Chilean miner Antofagasta (LON:ANTO) said on Monday it had suspended a $1.3 billion expansion project at its Los Pelambres operation in the home country for about four months as the coronavirus pandemic has made it impossible to carry on with work.
The company has also suspended contracts with most of the companies involved in the project aimed at boosting Los Pelambres output.
The mine, which is Antofagasta’s flagship mine, had production of 357,800 tonnes in 2018. It accounts for nearly half of the its total copper output.
The decision, which will be periodically reviewed based on
the evolution of the coronavirus crisis in Chile, does not means contracts will
be terminated, Antofagasta said.
This is a temporary suspension that has been taken as it is not possible to continue with the construction of the project as originally planned and is only for the duration of the emergency, as we hope to resume work as soon as possible,” Francisco Walther, vice president of projects at Antofagasta Minerals, said in the statement.
“We want to maintain a contractual relationship with
most of the contractor companies with which we are working today, but we must
accept that, given the current conditions, many cannot do the work for which
they are contracted,” added Walther.
Antofagasta said the terms that will apply to contractor
companies during this suspension period will be agreed in the coming days.
However, each case will be reviewed individually, the company noted, seeking to
maintain, whenever possible, each workers’ minimum monthly income equal to
CLP500,000 (roughly $585) and avoiding the termination of their employment.
Antofagasta had said in March that it would put only parts of the expansion project on care and maintenance. It also reduced the number of staff to reduce risk of coronavirus infection.
The awaited upgrade of Los Pelambres, Antofagasta’s biggest
mine, will add 60,000 tonnes of copper a year to the company’s overall
production once in full operation. Annual production is expected to increase
from 40,000 tonnes in the first year at the expanded throughput to 70,000
tonnes towards the end of a 15-year period.
The project includes the construction of a desalination
plant and water pipeline, which will also benefit the existing operation in cases of prolonged or severe drought. It could also be used
by a potential further phase of expansion, which may follow the current one if Antofagasta
can secure required environmental and regulatory approvals.
That phase will further increase production and also
significantly extend the mine life of Los Pelambres as it accesses the
operation’s substantial undeveloped mineral resources, which are currently five
times larger than its ore reserves.
Copper market
Antofagasta didn’t mention changes to its production forecast for 2019, which was cut in January as a result of massive protests against inequality in the South American country during the last quarter of the year, as well as issues affecting both Los Pelambres and the Antucoya project.
The news come on the same day Fitch Ratings cut its
short-term price assumptions for certain metal, including copper, as a result
of considerably lower economic activity.
Unprecedented lockdowns in much of Europe, the United States
and elsewhere are significantly reducing commodity consumption, the rating
agency said.
Fitch now expects global growth to contract by 1.9% in 2020,
translating into a fall in global copper demand of 6% from last year.
Although production disruptions in Chile, Peru, Mexico and
Canada will remove significant volumes from the market, Fitch still expects
copper to be in oversupply. As a result, it has reduced price assumptions to
$5,300 a tonne this year and $5,800 per tonne in 2021.