Goldcorp, Teck to combine El Morro, Relincho mines, form Chilean mega-project
Facing hostile commodity market, miners to save billions on development
SANTIAGO, Chile—Goldcorp Inc. and Teck Resources Ltd. have announced plans to combine their respective El Morro and Relincho projects, into a 50/50 joint venture.
The El Morro gold mine, which is one of the largest in the world, and the Relincho copper mine, are located approximately 40 kilometres apart in the in the Atacama region of Chile. The combined project will have the interim name of Project Corridor, and contain approximately 16.6 billion pounds of copper, 8.9 million ounces of gold, and 464 million pounds of molybdenum.
“Combining these two neighbouring assets is a common sense approach that allows us to consolidate infrastructure to reduce costs, reduce the environmental footprint and provide greater returns over either standalone project,” Don Lindsay, president and CEO of Teck, said. “Through Project Corridor, we will work to establish meaningful relationships with the community, Indigenous Peoples and other stakeholders that will help guide the project’s development and create greater value for all parties.”
The companies have conducted a Preliminary Economic Assessment and said the project “contemplates” a conveyor to transport ore from the El Morro site to a single line mill at the Relincho site. The result would soften infrastructure requirements, reducing the project’s environmental footprint, by utilizing a single desalination plant, a single port, a single transmission line, a single concentrator and a common tailings facility.
The joint venture will also lower costs and improve capital efficiency at a time when both companies are feeling significant market pressure due to low commodity and precious metal prices. The companies said the PEA “contemplates a phased development approach that will allow future expansions to be funded from project cash flows, thus significantly reducing the initial funding requirement.”
The initial capital cost to bring Project Corridor into production is targeted to be US$3.5 billion, with further capital required to construct future phases being funded largely from project cash flows. This target is a considerable reduction from the standalone development costs of the El Morro and Relincho projects, which were $3.9 billion and $4.5 billion respectively.
“The combination of El Morro and Relincho is consistent with our focus on maximizing value from our asset portfolio,” Chuck Jeannes, president and CEO of Goldcorp, said. “We now have an improved development approach that we expect to significantly decrease initial capital requirements and increase financial returns, while ensuring the project is developed in partnership with our neighbours, creating lasting benefits for residents in the region and our shareholders.”
In pursing the joint venture, Goldcorp also announced it has reached an agreement to acquire New Gold’s 30 per cent interest in the El Morro project for $90 million in cash, along with a 4 per cent gold stream on future gold production from the El Morro property.
The combined Corridor Project will create one of the largest copper, gold and molybdenum projects in the Americas and the world.
Closing on the joint venture and Goldcorp’s El Morro buyout are subject to customary conditions. The deals are expected to close in the fourth quarter of 2015.