Vale expands production capacity at Salobo copper mine

Brazil-based mining giant Vale (NYSE: VALE) has announced that its Salobo mine has reached a capacity of 32 million tonnes per year after completing a successful throughput test for the first phase of the Salobo III expansion project.

Under a US$1.1 billion expansion plan launched in 2019, the mine is set to increase the throughput capacity to 36 million tonnes per year by Q4 2024.

“This achievement is a significant milestone under the Salobo streaming agreement with Wheaton Precious Metals,” Vale said in the statement.

Under the terms of the deal with Wheaton Precious Metals (TSX: WPM) (NYSE: WPM), Salobo will receive US$370 million for completing the first phase of the Salobo III expansion project.

The remaining balance of the expansion payment will be triggered once Vale expands actual throughput above 35 million tonnes per year for a period of 90 days.

In addition, Wheaton will be required to make annual payments of between US$5.1 million to US$8.5 million for a 10-year period should the Salobo complex continue producing within certain copper grades.

At around 1,800 sq. km, Carajás is Vale’s second-largest land holding in a region known for iron oxide copper-gold deposits, of which Salobo is the prime example. The mine, the largest copper deposit ever discovered in Brazil, is estimated to hold more than 1 billion tonnes of red metal.

The operation expansion comes when miners scramble to acquire copper reserves or boost production amid forecasts that demand for the metal will outstrip primary supply within the next four years. The mismatch in supply and demand is likely to result in copper prices surging 20% by 2027, according to BloombergNEF analysts.