South32 eyes Chile’s Caserones copper mine

Caserones copper mine is located in Chile’s arid north, at an altitude of 4,200m to 4,600m above sea-level, close to the border with Argentina. (Image courtesy of Lumina Copper)

Australia’s South32 (ASX, LON, JSE:S32) is reportedly interested in adding Chile’s Caserones copper mine to its portfolio, amid a looming supply crunch of the industrial metal, a key component in the batteries that power electric cars.

The mine’s majority owner, Japan’s mining and energy conglomerate JXTG Holdings Inc., is said to have begun exploring the asset sale in April, in part because of rising copper prices, but also due to the project’s mounting challenges.

The project’s cost is now estimated in $4.2 billion, more than double the original $2 billion planned

Caserones, behind schedule ever since it began producing in May 2014, has not only been affected by a series of technical problems in its ramp-up phase, but it has also cost its Japanese owners, which include Mitsui Mining & Smelting and Mitsui & Co., hefty impairment charges.

The project’s cost is now estimated in $4.2 billion, more than double the original $2 billion planned, as rising labour costs and bad weather continue to plague the project.

On top of that, operator Minera Lumina Copper Chile (MLCC) is currently facing fines of up to $54.8 million for infractions to the provisions established in its mining permit.

The new president of JX Nippon Mining & Metals, the mining and smelting unit of JXTG, said last week that while the company wasn’t planning to sell all or part of Caserones, he wouldn’t rule out such a possibility. “We are always looking at improving our portfolio through buying and selling assets,” Seiichi Murayama said.

The executive, however, noted that JX was not in position to make another huge investment in a new copper mine.

Supply decline

The world’s main copper producing nations have been showing output declines this year, according to the latest monthly bulletin from the International Copper Study Group (ICSG).

Global production declined by about 1.3% in the first quarter of 2019 with Chile, the world’s No.1 copper producer, leading the pack. The country’s output fell by 5%, mainly due to lower head grades.

Industry analysts at CRU believe that is undeniable that global demand for copper will soon surpass supply.

Over the past year there has been board approvals for several high-profile expansions and new copper projects that are due on-stream over the next five years.

CRU says the coming online of major projects, including Anglo American’s Quellaveco (2022), Teck Resources’ Quebrada Blanca expansion (2021) and First Quantum’s Cobre Panama (already in production) should eliminate the gap between supply and demand.

The research group now expects 900,000 tonnes a year more mined copper supply by the early 2020s than at this time in 2018. 

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