A report by the Comisión Chilena del Cobre (COCHILCO) notes that 11 of the 45 mining projects considered in the total 2012 portfolio for Chile, will be delayed. This means a deferred investment of $38.9 billion, 37.3% of the total value, which was $104.3 billion as of June 2012. Of the 11 projects delayed, seven are copper and four for gold mining, MinerAndina reports. The copper projects include the expansion of Phase III Collahuasi, Hypogene Quebrada Blanca, Relincho, Inca de Oro, San Antonio oxides, Santo Domingo and Phase II Andina. The four delayed gold projects are Pascua Lama, Cerro Casale, El Morro and Lobo Marte.
The impact of these delays is expected to result in copper production of 8.1 Mt rather than the 8.4 Mt originally projected by 2020.
According to COCHILCO, the delays experienced by the various projects are due to both internal and/or external causes. Among the external factors there is a difficulty in ensuring power supplies below current costs, improving the environmental impact assessment and obtaining permits to build infrastructure required for the project.
Among the internal factors, COCHILCO includes the high costs considered for investment and/or operation, which would force companies to redefine their respective projects.
Other internal factors point to the project’s timing and the company’s global strategy and the securing of funding. The latter is the case of Collahuasi Phase III, since the decision to postpone its development for at least two years is based on recent statements by Charlie Sartain, CEO of Xstrata Copper, who noted that due to operational and management problems in the mine; no development will take place at the project until it is certain that it is meeting the business objectives of the company.
Meanwhile, the rescheduling of Teck’s Hypogene Quebrada Blanca project, will mean a delay of at least one year due to the withdrawal of the environmental impact assessment of the project and the company’s intention to refine it, including a review of electrical contracts and financing methods.
For Andina Phase II, one of the five structural Codelco projects, the company is putting the project through a thorough evaluation because of its complexity and high cost. In addition, there are additional synergies which may arise from its new relationship with the neighbouring Los Bronces mine, after Codelco acquired, along with Mitsui, a 29.5% share of Minera Anglo American Sur. COCHILCO reports this assessment could mean a delay of at least two years in the implementation of Andina Phase II.
In addition, among the gold projects delayed, the more complex situation is that of the Cerro Casale project, since, according to Barrick, which retains a 75% share (Kinross the 25%), it would not meet the investment criteria. At any rate, Barrick would review and evaluate the project to improve its economics.
Finally, the Pascua-Lama gold project, on the Chilean side, has experienced complexities and there is uncertainty about the final amounts of capital investment, which previously ranged from $7.5 billion to $8 billion and now the estimate is between $8 billion and $8.5 billion. Due to the above, Barrick has delayed its launching by about one year and it now estimates that this would occur no earlier than mid-2014.