Goldcorp purchased New Gold’s 30% interest in the El Morro copper-gold project in Chile, creating an opportunity for it to work with Teck Resources on a much larger project (Project Corridor). Acquiring the stake in El Morro gives Goldcorp full ownership of the project. Goldcorp will pay New Gold $90 million in cash at closing and a 4% gold stream on future gold production from El Morro. New Gold will make ongoing payments of $400/oz of gold delivered under the contract, subject to a 1% per annum adjustment (compounded annually commencing on the first anniversary of the agreement) once 217,000 oz have been delivered.

The deal opens the gate for Goldcorp to work with Teck on a plan that combines the El Morro and Teck’s neighboring Relincho projects into a 50:50 joint venture (JV). “This transaction allows us to consolidate the ownership of El Morro and work with Teck to jointly develop the Relincho and El Morro deposits in a way that is expected to deliver significant synergies,” said Chuck Jeannes, Goldcorp’s president and CEO.

The El Morro and Relincho projects are located within 40 km of each other in the Huasco Province in the Atacama region of Chile. The combined project for now will be referred to as the Project Corridor.

“Combining these two neighboring assets is a common sense approach that allows us to consolidate infrastructure to reduce costs, reduce the environmental footprint and provide greater returns over either standalone project,” said Don Lindsay, president and CEO of Teck.

Based on the results of a Preliminary Economic Assessment (PEA), Project Corridor contemplates a conveyor to transport ore from the El Morro site to a single line mill at the Relincho site. The benefits of this approach include a reduction in infrastructure requirements, including the use of a single desalination plant, a single port, a single transmission line, a single concentrator and a common tailings facility. As a result, the environmental footprint of the Project Corridor will be significantly less than the combined footprint of the standalone projects. The use of a common tailings facility located at the Relincho site responds to concerns expressed by local communities regarding the location of the previously proposed El Morro tailings facility within the agriculturally important Huasco River watershed.

The use of common infrastructure will also significantly reduce project capital costs and ongoing operating costs. The PEA contemplates a phased development approach that will allow future expansions to be funded from project cash flows, significantly reducing the initial funding requirement. As a result, the initial capital cost to bring Project Corridor into production is targeted to be $3.5 billion, with further capital required to construct future phases being funded largely from project cash flows. The feasibility studies of the standalone El Morro project and standalone Relincho project had previously estimated development costs of $3.9 billion in 2011 dollars and $4.5 billion in 2013 dollars, respectively.

Project Corridor will be one of the largest undeveloped copper-gold-molybdenum projects in the Americas. The integrated project allows for the optimization of both resources, resulting in a longer mine life of at least 32 years, based on existing proven and probable reserves.

Goldcorp’s El Morro project contains proven and probable reserves of 8.9 million oz of gold and 6.5 billion lb of copper. Teck’s Relincho project contains proven and probable reserves of 10.1 billion lb of copper and 464 million lb of molybdenum. These transactions are expected to close in the fourth quarter of 2015.

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