Shares in Chilean miner Antofagasta Plc. (LON:ANTO) got a boost Thursday after the company announced the board of directors had approved a $1.3 billion expansion of its Los Pelambres copper mine in Chile.
The awaited upgrade of Los Pelambres will add 60,000 tonnes of copper a year to the company’s overall production once in full operation. Annual production is expected to increase from 40,000 tonnes in the first year at the expanded throughput to 70,000 tonnes towards the end of a 15-year period. This, said the company, will happen as the hardness of the ore increases and the benefit of the higher milling capacity is fully realized.
Los Pelambres is Antofagasta’s biggest mine, producing 356,000 tonnes of copper last year.
Copper miners in mature markets, particularly in Chile, the world’s top producer of the red metal, have seen production costs rise as they need to dig deeper and process larger amounts of rock to obtain the same amount of copper they used to a decade ago.
Construction will start in early 2019 and first production is expected in the second half of 2021. The project includes the construction of a desalination plant and water pipeline, which will also benefit the existing operation in cases of prolonged or severe drought, and for a potential further phase of expansion, chief executive officer Ivan Arriagada said in the statement.
The capital cost of the project also includes $500 million for the desalination plant and water pipeline. The seawater treatment facility will supply the expansion and a potential further growth phase, acting also as a back-up for the existing operation in case of extreme dry conditions, were these to materialize, Arriagada noted.
A subsequent phase of expansion may follow, depending on whether the company can secure required environmental and regulatory approvals. This phase will further increase production and also significantly extend the mine life of Los Pelambres as it accesses the operation’s substantial undeveloped mineral resources, which are currently five times larger than its ore reserves.
The company, majority-owned by Chile’s Luksic family, one of the country’s wealthiest, recently adjusted down its production guidance for 2018 to 705,000-725,000 tonnes from the previous 705-740,000 tonnes, but maintained its net cash cost target is $1.35 per pound.
Shares in Antofagasta were up more than 4% in London to 795p by 1:53 pm local time.