Antofagasta halts Los Pelambres expansion project

Antofagasta (LSE: ANTO) has suspended a US$1.3 billion expansion at its Los Pelambres operation in Chile 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 accounts for nearly half of the company’s total copper production.

Last year Los Pelambres produced 363,400 tonnes of copper, an increase of 1.6%, due to higher copper grades.

The decision, which will be reviewed periodically based on the evolution of the coronavirus crisis in Chile, does not mean 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 a news release.

“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,” Walther noted.

Antofagasta said the terms that will apply to contractor companies during the suspension period will be agreed upon in the coming days. However, each case will be reviewed individually, the company explained, seeking to maintain, whenever possible, each workers’ minimum monthly income equal to CLP 500,000 (roughly US$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 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 expansion 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.

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 US$5,300 a tonne this year and US$5,800 per tonne in 2021.

— This article first appeared in our sister publication, MINING.com.