Antofagasta Minerals continues Antucoya development as planned

Friday, September 24, 2010

Chilean miner Antofagasta Minerals, a subsidiary of London-based Antofagasta plc (LSE: ANTO), is continuing to develop its Antucoya copper project as planned, a company spokesperson told BNamericas.

"No changes have been made to Antucoya's development, which currently involves completing the feasibility study by the middle of next year," the spokesperson said, refuting a press report suggesting that the project would be put on hold until congress makes a decision on a bill to modify the mining royalty.

Once the royalty bill is approved by congress, the company will reevaluate the Antucoya initiative, Antofagasta Minerals CEO Marcelo Awad was reported as saying by paper El Mercurio. The deadline to complete this analysis is May 2011 when the firm presents its investment plan, according to the report.

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"We are resolutely working on the project," the spokesperson said, although a possible increase to the royalty would be a factor to take into account when evaluating the final construction decision. This will take place next year after the feasibility study is completed.

Originally, Antucoya was to be run as part of the company's nearby Michilla mine but then the company decided to develop it as a stand-alone operation.

Antofagasta Minerals is currently working on an US$8mn project to test metallurgical recovery rates at Antucoya that includes extracting 2.5Mt of ore, of which 500,000t are being sent to Michilla's SX-EW plant for test processing. The metallurgical tests received environmental approval from local regulator Corema in February. No official estimates on the required investment have been made public yet.

"Antucoya has an average copper grade of 0.31%. Its development options are already limited, considering the current tax burden and high copper prices. If changes are made to the tax system, the project could be subject to delays," Awad was quoted as saying by the report.

However, the main problem is not an increase in the tax burden but stability, according to the executive. "We need long-term tax stability. Any change to the system brings too much uncertainty," Awad said.


The royalty bill, approved by the lower house on September 15, sets a variable 4-9% tax for mining companies currently enjoying tax stability, and from 5-9% for new projects from 2010-12.

Companies would then return to the current system from 2013-17, and those with tax stability would pay a fixed 4% rate, while new projects would pay a fixed 5%. Starting in 2018, all companies would be under the new system, paying a tax of 5-9% with stability until 2025.

The bill is currently waiting to start its second legislative process in the senate.

Antofagasta Minerals, the largest privately-owned copper producer controlled by Chileans, is about to start operating its Esperanza copper project and also owns the Los Pelambres and El Tesoro copper mines in northern Chile. The company also has several international JVs.