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Updated Costa Fuego study outlines 20 years of copper-gold production
27 March 2025

After a decade in the Chilean copper space, Hot Chili is closer than ever to delivering a developable Costa Fuego project it now believes can deliver some 3.3 billion pounds of the red metal over two decades.

Two years after delivering a preliminary economic assessment, today’s prefeasibility study has outlined a more expensive, but larger and more robust development option that could generate US$3.9 billion in free cash over 20 years.

The PFS outlines a project that could produce around 116,000 tonnes per annum of copper equivalent over the mine life at all-in sustaining costs of $1.85/lb after credits for the gold, silver, and molybdenum.

The first 14 years should support the production of 95,000tpa copper and 48,000 ounces per annum gold from reserves now re-stated as 502Mt grading 0.37% copper, 0.10 grams per tonne gold, 0.49gpt silver, and 97 parts per million molybdenum.

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Total resources are 798 Mt grading 0.45% CuEq, making it one of the largest undeveloped copper projects globally.

Early mining is concentrated at the Productora and Alice open pits before the focus shifts to the Cortadera underground.

Processing comes from a circa 21Mtpa sulphide concentrator and leaching facilities.

Initial capex is now $1.27 billion, almost $220 million more than originally outlined, while an expansion will cost almost double the prior estimate at $1.3 billion. 

Assuming a copper price of $4.30/lb, post-tax net present value is put at $1.2 billion with an internal rate of return of 19%.

Payback should be around 4.5 years.

At the prevailing near-record spot price of $5.30/lb, NPV jumps to $2.2 billion with an IRR of 30%.

Credits: Hot Chili

Hot Chili says its work has reduced development risks, and it estimates it will offer some of the lowest capital intensities of any project along Chile’s coastal belt at $14,079/t CuEq.

The company expects to have a better leverage to the copper price than its peers, such as Capstone Copper’s Mantoverde mine or Santo Domingo development, BHP’s new Filo del Sol investment, or Solgold’s Cascabel.

Further, its location on the coastal belt offers easier access to water and power than its peers at higher elevations.

Hot Chili also claims to have a head start in permitting on its rivals. Its stage one environmental impact assessment is due to be submitted soon. 

Growth targets

Work on a second EIA that supports the integration of the La Verde porphyry, which was excluded from the PFS, could enhance project economics in the planned definitive feasibility study.

Managing director Christian Easterday said Hot Chili was now “within an elite grouping of copper developments globally” that could offer a meaningful source of near-term copper into a market set to struggle to meet demand.

The company will advance its DFS and drill out La Verde over the next year.

It aims to deliver its first red metal by the end of the decade. 

Glencore looming in background

The question remains: how will it pay for it? Hot Chili has around A$19 million in cash to fund its DFS and studies for a complementary Huasco water supply and desalination business. 

With Glencore still on the register as a 7.5% shareholder, it is an obvious development partner. As long as the Swiss-based trader maintains that equity level, it can purchase up to 60% of concentrate for the first eight years of its life.

A PFS for the Huasco Water project is also imminent.

Hot Chili shares were up 2% in early trade to 72c, capitalising the company at $108 million.

The stock has traded between 60c and $1.31 over the past year, having peaked at $2.60 in 2020.

Andrew ToddSponsored

Thu, 27 March 2025 2:47PM

Hot Chili managing director Christian Easterday (left). The company has dropped a bombshell PFS for its Costa Fuego copper-gold project in Chile. Credit: File

Hot Chili has dropped a bombshell prefeasibility study for its Costa Fuego copper-gold project in Chile, cementing its place among the world’s top copper developments with a 20-year mine life, top-tier production scale and economics that scream upside in today’s red-hot metals market.

At a conservative copper price of US$4.30 (A$6.79) per pound and gold at US$2280 per ounce, Costa Fuego has a post-tax net present value (NPV) of US$1.2 billion (A$1.9b) assuming an 8 per cent discount rate. The figure quickly blows out to a massive US$2.2b (A$3.5b) at current spot prices, allowing for a much quicker return on investment in the process.

The company’s latest milestone reveals Costa Fuego is poised to pump out an average of 116,000 tonnes per annum of copper-equivalent metal, which includes 95,000t of copper and 48,000 ounces of gold in its first 14 years.

Across its full 20-year life span the project is set to deliver a staggering 1.5 million tonnes of copper and 780,000 ounces of gold before any by-products are factored in. Hot Chili says the haul will put it firmly in the top quartile of global producing copper projects.

The project is set for a five-year payback period on capital expenditure clocking in an internal rate of return of 19 per cent on an upfront US$1.27b (A$2b) to get the mine running.

