Inside BHP’s Cerro Colorado USD$1.5b Restart

Cerro Colorado operated for nearly three decades as an important copper producer in Chile’s Tarapacá Region before entering temporary closure in late 2023. In its final years, the mine faced declining production, expiring environmental permits and growing restrictions linked to its use of groundwater from the Lagunillas aquifer.

After several years out of production, BHP is now seeking to bring the mine back into operation through a US$1.5 billion restart project. The proposal would extend Cerro Colorado’s operating life by approximately 20 years and support production of up to 130,000 tonnes of copper cathodes annually.

The restart is not simply a return to the mine’s previous operating model. BHP is proposing new water, processing and electrical infrastructure designed to address the issues that contributed to the closure. The project has entered formal environmental evaluation, with 19 government agencies reviewing its environmental, technical and territorial impacts.

Almost 30 years of production

Cerro Colorado is an open-pit copper mine located near Pozo Almonte, approximately 120 kilometres east of Iquique.

The mine began operating in 1994 and forms part of BHP’s Pampa Norte division, alongside the Spence operation. It has historically produced copper cathodes through leaching, solvent extraction and electrowinning.

Production declined during the mine’s final operating years as BHP adjusted its mine plan and approached the expiry of its environmental authorizations.

A sale that did not proceed

In 2018, BHP agreed to sell Cerro Colorado to private equity manager EMR Capital for an initial US$230 million, together with additional payments linked to copper inventories and future copper prices.

The transaction was later cancelled after the required financing conditions could not be satisfied within the agreed period. BHP therefore retained ownership.

Although the failed sale did not directly cause the mine’s closure, it reflected the uncertainty surrounding an operation facing limited remaining permit life and significant water-related challenges.

Water became the central issue

Cerro Colorado historically depended on groundwater from the Lagunillas aquifer.

That water use became the subject of environmental and judicial proceedings concerning its potential impact on the Lagunillas wetland and surrounding ecosystem.

In 2019, the Second Environmental Court partially annulled the environmental approval for the mine’s operational continuity project. The Chilean Supreme Court later upheld the decision.

In 2021, the First Environmental Court also issued a precautionary order temporarily restricting groundwater extraction from several wells while an environmental damage claim was being considered.

The dispute had a direct operational impact. BHP announced that any operation continuing beyond 2023 would require a new water source rather than relying on the freshwater historically used by the mine.

Temporary closure

Cerro Colorado stopped productive operations in late 2023 and entered temporary closure and maintenance.

BHP has since stopped using groundwater from Lagunillas for mining operations. Limited water continues to be used for wetland support, drinking water, sanitation and site maintenance.

In 2025, Chile’s mining authority, Sernageomin, extended the temporary closure period until October 2028, giving BHP additional time to develop the proposed restart and obtain the necessary approvals.

What BHP is proposing

The new project would reactivate the open-pit mine and reuse much of Cerro Colorado’s existing infrastructure.

It would also include new and expanded crushing facilities, leaching areas, waste deposits, electrical infrastructure and a new water supply system.

Processing capacity would begin at approximately 20 million tonnes of ore per year and gradually increase to a maximum of 30 million tonnes annually.

Open-pit mining would take place during the first 13 years. During the remaining years, the processing facilities would treat ore previously extracted and stored in stockpiles.

A new water supply model

The most important difference between the previous operation and the proposed project is the source of water.

Rather than returning to the operational use of groundwater from Lagunillas, BHP proposes purchasing treated wastewater from authorized third parties.

The water would be transported from the Alto Hospicio area through an underground aqueduct approximately 105 kilometres long. The system would also include pumping stations, a storage reservoir and a reverse-osmosis plant.

The water would be used for mineral processing, leaching, dust suppression, road maintenance and fire-control systems.

This represents a change from earlier suggestions that a future Cerro Colorado operation could use seawater. The current proposal instead focuses on treated wastewater, which could provide an alternative model for supplying mining operations in water-stressed areas of northern Chile.

New infrastructure and employment

The project would initially use existing electrical infrastructure. To reach maximum processing capacity, BHP would construct a new 220 kV transmission system, including a transmission line of approximately 66 kilometres.

Construction would take place in two main phases. The first would establish the water system and infrastructure needed to begin processing. The second would expand the operation to its maximum capacity.

The Environmental Impact Study estimates a peak construction workforce of approximately 3,433 people and a maximum operational workforce of around 3,260.

Environmental and community challenges

The proposed water source addresses the main issue affecting the former operation, but it does not eliminate all environmental and regulatory risks.

The Environmental Impact Study identifies 53 potential environmental impacts, including 12 classified as significant. These principally concern vegetation, wildlife, archaeological resources and the human environment.

BHP has proposed mitigation measures such as relocating reptiles, transplanting protected plants, conserving plant material and protecting archaeological and cultural resources.

The company also completed a 15-month early-participation process involving local stakeholders, communities and authorities.

Nevertheless, Indigenous and community scrutiny will remain important. In June 2026, an Indigenous agricultural association filed an administrative appeal concerning a related prospecting project, arguing that its impacts should be assessed together with the planned operational extension.

That proceeding remains unresolved.

What happens next?

Chile’s Environmental Evaluation Service declared the project admissible on July 8, 2026.

The reviewing authorities may now request clarifications, corrections or additional information from BHP. Entry into environmental evaluation does not guarantee approval.

BHP has discussed beginning project execution in 2028 and potentially returning Cerro Colorado to production around 2030. These dates remain provisional and will depend on environmental approval, sectoral permits and construction of the required infrastructure.

Conclusion

The significance of Cerro Colorado’s potential reopening extends beyond restarting a single mine. If approved and successfully brought back into production, it would give BHP three operating copper mines in Chile—alongside Escondida and Spence—and further strengthen the company’s position as one of the country’s leading copper producers.

The restart would also broaden BHP’s production base in Chile at a time when copper is becoming increasingly important to the company’s global growth strategy. By reactivating an existing asset, BHP could make use of established mining infrastructure while introducing a new operating model designed to address the water and environmental challenges that contributed to Cerro Colorado’s closure.

For mining suppliers, the project could create significant opportunities in water treatment, pipelines, pumping systems, electrical infrastructure, leaching technology, environmental monitoring, construction and logistics.

For now, Cerro Colorado remains a project under environmental evaluation rather than an approved development. Its future will depend on whether BHP can demonstrate that the proposed model can support another 20 years of production while resolving the environmental, water and community concerns that affected the previous operation.

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