OPERATOR SERIES: Southern Copper's Mexican projects

By
Tuesday, November 29, 2016

Mexican operations accounted for two-thirds of Southern Copper's red metal output in Q3, boosted by the US$3.5bn Buenavista del Cobre expansion.

And the Phoenix-based company is looking to Mexico to achieve its future growth aims, with doubts hanging over the US$1.4bn Tía María project in Peru.

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BNamericas takes a look at the company's Mexican portfolio, comprising projects capable of producing 312,000t/y copper, with capex totaling around US$3.5bn.

PILARES

Pilares is seen as an extension to the La Caridad mine in Sonora state, producing ore for processing at the La Caridad concentrator.

Pilares is expected to boost output by around 40,000t/y copper equivalent, according to a September corporate presentation, which indicated an initial capex requirement of US$189mn.

Talks with local communities are advanced, and Southern plans to begin developing the mine in 2017, company officials told the Q3 earnings call.

EL PILAR

El Pilar is a fully permitted copper project which has been approved by Southern's board.

The project will be developed as an open pit mine producing 35,000t/y copper cathodes with SX-EW technology.

Output is due to begin in 2018. The mine life is currently 13 years, and exploration is continuing.

An engineering analysis is under way to consider potential synergies between El Pilar and the Buenavista del Cobre mine, just 45km away in Sonora state. El Pilar was acquired for US$100mn in 2015.

EL ARCO

Southern describes El Arco as a world class deposit, hosting a 1.5Bt ore reserve and grades of 0.416% copper and 0.14g/t gold.

Progress has been slow since a 2010 feasibility study, with the focus on exploration and land acquisition, investment in which continues in 2016, according to Southern's Q3 report.

An engineering study aimed at optimizing investment is pending, and the Baja California state project has yet to receive board approval.

Output is expected at 190,000t/y copper and 105,000oz/y gold, with capex of around US$3.00bn, CFO Raul Jacob told the call.

ANGANGUEO

Angangueo is an underground polymetallic deposit in Michoacán state.

Southern plans to build a concentrator plant which will produce 20,900t/y copper and 10,200t/y zinc over the first seven years. The project will also produce 2.4Moz/y silver and 1,500oz/y gold over the life of mine.

Angangueo is on hold pending approval of its environmental permits, Southern said in its Q3 report. Capex is US$175mn.

LOS CHALCHIHUITES

The Los Chalchihuites deposit in Zacatecas state has mixed oxides and sulfides of lead, copper, zinc and silver, according to Southern's website.

The project is expected to cost US$140mn and produce 26,000t/y copper, according to a September 2016 company presentation.

OUTLOOK

With a focus on cash flows amid current weak copper prices, Southern is stepping on the gas on lower capex, high return brownfield expansions, executive VP Daniel Muñiz told the earnings call.

This is reflected in the Buenavista expansion and progress at Pilares and El Pilar, while El Arco, Angangueo and Los Chalchihuites may not see the light of day for some years.