Hot Chili reports a total life-of-mine free cash flow of some US$3.86b after tax, with revenue pegged at a whopping US$17.3b.

The eye-popping numbers still have plenty of room for improvement, thanks to a surging gold and copper price. Copper is flying thanks to United States President Donald Trump’s tariff war. The gold price is too, as it continues to push new all-time highs above US$3000 per ounce. At current prices, Hot Chili’s forecast NPV rockets up to US$2.2b (A$3.5b) and the internal rate of return jumps to 30 per cent.

In fact, every US$0.10 per pound bump in the copper price adds another US$100 million to the NPV, making Costa Fuego a highly leveraged play in a market screaming for more copper amid electrification and renewable energy booms.

The company will now kick off its definitive feasibility study (DFS) and submission for stage one environmental approvals to keep the project on-track for first production before the end of the decade.

With cash of approximately A$19 million as at the end of last year and both of our key assets (Costa Fuego and Huasco Water) at PFS level study, we are well positioned to pursue potential strategic partnership and sponsorship funding discussions.Hot Chili managing director Christian Easterday

Costa Fuego is widely regarded as one of the better undeveloped copper resources globally. It has a mammoth combined resource of 798mt grading 0.45 per cent copper equivalent for 2.9mt of copper, 2.6m ounces of gold, 12.9m ounces of silver and 68,000t of molybdenum.

The company has tabled a maiden ore reserve of 502 million tonnes grading 0.37 per cent copper, 0.10 grams per tonne (g/t) gold from blending an open pit and underground mining strategy across its Cortadera, Productora, Alice and San Antonio deposits.

Nestled at a low 740 metres above sea level on Chile’s coastal range, Costa Fuego leverages a strategic edge few jurisdictions can match. It is just 60 kilometres from the Las Losas port and a stone’s throw from Vallenar’s skilled workforce.

The projected mining costs are calculated to be below the benchmark of undeveloped competitors, with the project’s C1 cash cost sits at a lean US$1.38 per pound of copper, including by-product credits, with an all-in sustaining cost of US$1.85 per pound – placing it among the lowest-cost producers globally.

Hot Chili has outlined a hybrid mining approach for its considerable undertaking. Open pits will cornerstone the low-cost operation, accompanied by a massive block cave mining operation down to 1000m at its flagship Cortadera deposit. The operation will kick off in year three and add 146mt of higher-grade feed.

The company’s processing will be undertaken by a massive 20.7mt-21.7mt per annum sulphide concentrator, a 4mtpa oxide heap leach and a 3.6mtpa low-grade sulphide leach that will churn out concentrate and cathode copper.

Hot Chili isn’t quite done yet with exploration at its Chile operation, saying its recent La Verde copper-gold porphyry discovery, 35km south of Costa Fuego, is shaping up as a game-changing second porphyry project.

La Verde’s wide, shallow intercepts, including 320m at 0.3 per cent copper and 0.1g/t gold, hint at a massive system still open in all directions. Step-out drilling is underway, and the company believes it can one day fold La Verde into Costa Fuego’s production hub, potentially juicing front-end mine life and economics ahead of a DFS.

With copper prices soaring and gold continuously at all-time highs, Costa Fuego’s timing is impeccable. The company’s $19m cash pile positions it well to rapidly expand La Verde while simultaneously courting strategic partners for production, as it charges toward the all-important DFS milestone.

In partnership with BULLS N’ BEARS

Hot Chili says it can solve Chile’s water problem for large industrial projects in the Huasco Valley region and bank US$447m over 20 years in free cash by getting into the water supply business using its giant Costa Fuego copper play as a foundation off-taker.

The company recently tabled a pre-feasibility study on its 80 per cent owned Huasco Water project in Chile that makes use of its hard won permit to supply sea water to Chile’s Huasco Valley region. According to management, the Huasco joint venture holds the only active maritime license in the Huasco region – a feat that it says took 10 years of regulatory burden to achieve.

Hot Chili’s 80 per cent owned Huasco Water project is aiming to extract seawater under its maritime concession in Chile to supply water to its own Costa Feugo copper-gold project and others in the Huasco Valley region
Hot Chili’s 80 per cent owned Huasco Water project is aiming to extract seawater under its maritime concession in Chile to supply water to its own Costa Feugo copper-gold project and others in the Huasco Valley region

The JV is aiming to develop a long-term, regional multi-user seawater and desalination water supply network for the Huasco valley area of the Southern Atacama region of Chile, which sits about 600km north of the Santiago capital.

