Goldcorp and Teck Resources Form Chilean Mega Project to Cut Costs

Goldcorp (TSX:G,NYSE:GG) and Teck Resources (TSX:TCK.B,NYSE:TCK) will combine their El Morro and Relincho projects, located approximately 40 kilometers apart in Chile, in a move to cut costs as metals prices remain at multi-year lows.
The combined project will be given the interim name “Project Corridor,” and each company will contribute their project interests as part of a new 50/50 joint venture. Goldcorp has also agreed to acquire New Gold’s (TSX:NGD,NYSE:NGD) 30-percent interest in the El Morro project for $90 million and a 4-percent stream on future gold production from the property.
“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,” said Teck President and CEO Don Lindsay in a statement.
Goldcorp’s El Morro project contains 8.9 million ounces of gold and 6.5 billion pounds of copper, while Teck’s Relincho contains proven and probable reserves of 10.1 billion pounds of copper and 464 million pounds of molybdenum. Project Corridor will be one of the largest undeveloped copper-gold-molybdenum projects in the Americas.

According to the companies, combining the projects will result in a reduced environmental footprint, as well as lower costs due to common infrastructure and a phased development approach and a longer mine life of at least 32 years.
Project Corridor is expected to garner a US$3.5-billion initial capital cost, compared to earlier estimates of US$3.9 billion and US$4.5 billion for El Morro and Relincho, respectively. A prefeasibility study for the project is expected to commence in early 2016, to be completed in 12 to 18 months.
The initial stage of development is expected to include a single-line mill and concentrator facility with an initial capacity of 90,000 to 110,000 tonnes per day. It will also use a common tailings facility located at Relincho. The companies note that this approach “responds to concerns expressed by local communities regarding the location of the previously proposed El Morro tailings facility within the agriculturally important Huasco River watershed.”
“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,” said Goldcorp President and CEO Chuck Jeannes in Thursday’s release.

Reuters states that Goldcorp withdrew a previous environmental impact study for El Morro in November after Chile’s Supreme Court halted development at the project. The court said that local indigenous groups opposing the project needed to be better consulted.
Goldcorp and Teck said that Project Corridor will “undertake extensive engagement with communities, Indigenous Peoples and other stakeholders,” with the process being facilitated by two independent organizations with expertise in socially sustainable outcomes for resource projects.
Following the news, Teck’s share price was up 19 percent, at $8.83. The company’s share price has lost 45 percent so far this year. Goldcorp’s share price was up 2 percent, at $17.82, but is still down 17 percent year-to-date.
 
Securities Disclosure: I, Teresa Matich, hold no investment interest in any companies mentioned.