rio de Janeiro-São Paulo shuttle, and supposedly dated some of the most beautiful actresses in Hollywood, such as Zsa Zsa Gabor and Linda Christian. He even eloped with Princess Ira von Fürstenberg, to the chagrin of her husband.

But neither his business acumen nor his personal flair would help him become a mining tycoon. In 1974, three years before Baby Pignatari’s death, BNDESPAR (a government-owned holding company) acquired a majority interest in a nearly bankrupt Mineração Caraíba.

BNDESPAR put Mineração Caraíba under the control of government-owned Caraíba Metais, an industrial concern. A complex divestment process that ran from 1988 to 1992 brought Caraíba Metais itself to the hands of the private sector, while Mineração Caraíba remained government-owned. A new board of directors took over Mineração Caraíba and started a remarkably modern management style for Brazilian state-owned companies of the time.

In 1994 the Brazilian government sold Mineração Caraíba to the same group that had purchased Caraíba Metais.

FROM THE GROUND UP
Mineração Caraíba struggled for a long time. Depleted reserves seemed to have numbered the company’s days: it expected to go out of business by 2007. Today, however, it employs nearly 1,000 workers and, at about 3.2 million tons of copper ore per year, it is the country’s second largest copper concentrate producer.

A change in senior management, along with soaring copper prices, made the company’s future more promising. The metric ton of copper went from US$3,000 to about US$8,000 in the last two years, which boosted profits, but new management initiatives also played a key role in Mineração Caraíba’s turnaround.

Sérgio Roberto Fráguas, the new president and CEO, is blunt: “We had to broaden our portfolio to avoid going out of business.”

An example of the ingenuity that was put to work is the exploration of copper cathodes. From 1979 to 1986, extraction from the mine was done exclusively through surface mining. Only when the surface reserves ran out did the company start subsurface mining. As a result, oxidized ore left over from the surface mining was later washed away with the acidic water from Caraíba Metais. Mineração Caraíba used solvent extraction and electrowinning to harvest copper cathodes from the acid water. As a result the company brought a new product to the market and reduced the environmental footprint of its sibling company.

Fráguas also integrated management initiatives. “We did not have synchronized strategic, tactic and operational plans with companywide consensus.” Since it became privately owned again, Mineração Caraíba deployed a management system based on Total Quality Control (TQC); began to follow the ISO: 9001, 14001 and OHSAS 18001 norms; and added Six Sigma to its toolbox.

The theory of Constraints helps raise productivity. Ore supply and ore grinding have been identified as constraints, so Mineração Caraíba created “lungs” to help level production capacity and avoid interruptions. As an example, the ore lung has seven days’ production capacity, while Fráguas explains that the largest incident to date stopped production for five days. (Fráguas jokingly calls such episodes “Murphys,” in a reference to Murphy’s Law.)

Operation of the underground mine is almost fully mechanized, with large modern equipment. The method used is Vertical Retreat Mining (VRM) – backfilling with a paste made of solid residue, cement and water. This keeps the rock bed stable, minimizes water consumption from the São Francisco River, and reduces pollution due to solid waste. This process and the copper cathode extraction method are examples of the “clean technology” employed by Mineração Caraíba.

Mineração Caraíba adopted the participative management model: senior management to laborers all join forces in the search for continuous improvement of processes, products and services. Fráguas says that this style has been fundamental to build the company’s identity and to achieve the results sought by the organization. A simple hierarchy chart eases communication and speeds decision making, while ensuring the commitment of all workers to the organization’s excellence culture. Senior and middle management share responsibilities with their teams, encouraging all hands to participate in decision making. The end product is an environment rich in cooperation and mutual respect.

OUTLOOK
Mineração Caraíba faces some stiff competition: Vale (the largest mining company in Brazil), Yamana (from the Brazilian state of Goiás) and Codelco (from neighboring Chile) also seek to supply raw materials to Caraíba Metais. The main weapons that Mineração Caraíba brings to the fray are the high purity grade of its copper concentrate and the delivery right into the premises of Caraíba Metais. A full-time representative is at hand to help expedite delivery and to resolve any issues or complaints.

Mineração Caraíba constantly seeks opportunities to improve profitability. For example, it is currently researching a new process that will bring its electrolytic copper from 99.99 percent to 99.999 percent purity levels.

The company is also searching for ways to turn the solid material that is wasted by its current extraction process into input for new products, such as pig iron or vanadium-iron.

In 2007 Mineração Caraíba acquired the rights to the Boa Esperança copper mine, in the state of Pará. Production is scheduled to start in 2012. According to the scoping study, the yield should be around 30,000 tons of copper per year.

It looks like Fráguas meant what he said about broadening the company’s portfolio: Mineração Caraíba has also acquired one gold mine. The Nova Xavantina mine, in the state of Mato Grosso, is expected to yield gold for ten years each, starting in 2009.

The company that was supposed to go out of business by 2007 looks stronger than ever.