The second concentrator is expected to add 170,000 mt/d of copper capacity to the exisiting Centinela operations (above). (Photo: Antofagasta plc)
After an extensive review, Antofagasta plc has approved the construction of the $4.4 billion Centinela Second Concentrator Project. The company said critical path works will begin immediately with full construction expected to commence after definitive project finance documents have been executed during Q1 2024.
“The Centinela Second Concentrator Project is a key element of our profitable growth strategy as it will add a further 170,000 metric tons per year (mt/y) of copper equivalent production, with first copper expected in 2027, significantly progressing us towards our long-term ambition of 900,000 mt/y of profitable copper production,” said Antofagasta CEO, Iván Arriagada. “Importantly, it will also reduce net cash costs and unlock significant value in the Centinela District’s 2 billion mt ore reserve. This brownfield expansion project is expected to deliver attractive returns in excess of our cost of capital at a wide range of commodity prices. We are leveraging more than 20-years of operational experience and understanding of Centinela’s ores, using existing infrastructure and building on long-established relationships within our local communities.
The anticipated 170,000 mt/y of copper equivalent production consists of 144,000 mt/y of copper, 130,000 oz/y of gold and 3,500 mt/y of molybdenum, across a 36-year mine life. Net cash costs in the Centinela district are expected to be in the first quartile of the industry cost curve following the expansion.
The expansion project would include a new 95,000 mt/d concentrator incorporating high pressure grinding rolls (HPGRs) to reduce energy consumption, the expansion of the existing raw seawater pumping and transport system, a new tailings storage facility, capacity growth in energy and other input supply infrastructure, the expansion of outbound logistics networks such as the concentrate transport system and critical port infrastructure, additional loading equipment, autonomous hauling equipment and a truck-shop for the mine expansion at Esperanza Sur.
“This project will elevate Centinela to become one of the top 15 copper mines in the world by output and we will become one of the leading gold producers in Chile,” Arriagada said. He said the world is facing a significant shortage of copper, with electrification and the energy transition driving rising demand. And he views the Second Concentrator Project as a clear opportunity to provide additional copper from the mine’s existing resource base, using 100% renewable electricity and raw sea water to reduce Centinela’s environmental footprint.
The cost for the project was originally estimated at $3.7 billion (August 2022). Antofagasta said the new capital cost estimate is based on detailed engineering and includes an escalation for inflation during construction, a stronger local currency estimate, updates to local labor regulations, etc.
The second concentrator will source ore initially from the recently opened Esperanza Sur pit and later from the Encuentro pit. The sulphide ore in the Encuentro pit lies under the Encuentro Oxides reserves, which are expected to be depleted by 2026. 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. The combined investment in mine development and sustaining capital for the expansion of the Encuentro pit is estimated to be approximately $1 billion.
The company said detailed terms and conditions have been substantially completed for the option to provide water for Centinela’s current and future operations by a third party acquiring the existing water supply system and building the new water pipeline expansion. The planned outsourcing of the water supply will only proceed if it improves the net present value of the project, the company said, with closure of this process scheduled to be made alongside the execution of definitive project finance documents during Q1 2024. If it goes ahead as planned, the company said an estimated $600 million in cash will be received for the divestment of the existing water infrastructure and the project cost will reduce by approximately $400 million, considering that the investment required to expand the existing water system to supply the Second Concentrator will be undertaken by a third party.
The Centinela Second Concentrator Project has all the relevant permits approved by the authorities in Chile for the project to proceed into the construction phase. First production is expected in 2027.