Hot Chili says the project will initially cost US$151m in start up capital which it says can be paid back in 4.5 years from the operation.

Total expected revenues have been modelled over 20 years and come in at US$880M and the project shows a pre-tax net present value using an 8 per cent discount rate of US$179m and a 22 per cent internal rate of return.

‘The company views the potential to outsourcing of its seawater supply infrastructure as a key value enabler…’Hot Chili managing director Christian Easterday

Stage 1 for the business will target the potential supply of seawater at 500 litres per second (L/s) to Hot Chili’s Costa Feugo copper-gold project which will be the foundation off-taker for the project via a 62km over-land pipeline.

A memorandum of understanding (MOU) has been executed with its own Costa Feugo project that will see the supply of seawater for the duration of the 20-year project life.

In addition to its sought after concessions to extract sea water, Huasco Water has permits for coastal land access, stage 1 pipeline easements and has secured connection to the electricity grid. The company plans to supply seawater by the end of the decade.

Stage 2 will see a desalination plant, estimated to cost US$1.4 billion, supply water at a rate of 1300L/s to a range of potential businesses within the Huasco Valley region.

The numbers really begin to ramp up during the second stage, with post-tax-free cash flows jumping to an estimated $4 billion from revenue of US$9.35B modelled over 22 years.

The post-tax NPV for stage 2 comes in at $977M with a 4 year payback.

The company’s staged approach enables scaling up for long term supply to mining, community and agricultural firms in the Huasco Valley region, with the potential to stretch beyond initial project estimates.

Hot Chili managing director Christian Easterday said: “The outcomes of the water supply preliminary feasibility study provide an opportunity for Hot Chili to fully consider the strategic value of its 80 per cent owned subsidiary company Huasco Water, which controls all our critical water assets. The company views the potential to outsourcing of its seawater supply infrastructure as a key value enabler and has anchored Huasco Water by executing a memorandum of understanding to negotiate a foundational seawater offtake agreement for Costa Fuego.”

Huasco Water has identified possible demand of at least up to 4000L/s across six undeveloped mining projects, all requiring access to a desalinated water supply.

Desalination water supply is projected to occur shortly after the seawater supply, due to begin at the end of the decade, is piped to Costa Feugo.

The permitting process to upgrade its maritime concessions to enable desalinated water to be provided is advancing.

The Huasco Valley region contains one of the largest groupings of major undeveloped copper projects in the world, all of which are in need of a reliable water supply. If an improving copper price warrants a move towards production for Hot Chili’s Costa Fuego, Huasco Water will be dragged along with it.

Management says just three potential clients in the region who may tap into their water business are Teck Resources, Atex Resources and Agrosuper.

Agrosuper is a food production company and also produces animal feed. An MOU for desalinated water has been executed with the group.

The HW Aguas para El Huasco SpA (Huasco Water) is a joint venture between Hot Chili (80 per cent interest) and Compañia Minera Del Pacifico – CMP (20 per cent interest).

Huasco Water is the only company with permitted access to supply seawater in the Huasco Valley region following a ten-year regulatory approval process.

The permitting process for desalination water has advanced over the past year with regulatory applications made to enable the supply from the existing maritime concession. A second maritime concession application by Huasco Water has been lodged. The second application includes brine discharge for the potential seawater desalination operations.

Hot Chili’s first mover advantage in the water sector in Chile cannot be overstated. The demand in the area appears to be real and the barriers to entry for others that have not suffered the ten year ordeal to get permitted just might give Huasco and Hot Chili a potentially decades long free run at supplying water to both its own project and the other mega projects that are littered around the area with no current water options.

With copper prices recently on the move, Hot Chili stands to derive a double benefit. Not only will the economics at its Costa Feugo project improve, but the company stands to reap the rewards from other copper groups in the region who may develop a thirst for some Huasco water.

Doug Bright BULLS N’ BEARS

Hot Chili has secured the milestone government registrations necessary to help fast-track its Costa Fuego copper-gold and Huasco Water projects in Chile.

The registrations, before Chile’s Office for Sustainable Project Management, confirm the two projects meet the government’s key criteria for consideration for a list of strategic investment projects that could be prioritised through a streamlined administrative approvals process.

Hot Chili’s 80 per cent owned Huasco Water project is aiming to extract seawater under its maritime concession in Chile to supply water to its own Costa Feugo copper-gold project and others in the Huasco Valley region
Hot Chili has received registrations for its Costa Fuego copper-gold project and its Huasco Water project on Chile’s coastal range. The water project will involve drawing seawater from an intake near the coastal port of Huasco.

Part of the office’s objectives is to optimise and accelerate approvals for projects that promote sustainability.

