Sierra Gorda Gets Environmental Nod for US$2-billion Expansion

Poland’s KGHM (GPW:KGH) has been given the green light from Chile’s environmental authority to proceed with its US$2-billion expansion plans for the Sierra Gorda copper mine.

Environmental approval was received for the expansion and upgrade, which will see the mine’s life extended by 21 years, with an increase in capacity at its concentrator plant to 230,000 tonnes of throughput per day.

Sierra Gorda is a major operation for KGHM, which owns 55 percent of the mine in partnership with Japan’s Sumitomo Metal Mining, producing 12,000 tonnes of copper for KGHM in the first quarter of 2018.

That figure represented a fall of 2,000 tonnes in KGHM’s share though, which blamed a fall in copper grades in its Q1 report. Sierra Gorda also produces molybdenum, which is so far also down in 2018 due to falling grades.

When the expansion is completed, Sierra Gorda will have a nameplate capacity of 220,000 tonnes of copper a year, contributing 121,000 tonnes to KGHMs books.

KGHM has had its share of Sierra Gorda since 2011 when it took over Canadian miner Quadra FNX for almost C$3 billion. The mine became operational in 2014.

Expansion plans have been in development since the takeover to when they were shelved in 2015-16 following a fall in commodities prices, which saw copper valued below US$4,400 a tonne, halving KGHM’s net profits at the time.

The mine is located in the Antofagasta region of northern Chile, where it has plenty of operating copper mines as neighbors. The mine avoids water issues by using sea water from the cooling system of a power plant 144 km away in the coastal port of Mejillones.

On the Warsaw Stock Exchange, KGHM was trading at PLN 93.28 as of market close on Tuesday (August 28), up 7.69 percent over the course of the past 5 days.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.