Phase two of Sierra Gorda copper project in Chile shelved indefinitely

May 11, 2017

The planned second phase expansion of the Sierra Gorda copper project in Chile has been shelved indefinitely by Polish mining company KGHM.

KGHM bought the project in Chile’s Atacama Desert mining belt in 2011, its largest ever foreign acquisition, and began shipments in 2014. The company planned a second phase that would ramp up production to 220 kt/a (242,000 stpy) by 2018 or 2019. However, on May 8 KGHM CEO Radoslaw Domagalski-Labedzki said at a news conference in Poland that the second phase will not happen.

“In the current macro conditions, the second phase has lost sense,” Domagalski-Labedzki said.

Originally the project was co-owned with Japan’s Sumitomo Metal Mining Co Ltd and Sumitomo Corp. Both Sumitomo Metal and KGHM reported losses and booked writedowns on the project earlier this year, and in March KGHM said the second phase was on hold.

KGHM has struggled to master complex ores and high production costs at a time of falling copper prices. Other new projects in Chile, the world’s top copper exporter, have suffered similar issues in recent years, with much of the easier ore now gone and companies needing to solve difficult technical issues in remote locations.

When asked if the phase two expansion could one day be revisited and under what conditions, Domagalski-Labedzki said: "There is no such possibility."

The CEO told Reuters that KGHM was still committed to Chile and was focused on optimizing the first phase of Sierra Gorda.

In 2016, the mine produced around 98 kt (108,000 st) of copper, according to government figures.

 

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