Hot Chili’s maiden combined probable open pit and underground ore reserves for its Costa Fuego project stands at 502 million tonnes at 0.37 per cent copper, 0.10 grams per tonne (g/t) gold, 0.49g/t silver and 97 parts per million molybdenum across multiple processing streams. The streams include the sulphide concentrator, oxide leach and low-grade sulphide leach processes.

The total combined metal in the reserves is a heady 1.86Mt copper, 1.58M ounces of gold, 7.95M ounces silver and 49,000t molybdenum.

Significant additional opportunity exists to extend the overall resource numbers with the company’s recent discovery of copper-gold porphyry mineralisation at its non-contiguous but nearby La Verde project.

La Verde is the latest addition to Hot Chili’s Costa Fuego production hub. It is only 50 kilometres south by road from the company’s central processing facility at Productora, within the company’s Costa Fuego group of projects.

The Costa Fuego complex is on Chile’s coastal range and comprises the company’s principal reserves zones at Productora, Alice, San Antonio and Cortadera, which all lie within a radius of about 10km.

The centre of the company’s contiguous tenure and its current resources is about 63km southeast of the port city of Huasco, in the Huasco province of the nation’s highly prospective Atacama region.

Huasco plays an important role in Hot Chili’s plans, as it is the proposed location for the seawater intake for the company’s Huasco Water project.

Huasco Water is an joint venture between Hot Chili and Chilean mining company Compañia Minera Del Pacifico. With its first-mover advantage, Huasco Water is the only company permitted to supply seawater in the Huasco Valley region, following a 10-year regulatory approval process.

The combined projects possess a valuable, unique and strategic mix for Hot Chili over the next decade and have what the company describes as a “top quartile copper production capacity with lowest quartile capital intensity”.

Hot Chili undertook March pre-feasibility studies for the water and the Costa Fuego gold-copper projects. A positive study outcome provides Hot Chili with an opportunity to consider the strategic value of its 80%-owned subsidiary company Huasco Water, which controls all its critical water assets.

The company sees significant value potential in outsourcing its vital seawater supply infrastructure and has secured Huasco Water’s position by executing a memorandum of understanding for a ground-breaking seawater offtake agreement for a proposed large-scale, multi-customer water business.

Its stage one water supply pre-feasibility study examined the delivery of 500 litres per second (L/s) of seawater, followed by a stage two 1300L/s of desalinated seawater supply.

A conceptual stage three study looked at future expansion to supply up to 2300L/s of desalinated water.

The staged approach considers the initial establishment of seawater supply infrastructure, including pumps and pipelines, towards the end of the decade, to be followed by an initial desalinated water supply and then subsequent phases of expansion.

It would enable long-term water supply to be scaled to regional demand growth to support mining, communities and agriculture in the Huasco Valley, with the potential to extend well beyond the project’s initial horizons.

The concept is further supported by significant interest in Huasco Water displayed by other Chilean and international water infrastructure investment groups, along with nearby mine developers, agricultural and community groups and government bodies.

Hot Chili says while long permitting timelines continue, its desalination permitting is progressing and no regulatory changes have been made to Chile’s maritime permitting process since Huasco Water was granted its concession.

Additionally, the company’s environmental impact assessment (EIA) is advancing, with its stage one seawater supply baseline studies completed for inclusion in its Costa Fuego EIA.

The latest registration is a significant milestone that confirms Hot Chili’s projects meet the Chilean government’s objective criteria to acquire priority status.

With the paperwork in hand for both Costa Fuego and Huasco Water, the company is now able to centralise and monitor all of its active permitting processes through a single platform and supervisory entity.

The current permitting needs include the company’s second maritime concession application for Huasco Water and its upcoming EIA submission for Costa Fuego and Huasco Water.

Andrew Todd BULLS N’ BEARS

Hot Chili has secured the services of two seasoned mining executives to bolster leadership as the company progresses its Costa Fuego copper-gold project and Huasco Water venture in Chile’s Atacama region.

Ex-Gold Fields Australia executive Stuart Mathews joins as non-executive chairman, while Chilean copper expert Alberto Cerda assumes the role of project director. Cerda brings a particular set of skills… namely in mine development and operations to support the company’s upcoming definitive feasibility studies for both projects.

Hot Chili has appointed mining executive Stuart Mathews as non-executive chairman to progress its Chilean projects into development.

The appointments align with Hot Chili’s strategic focus on advancing its low-altitude, copper and water projects amid a looming copper market, which has international majors clamouring for quality.

