GROWTH PROJECTS & OPPORTUNITIES

Our approach to considered growth means that we focus on value, controlling capital costs and optimising production at our existing operations and developing new mining operations to deliver production in the future. We achieve this through careful project management and constant monitoring of the efficiency of our mines, plants and transport infrastructure.

Our approach to considered growth means that we focus on value, controlling capital costs and
optimising production at our existing operations and developing new mining operations to deliver
production in the future. We achieve this through careful project management and constant
monitoring of the efficiency of our mines, plants and transport infrastructure.

The Los Pelambres desalination plant and concentrator expansion were completed in 2023 and moved forward to operational ramp up, contributing to water supply and ore treatment. After an extensive review, the construction of the Centinela Second Concentrator Project was approved by the end of 2023. Critical path works began immediately after announcement, with full construction commencing after the execution of definitive project finance documentation during Q1 2024.

Phase 1

This phase of work was designed to optimise throughput within the limits of the existing operating, environmental and water extraction permits.

As mining progresses at Los Pelambres, ore hardness will increase. The expansion aims to compensate for this, increasing plant throughput from its current capacity of 175,000 tonnes of ore per day to an average of 190,000 tonnes of ore per day. The Phase 1 Expansion was divided into two sub-projects: the construction of a desalination plant and water pipeline from the coast to the El Mauro tailings storage facility, and the expansion of the concentrator plant, which includes the installation of an additional SAG mill and ball mill and six additional flotation cells.

As of the end of 2023, the desalination plant and the water pipeline continued to successfully ramp up, with four million cubic metres delivered to the Company’s operations at Los Pelambres. At the processing plant, mechanical completion of the concentrator plant expansion was successfully achieved in October 2023. As at year end, commissioning work is under way with results being consistently ahead of schedule and with two million tonnes of additional material processed.

Desalination plant expansion

The desalination plant expansion to 800l/s, which is part of the Los Pelambres water strategy, required a separate Environmental Impact Assessment (EIA).

This project is designed to contribute to enhancing the resilience of Los Pelambres from the future impact of climate change and the deteriorating availability of water in the region. The project includes the expansion of the desalination plant and the construction of a new water pipeline from the El Mauro tailings storage facility to the concentrator plant. The project cost will be reported as part of the Group’s sustaining capital expenditure. Construction is due to start in early 2024 and is expected to be completed in 2027.

In 2021, Los Pelambres submitted the EIA required for this project, which includes the desalination plant expansion and two other sustaining capital infrastructure projects:

  1. The replacement of the concentrate pipeline. The new pipeline will follow the route taken by the existing water pipeline from the desalination plant to the mine. This revised route for the concentrate pipeline will avoid interactions with communities along the Choapa Valley, and reduce the risk of unplanned downtime from the existing pipeline which has been in operations over 20 years, and is planned to be in operation from 2027; and
  2. Construction of certain planned enclosures at the El Mauro tailings storage facility.

The Company received approval of the EIA for the above projects in late 2023.

The sustaining capital infrastructure projects indicated above will commence construction in 2024, which will provide a platform for the Phase 2 projects that are outlined below.

Phase 2 – Mine life extension

The current mine life of Los Pelambres is limited by the capacity of the El Mauro tailings storage facility, with sufficient storage capacity for a further 12 years. This project will require an EIA, with a scope that will include increasing the capacity of the El Mauro tailings storage facility, additional storage capacity for mine waste at Los Pelambres and any water requirement for the enlarged capacity of this operation. This will extend the mine’s life by a minimum of 15 additional years, accessing a larger portion of Los Pelambres’ six billion tonnes of mineral resources. This EIA will also provide for the option to increase throughput to 205,000 tonnes of ore per day (from the current capacity of 190,000 tonnes of ore per day).

Key studies on tailings and waste storage capacity have advanced and a community consultation is under way. The environmental and social studies associated with this project are being prepared, including the voluntary public consultation with communities and informative engagement with key authorities, which should be submitted to evaluation by the relevant authorities in Chile during 2024 as part of the EIA application.

