Chile Project Pipeline – USD$2.6b in Medium Size Mines to be Built

Chile is a country that is generally known for its massive copper mines. In fact, 7 of the top 20 producing copper mines are in Chile. Large scale miners often get more fanfare than medium size miners due to the sheer size of these operations, the amount of people they employ, and the inputs they need just to operate. Although large mines may get more attention, medium size miners have an important role within the mining industry that should not be overlooked.

The Chilean Copper Commission (Cochilco) recently released their study “Monitoring of relevant variables and indicators of medium and small Chilean mining”,  which outlines some of the benefits that medium size miners have on the industry and the projected investment that Chile has in this segment leading up to 2023.

Benefits

• The report concludes that small mining generates a significant amount of employment in Chile. Of the roughly 290,000 people employed in the mining industry, at least 28,000 would be considered to work in the small to medium size segment.
• Medium size mining in Chile is made up of about twenty companies. In 2021, they recorded a production of 215,036 tons of copper with an export value of $2.3b.
• Medium size miners produce as much income as whole sectors of the Chilean economy such as wine and forestry products.

Medium Size Operations – Project Pipeline 2023 – 2031

Cochilco estimates investment in medium size operations for the period 2022-2031 will total approx. US$2.6 billion. This could increase because generally large miners have been selling deposits that cannot be developed into large scale mines. This could open an interesting space for the growth of medium-sized mining.

• Sierra Norte –  Expected to start operations this year, Compañía Minera Sierra Norte made an investment of US$597mn. The project entails an open pit mine, a plant with with a capacity to process some 100Mt/y, 2,000t/d hydrometallurgical treatment plant, and a 24,000t/d concentrator plant.
•  Michilla Development Plan – With an expected investment of US$235mn, the project entails extending the mine life of the Michilla copper mine in Antofagasta region by 21 years. Currently, it is under environmental review.
•  Costa Fuego –  The US$725mn project is scheduled to enter operations after 2025. Hot Chili has been expanding resources with drilling. The company plans to deliver the Pre-feasibility Study (PFS) in early 2024.
•  Ciclón Exploradora – The US$110mn project entails mining two underground mines in to extract copper, zinc, silver, lead and gold with a 1,500tpd processing plant. The project stalled out in the environmental evaluation and will need to present a new environmental impact study.
• Arqueros – The US$200mn project is expected to start operations this year or next. Construction of the underground mine includes a concentrator plant, a tailings deposit, and complementary works for the supply of water, energy, and other services. The mine is expected to extract 5,000t/d. The Environmental Impact Study was approved by regulators in 2022.
• Playa Verde – The US$95mn project plans to start operations in 2024. Works include dredging old tailings deposits at Chañaral’s Playa Grande beach. The mineral extracted will be processed in a metallurgical plant to obtain copper in cathodes and concentrates. It aims to process 5Mt/y for seven years
•  El Espino – The US$624mn project is expected to start operations after 2024. The open pit will have a production capacity of 26,000 tons of copper per year and another 13,000 ounces of gold per year.

Technological Transformation of Medium Size Miners

The University of Chile carried out a study “Digital transformation in the medium and small Chilean mining” (AMTC, 2021), which through a survey of medium size miners, raised concerns about gaps that medium-sized minera have regarding technology and digital solutions.

• Of the companies interviewed, 73% considered that they have a low level of knowledge in digital transformation. The two main areas holding back medium size miners was financial resources and adequate human resources to implement digital transformation projects.
• The report outlined that medium size miner need solutions that are competitive in terms of implementation costs and that the technology is scalable. They also suggested more support from universities, government, and providers of technology.
• Regarding the most relevant technological areas that medium size miners wanted to address were – the integration of the information technology area with the operation (31%), process automation (24%) and remote operations centers (21%).
• The most important work areas to carry out digitization projects were monitoring sensors (31%), workforce optimization (21%) and drilling automation (15%).
• An important percentage of the respondents indicated that the capture of data in operations is still carried out with written logs (37%) and only 36% do it via sensors, which delays the processing of data.

Conclusion

Medium size mining plays an important role for the Chilean economy. While major miners may be focused on large deposits, this is opening a space for medium size miners to grow. One area that is holding back this segment of the market is the implementation of new technologies that make these operations more efficient.

Given the positive contributions that medium size mines have on the economy, it makes sense for this segment to receive government support for their technological transformation. This support can come in the form of training workers with digital tools, providing subsidies, and more support from R&D programs.

From a supplier perspective, medium size operations provide new opportunities that may be currently overlooked. Typicaly this is because large scale mining is more attractive from a potential revenue standpoint. Obviously, medium size operations do not have the same financial or skill set as the large miners, but suppliers can still find a profitable market if they focus on the basic technology transformation projects and/or developing two tier pricing.

There are now many software options that could be priced more competitively for this segment of the market. There is also smaller software providers or startups with tools that could dramatically improve the operations of medium size miners. Sensor prices have dropped significantly, and they can be deployed throughout an operation to improve monitoring. Internet and connectivity are also becoming easier and cheaper even for operations in the middle of the desert.

Ax Legal is an advisory firm that works with foreign companies in Latin America. Our team of legal and commercial advisors have a distinguished track record of helping foreign technology and services companies to grow and operate in Latin America. Over the years, we have worked with starts up, mid-size businesses, and publicly listed companies. The one common factor that connects are clients is that they are leaders in their field, providing innovative technologies and services to the industrial sectors.

To better understand how we can support you in the Region, please contact Cody Mcfarlane at cmm@ax.legal