Hot Chili says Mathews’ and Cerda’s proven expertise in delivering large-scale mining operations – particularly in Chile in Cerda’s case – positions the company to navigate the complexities of project development, resource optimisation and strategic partnerships in the world’s top copper producing country.

Costa Fuego is a large copper-gold porphyry set to churn out 116,000 tonnes per annum of copper-equivalent metal, which includes 95,000t of copper and 48,000 ounces of gold in its first 14 years. Importantly for Hot Chili’s metals mix, chairman Mathews comes from a gold mining background as the recent executive vice president for Gold Fields in Australasia, where he oversaw operations producing more than 1 million ounces of gold annually.

Cerda takes care of the copper background as a Chilean mining engineer with more than 40 years of experience in major copper projects in Chile for companies such as Newmont, Barrick and BHP Billiton.

Hot Chili’s projects are strategically positioned to benefit from rising copper demand and regional infrastructure needs. Costa Fuego’s robust economics and Huasco Water’s exclusive water supply permit make it strategically significant to the region.

With environmental permitting and exploration ongoing, the company is well-placed to deliver and further extend its overall resource numbers, thanks to a recent discovery of copper-gold porphyry mineralisation at its non-contiguous but nearby La Verde project.

Located 60 kilometres from Las Losas port on Chile’s coastal range, Costa Fuego is Hot Chili’s flagship project. A recent prefeasibility study outlined a 20-year mine life with a maiden ore reserve of 502Mt grading 0.37 per cent copper, 0.10 grams per tonne (g/t) gold, 0.49g/t silver, and 97 parts per million (ppm) molybdenum, with a contained 1.86Mt copper, 1.58M ounces gold, 7.95M ounces silver and 49,000t molybdenum.

The project is expected to generate a post-tax net present value (NPV) of US$1.2 billion at a US$4.30 a pound copper price and US$2280 per ounce gold price. At current market prices, the NPV increases to US$2.2B, with a 19 per cent internal rate of return and a five-year payback on US$1.27B capital expenditure.

Hot Chili’s 80 per cent-owned Huasco Water project, in partnership with Compañia Minera del Pacifico, addresses critical water scarcity in the Huasco Valley.

Secured after a decade-long regulatory process, Huasco Water holds the region’s only maritime licence for seawater supply, providing the project with a significant competitive advantage. Its recent pre-feasibility study detailed a two-stage development plan to supply water to local major copper producers, to earn an estimated revenue of US$9.35B and a US$977M NPV over 22 years of supply.

The company has completed its baseline environmental studies and a second maritime concession application is under review, positioning Huasco Water, like Costa Fuego copper, to commence supply by the end of the decade.

With copper prices soaring and gold continuing at all-time highs, the appointments come at pivotal time in the company’s development. Hot Chili says it remains on a tidy $7.5M cash pile to rapidly expand its resources, while simultaneously courting strategic partners for production at its huge copper and water undertakings.

Barry Fitzgerald | August 2023

Increasing supply challenges and soaring demand means copper price take-off must be close. And RareX eyes DSO fertiliser to help it grow.

BHP’s erudite vice president of market analysis and economics, Huw McKay, lobbed his commodity outlook report during the week alongside the company’s FY2023 profit report.

His report was interesting reading as always. The main findings from a short-term perspective were that there could be a balanced copper market emerging and that iron ore remains broadly balanced.

No surprise in the latter (price support is expected in a $US80-$US100t range) but the call on copper represents an upgrade from the call in February that the market was facing a short-term surplus with its price pressure implications.

The suggestion that the surplus which most were forecasting in the next couple of years could in fact be replaced by a balanced market does not carry the same importance for BHP in isolation as it does for the broader copper and equity markets, where negative sentiment reigns on all things copper and economic.

So it is a nice tonic for ASX-listed copper equities.

McKay made the point that better Chinese end-use demand, particularly for its green energy build-out, electric vehicles and housing completions (as distinct from housing starts where there is some real drama), and likely higher operational shortfalls at the world’s fleet of copper mines than most are forecasting, indicated the potential for a balanced copper market, or maybe just a small surplus.

As it is, the copper price is doing okay anyway at $US3.80/lb, even if it is below the June half year average of US$3.95/lb. But where things get really interesting for the metal is the medium term (FY2025-FY2026) to the long-term, (FY2027 and beyond).

McKay’s call on copper for the long-term remains super bullish, which is just as well as his bosses set out to spend as much $US20 billion expanding copper production in South Australia and Chile in coming years.

In short, McKay is forecasting “pronounced” (supply) deficits in the copper industry’s medium-term future. He did not say so, but that means a take-off in copper prices can’t be that far off, remembering that it is almost Christmas.