After an extensive review, approval of the construction of the Centinela Second Concentrator Project was announced at the end of 2023. Following announcement, critical path works began immediately, with full construction commencing after the execution of definitive project finance documents during Q1 2024.

The project includes the construction of a second concentrator and tailings deposit, approximately 7 km from the existing concentrator, to take place in two phases. The EIA for both phases was approved by the authorities in 2016. Detailed engineering plans and costings were updated for Phase 1 of the project and key contracts finalised.

Following Phase 1, the capacity of the new concentrator will be 95,000 tonnes of ore per day, producing on average approximately 170,000 tonnes of copper equivalent (copper, gold and molybdenum) a year over the first ten years of operation. This is expected to move Centinela towards the first cost quartile of global producers.

The Phase 1 capital cost is $4.4 billion, including the cost of the new water supply system. This updated and approved capital cost estimate (previously $3.7 billion – announced in August 2022) is based on advanced detailed engineering and includes escalation for inflation during construction, the estimate of a stronger local currency against the US dollar, updates to local labour regulations and additional contingency provisions. The phasing of the project’s capital expenditure is expected to be weighted towards 2025, with similar expenditures in adjacent years. The estimate includes a concentrator plant, capitalised stripping, mining equipment, a new tailings storage facility, a water pipeline and other infrastructure, pre-commercial production operating costs, and owner’s and other costs.

Phase 2 is an optional growth step and work on this phase will only start once construction of Phase 1 is completed and it is operating successfully.

The second concentrator (and its potential Phase 2 expansion to 150,000 tonnes of ore per day) will source ore initially from the recently opened Esperanza Sur pit and later also from the Encuentro pit. The sulphide ore in the Encuentro pit lies under the Encuentro Oxides reserves. Fully exposing the sulphide ore in the optimal sequence required to initiate feed to the second concentrator from the Encuentro Pit is expected to require separate investments in infrastructure, mining equipment and mine development activities, which will materially commence half-way through the construction phase of the second concentrator and will span a period of 3-4 years. As announced in December 2023, the combined investment in mine development and sustaining capital for the expansion of the Encuentro pit is estimated to be approximately $1 billion. This expansion in mining activities will further enable Centinela to achieve the development potential of its extensive mineral resource base.

Detailed terms and conditions have been substantially completed for the option to provide water for Centinela's current and future operations, with a third party potentially acquiring the existing water supply system and building the new water pipeline expansion. A decision to proceed with the planned outsourcing of the water supply was announced alongside the execution of definitive project finance documents during Q1 2024, subject to the acquiring consortium closing its financing.

Twin Metals Minnesota (Twin Metals) is a wholly owned copper, nickel, and platinum group metals (PGM) underground mining project, which holds copper, nickel/cobalt, and PGM deposits in north-eastern Minnesota, United States (US). The planned project is over a portion of the total resource and envisages mining and processing 18,000 tonnes of ore per day for 25 years to produce three separate concentrates – copper, nickel/cobalt and PGM. However, further development of the current project, as configured, is on hold while litigation takes place to challenge several actions taken by the US federal government to deter its development.

In 2022, Twin Metals filed a lawsuit in the US District Court for the District of Columbia (District Court) challenging the administrative actions resulting in the rejection of Twin Metals’ preference right lease applications (PRLAs), the cancellation of its federal mining leases 1352 and 1353, the rejection of its Mine Plan of Operation (MPO), and the dismissal of the administrative appeal of the MPO rejection. Twin Metals claimed that the government’s actions were arbitrary and capricious, contrary to the law, and in violation of its rights. In
September 2023, following a motion to dismiss filed by the government, the District Court dismissed Twin Metals’ claims. In November 2023, Twin Metals appealed the District Court’s order to the US Court of Appeals for the District of Columbia Circuit. This action is pending. 
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