BHP flags delay at Spence copper mine expansion

Spence copper mine. (Image courtesy of BHP.)

BHP (ASX, LON, NYSE: BHP) is expecting delays at the ongoing $2.5 billion expansion of its Spence copper mine in Chile, as measures taken to stop the spread of covid-19 has resulted in layoffs.

Delivering results for the nine months to the end of March, the world’s biggest miner said the project’s schedule was under review, adding that first production won’t likely happen until early 2021.

The project was slated to begin production by the end of 2020.

The anticipated delay, it said, is due to the decision to reduce occupation in the camp to facilitate social distancing protocols.

The workforce downsizing may also affect the timeline for the commissioning of an $800 million desalination plant at the port of Mejillones, located about 60 km north of Antofagasta city.

The $2.5 billion expansion at the Chilean mine includes construction of a concentrator plant to increase production and extend the life of the deposit by about 50 years

Spence’s expansion contemplates the construction of a concentrator plant to increase production and extend the life of the deposit by about 50 years, as well as the seawater treatment facility.

Before the current pandemic, the expansion provided 4,100 temporary jobs and 220 permanent positions. Once finished, it will add 185,000 tonnes of copper and 4,000 tonnes a year to BHP’s output in its first decade.

Spence is BHP’s second-largest deposit in Chile after Escondida, the world’s biggest copper operation.

In the last four years, the company — already the world’s second-biggest listed copper miner — has boosted exploration spending to find new deposits of the metal, used in construction, renewable energy and electric vehicles.

BHP became last year the top shareholder in Australian miner SolGold (LON:SOLG) (TSX:SOLG), which is developing the Cascabel copper-gold project in Ecuador. The asset has the potential to become one of the largest copper-gold assets ever discovered, with an estimated productive mine-life of 55 years.

That doesn’t seem enough for BHP. Its new chief executive, Mike Henry, said in February the company needed more “future-facing” metals, such as copper. A month later, chairman Ken Mackenzie said the miner was in a strong position to make acquisitions if there were opportunities because of coronavirus.

“I’m not sure if there will be any opportunities that will come from this, but if there are, we are actually in a position to act,” Mackenzie said.

Copper prices have fallen nearly 18% this year — to trade at $5,175 a tonne on the London Metal Exchange (LME) — due to a collapse in demand caused mostly by coronavirus-related measures.