Actually, Mckay did reference a take-off from a demand perspective.

“These expected deficits are a joint function of historical under–investment in new primary supply and geological headwinds at existing operations intersecting with the ‘take–off’ of demand from copper–intensive energy transition spending that we expect will be a key feature of global industry dynamics as the final third of the 2020s arrives, if not earlier,” McKay said.

“Our confidence in medium term deficits is underpinned by both the demand and supply side, but if forced to elevate one over the other, supply headwinds would be the #1 motive force.

“Simply put, the supply response to supportive demand and price signals in the 2020s to date has been underwhelming, despite copper’s future-facing halo effect. And time is running very, very short to turn that story around.

“It is quite apparent that there is a very substantial disconnect between what needs to be done at the macro level to support both rising traditional demand and the exponential lift in metal needs implied by the energy transition and what is occurring at a micro level.”

McKay has previously estimated that in a “plausible upside” case for demand, the cumulative industry-wide growth capex bill out to 2030 (which will be here before we know it) could reach one–quarter of a trillion dollars.

Now he is saying that an updated analysis suggests that could be an under–estimate.

McKay added that the capex mountain presumes that there projects ready and waiting.

“The reality is that the industry’s collective set of development options is modest by comparison with prior decades, with the well–known lack of discoveries, the depth and complexity of what has been found, and the lengthening catalogue of above-ground risks and regulatory hurdles that confront project developers all adding to the challenges of bringing additional copper to end–users in a timely fashion,” he said.

“We reiterate our view that the price setting marginal tonne a decade hence will come from either a lower grade brownfield expansion in a mature jurisdiction, or a higher grade greenfield in a higher risk and/or emerging jurisdiction. None of these sources of metal are likely to come cheaply, easily – or, unfortunately, promptly.”

COPPER JUNIORS:

There is a message in all that for the junior copper explorers and would-developers out there – stick to your knitting and resist the temptation to go off on the lithium hunt, a sector BHP does not rate because of a lack of “rent” in coming years as supply grows hand over fist.

It is warming stuff for the copper juniors. They have being doing in tough in recent months as investors fret about the China slowdown.

But by BHP’s road map, their day in the sun will arrive around 2025 when the world wakes up to the profound supply deficits coming in the back third of the decade, something the market will front run by a couple of years by supporting both the copper producers and juniors.

Most of the likely candidates to benefit from that scenario have been mentioned here before and include names like Hot Chili (HCH), Coda (COD), Caravel (CVV) and Hammer (HMX). All have established copper resources with exploration upside.

CHINA:

A final message from McKay which is really a maths lesson. It has particular relevance to the current hysteria about China’s economy falling into a hole in the longer-term because of its ageing population, among other things.

While China has set a GDP growth target of 4.7% for this year, McKay reckons that come the 2030s, it will be a considerable stretch for anything in the 4s because of existing scale of the Chinese economy.

“Our mid case point estimates for growth in 2025, 2030, 2035 and 2050 are (rounded) 5%, 4¾%, 3½% and 1¾% respectively. But such is the underlying scale of the economy – in 2035 China will be roughly the same size as the US, India, Europe, and Japan put together today – 3½% growth in that year would be equivalent to $1¾ trillion of incremental new activity (PPP terms),” McKay said.

“That is roughly double the annual incremental change that China produced in the high–speed growth era of the mid–to–late 2000s.”

He said that it would also big enough to produce the equivalent of a new G20 member annually, being larger than the entire economies (in 2019) of Canada, Saudi Arabia, Australia, Thailand, Egypt, and Spain, just to name a few.

“Knowledge of that arithmetic is part of the reason why we are not perturbed that percentage rates of growth are bound to slow down. China is expected to remain the largest incremental volume contributor to global industrial value–added and fixed investment activity through the 2020s and many decades beyond: not just GDP,” McKay said.

That should mean something to long-term investors in the resources space. A confidence builder perhaps.

RareX:

Talking about the big thematics out there, RareX (REE) has set out to ride two of the biggest – fertiliser to meet the need to feed the world and rare earths for global decarbonisation through electrification.

It has the underpinning phosphate-rare earths project to proceed down the dual carriageway – its large scale Cummins Range deposit some 135km from Halls Creek in Western Australia’s Kimberley region.

Phosphate – one of the three primary macronutrients for plant growth – is a relative late-comer to the Cummins Range story but is now emerging as a low capex/high returning “starter” project, with combined phosphate/rare earths to follow in later years.

