Teck and Sumitomo are joining forces to build the Quebrada Blanca 2 copper mine project in northern Chile, with first production scheduled for the second half of 2021, Teck said Tuesday.
The QB2, which exploits sulfide resources beneath the current Quebrada Blanca copper oxides mine, is expected to produce an average 316,000 mt/year of copper in concentrate, plus silver and molybdenum during its first five years of operations at an average cost of $1.28/lb.
"QB2 is one of the world's premier undeveloped copper assets and this transaction further confirms the value of the project," said Teck CEO and President Don Lindsay.
Under the deal, which was announced Tuesday, Sumitomo Metal Mining Co. Ltd and Sumitomo Corp. will acquire a 30% stake in the mine for $1.2 billion. After the deal, Teck's participation will be reduced to 60% from 90%, while Chilean state mining company ENAMI retains a 10% non-funding stake.
Capital expenditure is estimated at $4.739 billion, which Teck said would be covered through $2.5 billion in project financing, Sumitomo's contribution and $693 million from Teck.
"This partnership significantly derisks Teck's investment in the project, enhances our project economics and preserves our ability to continue to return capital to shareholders and reduce bonds currently outstanding," Lindsay said.
The construction decision comes three months after environmental authorities in northern Chile approved the project and a week after the country's Supreme Court threw out a challenge to the license by local indigenous communities.
With engineering 80% complete, Teck said that the project will use the latest mining technologies, including autonomous mine trucks run from an integrated operations center 1,700 km away in Santiago and a desalination plant.
The 28-year mine plan for the project exploits than 25% of the total reserves and resources defined at the site and Teck has already begun a scoping study on a further expansion dubbed QB3.
"QB2 will be a long life, low-cost operation with major expansion potential, including the option to double production or more, to become a top five global copper producer," commented Lindsay, adding that the QB3 project would make copper as important to Teck's revenues as its coking coal business.
The project is the latest major investment confirmed in Chile's mining industry since copper prices recovered from record lows about two years ago. BHP is expanding its Spence mine, Antofagasta is investing $1 billion to upgrade its Los Pelambres operation and Capstone Mining is seeking a partner to revive its Santo Domingo project.
