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Chile Mining Update – Hot Topics from the Week

The year has just started and there is already some important news coming out of Chile. Our mining news flash is meant to provide quick insights into some of the most interesting topics of the week. We have provided a quick comment for each piece of news.  I am positive we will get some wrong but it will be interesting to look back to see what we get right. It would be great to hear your thoughts on the news this week. 

Datamine buys Chilean Start-up Zyght

The Chilean startup Zyght, which provides solutions in the field of health, safety, and the environment for high-impact industries, specifically mining, announced that it has been bought by Australian, Datamine.

Since its founding in 2010, and supported by Digevo Ventures, Zyght has become a dominant player in the Latin American software as a service market, with revenues in 2021 of approximately US $ 1.8 million.

Zyght was founded in Chuquicamata by Rodrigo Calle and Mario Jara, both sons of miners. The company started in 2010 supported by Corfo and winning a contest from Fundación Chile. Immediately afterwards, it received an investment of US$1 million from Digevo Ventures and Scale Capital.

Our take – Congrats to the Zyght management team. This is a big win for the Chilean METS industry. Chile has really started to pump out some amazing companies who are now going global. This won’t be the last Chilean company to be purchased as there are some really interesting companies with great solutions. The common factor between all these companies will be the support they received from Corfo and Fundación Chile.

New Mining Project Update in Chile

Capstone Mining agreed last month to merge with Chile-focused Mantos Copper to create a premier copper producer focused on the Americas. As of today, the two companies have issued technical reports for merging two of their mines: Mantos Blancos and Mantoverde.

The two projects consist of open pit mines that belonged to Mantos Copper. One of them, Mantoverde, has a capacity of 60,000 tons per year of copper cathodes, while Mantos Blancos produces between 40,000 and 50,000 tons of concentrates and cathodes.

At the Mantos Blancos mine, the newly mergered company has created a plan to increase the amount of metal extracted from 11,000 to 20,000 tons. Thus, in 2024 mining activity is expected to grow to 55,000 tons at a sustained total cost of $ 1.97 per pound. After removing bottlenecks, the project will undergo a second phase of expansion to increase to a total of 80,000 tonnes per year by 2025.

Regarding the Mantoverde expansion, this includes the construction of a new sulfide concentrator that intends to treat approximately 236 million tons of copper in the next 21 years of the mine’s life. The companies hope to reach an annual production of 122,000 tons in 2024 at a cost of 1.64 dollars per pound.

Our take – Good to see that both companies have found a way forward that should provide value to shareholders. I am not convinced that Santo Domingo will be built. It is facing crippling opposition from both the new government and the public. I do not think it can be built with the desal and port where it is today. Capstone will need some good news but hopefully we are wrong about this one. 

Water Consumption in Copper Mining: Cochilco’s Projections for 2021-2032

We published an article last month on the impact that the decade long drought in Chile has had on Chilean mines and what they will need to do to continue to operate in the future. You can find it here.

Cochilco released a report this week that outlines its projections for water usage between 2021-2032. In the report, the demand for water by the copper industry is projected to be 20.9 m3 / s for the next decade, of which 68% (14.2 m3 / s) would come from the sea, while 32% (6.7 m3 / s) would be from continental waters.

At the same time, the report estimates the the consumption of continental water will maintain an average annual decrease rate close to -5%. Sea water usage will grow with an average annual rate of 9%, which is translates into a 167% increase in the use of this oceanic resource by 2032 compared to 2020.

The report outlines that with the growth of water usage in the mining sector are based, in part, on the change in the production matrix, which is weighing more towards sulphide minerals. These must be processed by flotation, which requires greater use of water. Likewise, the drop in mineral grades requires a greater quantity of water to obtain a ton of fine copper.

Our take –I believe we are going to see more companies sharing desalination and pipeline infrastructure. Many of these mines are close enough in distance that it does not make sense for each company to build their own. We are very proud of what has been done in Chile on both the water and energy fronts. Where else in the world are you going to see the uptake of renewables and desalinated water like Chile. More impressive is that it has been done without subsidies.

Chile Lithium Tender

Chile has the world’s largest reserves of lithium, but it has been slow to capitalize on new demand.  This could all change with the current lithium tender. Chile will award five quotas of 80,000 tonnes each for the exploration and production of lithium in Chile.

The tender has been criticized by opponents and those close to President-elect Gabriel Boric, who believe the tender should be cancelled or postponed until the new government is in place. Boric has expressed that he would like to create a state-owned lithium company.

Opponents last week made a legal challenge to stop the process, but it was rejected by the Santiago Appeals Court who ruled it was filed too late as the tender had been publicized since mid-October through a Mining Ministry decree.

The Economic Commission analyzed the public bidding process stating that the national and international bidding process has been open and transparent, complying with all the formalities. In addition, the commision confirmed that the tender does not prevent the creation of a national lithium company, since the five quotas that are being tendered are only 4.4% of the known reserves of this resource in Chile.

Our take – There might be a big fuss for nothing. We will need to see the bids to really know if the offers are worth advancing with. If not, then we are back at square one anyway. Regardless of the outcome, Chile needs to do something quick to stroke growth of its lithium sector. The country risks losing its standing to Argentina who has some good projects progressing. 

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