Prices for rare earths (RE) have taken a beating in 2023, making it difficult for RE explorers/developers to gain traction in the market. Even so, broad agreement that demand/pricing for the magnet REs will take off in the second half of the decade remains.

RareX was a 3.8c stock on Thursday for a market cap of $26 million. So it is not as if it has the scale to stare down both the RE market and the equities market and get cracking on the RE component of the Cummins Range orebody in the here and now.

Think of a simple direct shipping (DSO) phosphate rock project as a bridge to becoming a RE producer of scale. As the company likes to put it, it is all about phosphate production enabling RE production. It is a neat bit of de-risking not available to most of the RE players on the ASX.

The plan began to take shape this week with the release of a scoping study into a rock phosphate direct shipping project with a 3-year life as the first stage of a three-stage development plan that moves into phosphate-RE concentrate in the second stage, and an upgraded third stage.

The second stage involves big bucks (an estimated $304m) but the strategic nature of RE and the north Australian location suggests grant funding is likely to be available. The forecast surge in RE demand/prices would also no doubt help.

But before then, a rock phosphate costing a doable $45m and producing 63,000t annually of contained phosphorus pentoxide annually could be chugging away earning a solid cashflow and establishing an operational base for the main event of large scale phosphate and RE production.

StockHead | August 2023

Hot Chili is looking to acquire the Cometa project to provide opportunities for more resource growth at Costa Fuego. Pic: Visoot Uthairam via Getty Images

Hot Chili is progressing its strategy of upscaling its already significant 2.8Mt copper, 2.6Moz gold Costa Fuego flagship project in Chile with a move to acquire the nearby Cometa asset. 

Hot Chili says Costa Fuego is already “one of the world’s lowest capital intensity major copper developments” and one of only a handful of projects outside of the control of major miners capable of delivering meaningful new copper supply this decade.

Its indicated resource of 725Mt grading 0.47% copper equivalent powers a punchy Preliminary Economic Assessment (PEA) – essentially a Scoping Study – which showcases attractive returns.

The PEA envisages a US$1.05bn project capable of producing 112,000t of copper equivalent (95,000t of copper and 49,000oz of gold) per annum over 14-years of a 16-year mine life.

Ove this time it would deliver revenue and free cash flow of US$13.52bn and US$3.28bn, respectively.

Post-tax net present value and internal rate of return – both measures of a project’s profitability – are estimated at US$1.1bn and 24% respectively.

Exploration, acquisitions to support production boost to 150,000tpa

Hot Chili (ASX:HCH) is now focused on upscaling Costa Fuego’s resource base to support an increase in the copper production profile to 150,000tpa ahead of its Pre-Feasibility Study, which is expected to be delivered in the first half of 2024.

Its planned acquisition of Bastion Minerals’ (ASX:BMO) Cometa project, 15km from Costa Fuego’s planned operating centre, is aimed at furthering this strategy via the discovery of further mineral deposits which could add supplemental feed or extend mine life.

Hot Chili ASX HCH
Location of the Cometa project. Pic: Supplied (HCH).

Acquisition terms

Under the letter of intent, the company has secured a 60-day exclusivity period to carry out due diligence with the intention to enter into a definitive option agreement for the acquisition of Cometa.

Hot Chili will pay Bastion US$100,000 in cash on the grant of the option and will pay a further US$200,000 within 12 months of its grant to keep the option in good standing.

Should the company exercise the option within 18 months of it being granted, it will have to pay Bastion US$2.4m in cash or an equal mix of cash and HCH shares.

This increases to US$3m if the decision is made after the initial 18 months and before the option expires 30 months from its grant.

An emerging copper monster

Hot Chili’s acquisition of the Cortadera project in early 2019 delivered multiple, very thick copper-gold porphyry hits that drastically changed the scale of what became the Costa Fuego project.

Not only does Cortadera account for the majority of resources at Costa Fuego – at 451Mt at 0.46% copper equivalent – but drilling also outside of the resource envelope continues to deliver more thick, copper-gold porphyry hits that strongly indicate there’s plenty of growth to come.

Expansion drilling continuing

The company is continuing a 30,000m expansion drilling campaign at Cortadera with nine reverse circulation holes totalling 2,010m completed so far.

Four of these drillholes have been completed across the western extension of the Cortadera porphyry resource, including one pre-collar in preparation for a deep diamond hole beneath Cuerpo 4.

Once the RC pre-collars are drilling, the RC rig is expected to begin a hydrogeological program at Cortadera from mid-September.

Hot Chili also plans to have one diamond drilling rig starting double shift drilling in September with preparations underway to bring a second rig online as it ramps up drilling across multiple exploration targets.

