Mining conglomerates wager on Chile
31-Dec-2012 Estrategia – News
Local market is pulling in new investors
Mining conglomerates wager on Chile
Four large world-class mining companies are looking to enter or considerably increase their stake in Chilean mining industry. From an international approach “these are heavy-weight producers” but in our country their presence today is almost nil, however this will radically change in the upcoming months
The list of companies that are looking for mineralized bodies but with no relevant presence in Chile is long if we consider the whole line from those called “junior” up to giant companies such as Vale, KHGM or Southern Copper. Their search is mainly focused between I and IV Regions and the list includes companies from all over the world, all sizes and different business areas. In general they consider Chile as a quality-resource market, a developed mining industry with stable political and economical situation.
KGHM
The Polish KGHM Polska Miedtz Group 32% controlled by Polish State has already entered the Chilean market in March 2011 by purchasing the Canadian Quadra FNX Mining for US$2,900 million. The International branch of KGHM became the controller of 55% of Sierra Gorda together with Japanese Sumitomo that holds the remaining 45%.
The mine located in the II Region is under construction stage and, as reported by the EIAS, it requires about US$3,000 million investment. The mine is expected to start up by 2014 and will mine copper, molybdenum and some particularly interesting gold resources. It has forecasted a 130,000-180,000 MTY production adding up concentrate and cathodes outputs.
The new acquisition the Polish company has made in our country is part of the internationalization strategy the company decided to start in 2009 and that has also implied purchasing other mine deposits around the world. The goal reportedly is set on achieving a global production of 700,000 MT to be in the list of top five largest producers. Nowadays, as reported by Cesco, it is in the eighth position amongst world producers with 464 million MT.
Thus Sierra Gorda represents the first step of KGHM in Chile, the country the company selected as a destination for its investments because of the important projects and the local market relevance. Some sources close to the company indicate the company has the will to support this important project and continue expanding its investments in Chile.
Southern Copper
The copper company is 75%-controlled by Grupo Mexico with headquarters in Peru. They have been evaluating the possibility to develop some operations in Chilean ground for more than 15 years. Juan Irarrázaval, the group’s representative in Chile, indicates that the company is currently developing several explorations in search of mining resources and that as of today they are analyzing two important copper projects in the Catanave and Diego de Almagro areas in the north of the country.
The agent indicates that some preliminary estimations exist for these projects and the company is carrying out some engineering studies to determine reserves, investment amounts, terms and production levels. On this point he says that if everything goes well, a light would be at the end of the road for both projects in one or two years.
Besides these two projects, Southern Copper is also permanently executing exploration works in the North of the country. The purpose of the company is focused on Greenfields exploration starting from zero-point in most basic exploration stage rather than buying a small mining company or purchasing stakes from a large size company.
Thus, Irarrázaval states “South Copper is making investment in exploration works. This sets a presence at local level, although and obviously in a very initial stage if compared against large-size companies such as Escondida, but this is the way mining companies should follow”.
Cesco indicates that Grupo Mexico, controller of Southern Copper, is in the seventh position in the world largest copper producers ranking with 579,000 MT output.
Vale Rio Doce
The Brazilian giant – Vale Rio Doce – is one of the largest mining companies in the world and the biggest in Latin America. They are not only involved in the metallic mining industry but also in petroleum, energy, and iron production. In the copper sector it is in the 14th position worldwide with 207,000 MT in 2011.
Since 2001, when the multinational company decided to globalize, Chile was considered as one of the targets for their international investments. Now almost two years have elapsed since their first project in Chile, Tres Valles mine, a deposit that started to work in 2005 in the Coquimbo Region. The mine may be classified as mid-size mining with investment reaching US$161 million and production surrounding 18,000 MT per year.
However, this project was originally considered as a first step of the company into our country. Gilberto Schubert, local General Manager of Vale, states “Minera Tres Valles’ main purpose is to start the operations of Vale in Chile and generate flows that allow the constant investment in exploration works into the country aimed at making new findings, and that is what we are doing in this moment”.
The exploration campaign is consequently being developed today, as the officer confirmed. “Vale has a geologists team to make explorations throughout the country. The team has already some projects going through drill works stage in several regions in Chile”.
Chinalco Yunnan Copper and Rio Tinto
The Australian Chinalco Yunnan Copper and the giant British-Australian Rio Tinto that today holds 30% of the largest producer in Chile, Minera Escondida, gave their first steps in the own projects research in 2011 by announcing their alliance for a joint-work to search copper in the North of the country.
The joint effort of these companies tells the will to enter, increase and eventually achieve an own operational development as copper producer. The company is now carrying out exploration works and the Candelabro project study at Tarapacá, 60 kilometers from Cerro Colorado mine. The deposit is a copper, molybdenum, and gold deposit with an important exploitation potential. Other projects the company is developing are Caramasa and Sulfatos, also located in the Tarapaca region; Humito at the Third Region, and Palmani in Arica and Parinacota Region.
Chinalco Yunnan Copper holds some properties and makes exploration works in Austalia, Laos, and Chile. The company is the international branch handling the investments of Yunnan Copper Industry, the third copper producer in China.
On the other side, Rio Tinto, that is also developing explorations on its own account, and is also evaluating other projects such as Amos Andrés, contiguous to Collahuasi, is the fifth world copper producer reaching a 678 million MT production in 2011. The British-Australian giant is developing exploration works in our country since 1989 with an investment over US$100 million.
Other interested parties
The range of interested mining companies in the local market is wide it does not only comprise large-size international companies. Especially referring to gold area there is a considerable number of companies carrying out exploration works and many of them are already evaluating some projects.
In this approach one of the most important regions observed by all kinds of mining companies (junior, mid and large-size companies) is the Maricunga Belt at III Region. The Canadian financed Atacama Pacific Gold mine stands out because of the very soon tidings it will report. Cerro Maricunga is the main project of the company, a gold porphyry project that is in an advanced study stage. Other projects of this company in the same region are Piedra Parada Gold, Roca, Toro, and Pircas. Besides, there is another porphyry project being monitored in the 1st Region, Anocaire.
There is another company that could be making its first productive outing in Chile, we refer to Hotschile, who announced a short time ago the purchase of El Dorado deposit formerly owned by the Canadian Andina Minerals. The mining company with local offices in Peru is studying three additional copper, gold, and silver projects located at the 3rd Region.
Japanese investments coming with Sumitomo, Mitsui and Nippon Mining & Metals, amongst others, have been developing-for very years now-a strong campaign to specifically enter the Chilean copper market. As of today they have mainly participated in projects controlled by other large companies, however the interest has been expressed to develop their own projects. Thus, the main step is being given by Pan Pacific Copper with the upcoming start up of Caserones and the advanced status of the Vicuña project studies.
