KGHM to go ahead with $2bn expansion of Sierra Gorda copper mine in Chile

Polish miner KGHM (WSE:KGH), Europe's second-largest copper producer, was given Monday environmental approval for a $2 billion expansion and upgrade of its flagship Sierra Gorda mine in northern Chile, 60 km south-west of the town of Calama.

The state-controlled company grabbed the copper and molybdenum project in 2012, after completing the acquisition of Canadian rival Quadra FNX, in what was the largest-ever foreign acquisition by a Polish company.

Upgrades are expected to extend the mine’s life by 21 years.

KGHM, also one the world's largest silver miners, had planned to extend Sierra Gorda earlier, but the 2015-2016 rout in commodity prices forced the company to place the plan in the backburner.

According to Chilean newspaper Estrategia, the approved upgrades would extend the mine’s life by 21 years. They include an increase to the capacity of the facility's mill from 190,000 tonnes to 230,000 tonnes per day, though overall production of copper cathodes will stay at 55,000 tonnes.

Sierra Gorda, a joint venture 55% owned by KGHM and 45% by Japan's Sumitomo Metal Mining Co Ltd, began operations in July 2014 with an expected output of 220,000 tonnes of copper a year once the now approved expansion was completed.

Last year, the mine produced 101,700 tonnes of copper. In the first half of 2018, however, output fell by 10% year-on-year to 25,000 tonnes, versus a full year target of 59,000 tonnes.