Mining companies to settle down investment pace: some projects decelerate
04-Jul-2012 Diario Financiero – News
BHP Billiton withholds two expansion projects in folder: Spence and Cerro Colorado expansions will not be implemented as fast as announced
Mining sector in Chile must continue investing to maintain production level. This maxim that has been ruling the mining sector for a couple of years did not consider that markets would deteriorate to the current level affecting copper mining companies in two ways: Difficulty to get funding as a result of cash flow shortage and copper price reduction which is today quoting at US$1 below last year price.
Following this logic, the US$100.000 million portfolio announced by Government for new investments in mining sector is somehow in jeopardy. Not only regarding the amount of investments but also its execution timing.
As for investments it may be said it is quite to the contrary: Projects announced are becoming more and more expensive making consolidated budget even heavier. However doubts are set on timing. According to experts’ opinions, the possibility for projects portfolio to completely realize is rather low.
BHP has recently given a sign on this respect by informing that projects already being developed would continue but those scheduled to follow afterwards would be slowing their pace down.
Precisely, two of those projects with delayed progress status are in Chile: Spence and Cerro Colorado expansions. These two projects belong to the Pampa Norte unit and are being analyzed for possible Hypogene mineral processing, with wide production potential but with low-grade mineral.
Although the company has not officially informed an amount for development of both expansion projects, by the size of projects and current production costs it may be estimated these would not be less than US$3,000 million each.
Canadian Teck, having two parallel projects, has also given some signs: Quebrada Blanca Phase II expansion (for US$5,600 million) and Relincho (cost to be defined yet). However, QB II is somehow ahead while Relincho is staying behind while its feasibility study will be possibly finished by the end of first quarter 2013. Only then timing will be set, although it is now in accordance with prefeasibility stage and keeping the perspective to start production process in 2017.
Will there be capital?
It is the opinion of Aldo Casali, Mine Engineering of Universidad of Chile, that no capital restrictions should exist for mining projects as they provide capital return certainty few industries may offer. “One of investors’ alternatives is making mining business in regions offering stable economics and politics, good projects, experience, and future productions with interesting projected demand. All those conditions gather in Chile “, he states.
