Chilean miner Antofagasta (LON:ANTO) said on Monday it had suspended a $1.3 billion expansion project at its Los Pelambres operation in the home country for an estimated four months as the coronavirus pandemic has made it impossible to carry on with work.
The company has also suspended contracts with most of the companies involved in the project aimed at boosting Los Pelambres output.
Antofagasta’s flagship mine had production of 357,800 tonnes in 2018. It accounts for nearly half of the company’s total copper output.
The decision, which will be periodically reviewed based on the evolution of the coronavirus crisis in Chile, does not means contracts will be terminated, Antofagasta said.
“This is a temporary suspension that has been taken as it is not possible to continue with the construction of the project as originally planned and is only for the duration of the emergency, as we hope to resume work as soon as possible,” Francisco Walther, vice president, projects, said in the statement.
“We want to maintain a contractual relationship with most of the contractor companies with which we are working today, but we must accept that, given the current conditions, many cannot do the work for which they are contracted,” added Walther.
Antofagasta said the terms that will apply to contractor companies during this suspension period will be agreed on in the coming days. However, each case will be reviewed individually, the company noted, seeking to maintain, whenever possible, each workers’ minimum monthly income equal to CLP500,000 (roughly $585) and avoiding the termination of their employment.
Antofagasta had said in March that it would put only parts of the expansion project on care and maintenance. It also reduced the number of staff to reduce the risk of coronavirus infection.
The awaited upgrade of Los Pelambres, Antofagasta’s biggest mine, 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.
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. It could also be used by a potential further phase of expansion, which may follow the current one if Antofagasta can secure the required environmental and regulatory approvals.
That 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.
Antofagasta didn’t mention changes to its production forecast for 2020, which was cut in January as a result of massive protests against inequality in the South American country during the last quarter of the year, as well as issues affecting both Los Pelambres and the Antucoya project.
The news comes on the same day Fitch Ratings cut its short-term price assumptions for copper as a result of considerably lower economic activity, reducing price forecasts to $5,300 a tonne this year and $5,800 per tonne in 2021.