BHP Billiton and Rio Tinto are being forced to spend $US3.4 billion ($3.67 billion) on a water plant at their copper project in Chile, at a time when mining companies globally are curtailling capital spending.
The two miners will lose access to most of their water supply at the Escondida project, the world’s largest copper mine, in 2017.
BHP’s share of the new round of investment is estimated at $US1.97 billion and Rio’s at $US1.03 billion. Construction on the planned desalination plant is to start immediately, with completion planned for 2017.
The partners are in the middle of a $US4.5 billion round of spending which is to be completed next year, primarily on a new ore concentrator at the project, together with ancillary upgrades.
When completed, these upgrades will enable the production of more than 1.3 million tonnes of copper a year from 2015.
When the partners in Escondida disclosed the $US4.5 billion upgrade early last year, they signalled this was the first in a series of programs that could substantially expand capacity at the mine.
Boosting production would necessitate access to more water, which the planned desalination plant will provide.
“This investment was well flagged on the site visit to Escondida in October 2012,” Deutsche Bank analyst Paul Young said, “however the timing is a little earlier than we had expected.
“The critical path is the expiry of the local aquifer leases in 2017 which currently supply 75 per cent of the mine’s water.”
The new water plant will increase water supply to Escondida by close to 50 per cent from present levels. That will give the partners in the mine the option to increase copper throughput and production significantly.
“Securing a sustainable water supply in the Atacama Desert is a major priority for all Chilean copper producers,” BHP copper division head Peter Beaven said.
“The new desalination facility will minimise our reliance on the region’s aquifers, which will help us to meet our environmental commitments and enable us to achieve our long-term business strategy.”
Rio’s investment will be funded through the company’s share of Escondida’s cash flows, it said.
BHP has a 57.5 per cent share of the project and is the manager. Rio holds a 30 per cent stake
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