Anglo American’s Quellaveco yields first copper concentrate

Anglo American (LSE: AAL) said on Tuesday it had begun producing copper concentrate at its US$5.5 billion Quellaveco mine in Peru.  

The mining giant, which has a 60% stake in the mine, earlier this year forecast the copper project will produce between 100,000 and 150,000 tonnes in 2022, boosting the company’s overall copper production for the year to between 680,000 and 760,000 tonnes.

First ore at the Quellaveco mine, located in the Moquegua region of Peru, was mined in October 2021 and Anglo American expects the asset to generate 300,000 tonnes of copper per year for the first 10 years at full production.

The project is being delivered on time and budget despite two years of pandemic-triggered downtime, project leader Tom McCulley said.

“This first production of copper concentrate marks the beginning of the normal period of testing the processing plant with ore and the ramping up of mining activities to demonstrate readiness for operations,” McCulley said in the statement.

Mitsubishi Corp., which owns 40% of Quellaveco, said the mine will increase the company’s annual copper production by about 50%, reaching between 320,000 and 370,000 tonnes a year, from the current 200,000 tonnes.

Once at full-tilt, the operation will increase Peru’s copper production about 10% and create 2,500 direct jobs as well as other economic benefits related to procurement and an increase in water for human consumption, said Adolfo Heeren, CEO of Anglo American in Peru.

Scrawny pipeline

Quellaveco is one of the very few sizable projects to come online in the last three years, including First Quantum Minerals‘ (TSX: FM) Cobre Panama in 2019 and Ivanhoe Mines’ (TSX: IVN; US-OTC: IVPAF) Kamoa-Kalula in the Democratic Republic of Congo (DRC) last year.

The copper industry needs to spend upwards of US$100 billion to close what could be an annual supply deficit of 4.7 million metric tonnes by 2030, according to estimates from the CRU Group. The potential shortfall could reach 10 million tonnes if no mines get built, commodities trader Trafigura has said.

Click here for an interactive chart of copper prices.

While the world needs more of the metal, used in electric vehicles, solar panels and other products considered a key part of the energy transition, producers are wary of repeating oversupply mistakes of past cycles by speeding up plans at a time when mines are getting a lot trickier and pricier to build.

First production at Quellaveco comes at a time of weak copper prices. The metal hit a 20-month low on Monday as persistent worries that a recession would dampen metals demand hit a market with thin summer volumes.

Commenting on the news, Alexander Pearce, a London-based analyst at BMO Capital Markets, said first production at Quellaveco “represents a key milestone for the company, with the project underpinning >50% of copper growth for the group by 2024.”

“Whilst some risks remain until the project fully ramps up (note Anglo American has an ambitious ramp-up target of 100-150kt copper this year) the company has delivered the project to schedule thus far. Further, with 22/23 EV/EBITDA of 3.2/3.4 x Anglo continues to screen well versus peers.”