By Paydirt Media

Hot Chili has entered a binding letter of intent for 100% of the Cometa project to the south-east of Costa Fuego

Hot Chili Ltd continues to enlarge its footprint at the Costa Fuego copper-gold project in Chile, acquiring the 56sq km Cometa project directly adjacent to its keystone asset in August.

Hot Chili entered a binding letter of intent with Bastion Minerals Ltd for 100% of the Cometa project – 600km north of Santiago – just 25 days after starting a 30,000m expansion drilling program at Costa Fuego.

“We’ve had a long consultation strategy over a decade to build the Costa Fuego project,” Hot Chili managing director Christian Easterday told Paydirt. “The Cometa project is a known large-scale target, more an IOCG target at this stage, akin to Productora-style, but something that sits well within range of our central processing hub strategy.”

Cometa will be incorporated into Hot Chili’s wider plans to upscale Costa Fuego’s resource base and boost proposed copper production towards a 150,000 tpa target, before an expected PFS in 2024.

“Cometa is a greenfield project, which will give us a further exploration pipeline within our reach,” Easterday said.

A first-pass RC drill programme of 16 holes for 4,116m along the western edge of the Cortadera resource earlier in the year confirmed the potential for resource expansion. Easterday said the company was confident the prospect could provide Hot Chili with even more to talk about.

“Some of our drilling programme is dedicated to the last extremes of the PFS, which is largely complete,” Easterday said.

“We’ll be drilling a number of regional targets on top of expansion targets around the Cortadera resource which, in our opinion, is not finished yet. That drilling is related to a large pit assessment that we’ll undertake to determine the optimal path for our final PFS – whether its open pit then underground, or whether we might consider a higher strip ratio and a larger [open pit] operation.”

The company’s investor base had shown a lot of faith in Hot Chili’s Costa Fuego assets and Easterday said the new acquisition reflected a strategy of expansion.

“[The shareholder reaction] was positive but we do have a positive reaction to a lot of news flow,” Easterday said.

“We’ve confirmed the only 100mt-plus copper production project on the ASX outside BHP [Ltd], so I think the company’s taking strong steps towards being one of the premiere names on the ASX in terms of scale in the copper sector.

“Cometa is part of that strategy, to expand the project through the drill bit and to expand the project through acquisitions.”

Hot Chili commenced trading on the TSX in January 2022 and the OTCQX three months later. Easterday said it had been slow going on the North American exchanges, but conservative planning had paid off as the company fielded interest from Canadian institutional investors.

“The limited amount of liquidity we put over there has been largely focused into institutional hands,” Easterday said.

“In the initial TSX placement, interest came largely from about eight or nine Canadian funds and institutions as well as some retail spread. But recently what we’ve been seeing is a real transition in our trading, particularly since the PEA and the transaction.

“The royalty that we put over the project for about 1.1% effectively secured our next 12-18 months of funding. Since that, we’ve seen a change in the investor type and their buying.”

The Costa Fuego roadmap takes in a planned mineral resource upgrade in H1 2025, with development studies and resource growth ongoing throughout the year. A DFS in H1 2026 will precede FID in the second half of the year. Easterday was comfortable with Hot Chili’s scheduled milestones and confident in the company’s timing, coinciding with predicted commodity values.


“Our roadmap outlines a pretty logical pathway for FID in 2026 which we see as a pretty good time to get into [production],” Easterday said.

“We are, of course, using conservative consensus numbers. If we were to run out numbers at the same as other PEAs in the market – at $US8/lb – we’d probably have a project nearly twice the value.

“We have a $US1 billion-plus NPV on the project now and a much larger NPV if we start to see copper prices moving. So, we are pretty focused on expanding Costa Fuego to a 150,000 tpa production base, which exposes us to revenue profiles in the region of $US1.5 billion over the life of mine. That’s very important if you are trying to get into the first quartile of cash costs.”

Chile’s recent change in administration would not prove problematic for Hot Chili’s arrangements, Easterday was full of praise for the country’s robust political framework.

“Chile has gone through a well-publicised, two-year long constitutional debate
on taxation change and has largely emerged with no constitutional change and
a very limited increase in taxation,” Easterday said.

“That’s been very pleasing to see and that’s been a process of initiation from the new president and his side of parliament.

“The people of Chile spoke, and the protection of a two-third majority on constitutional change was very good. It meant that nothing crazy is happening regardless of who is in the President’s seat.”

– Michael Cameron

Think and Act Differently: transforming our oldest industry with our newest technology

28 June 2023

We hear the term ‘transformation’ a lot lately – because it is a time of great change in the world. The pace of change, driven and enabled by technology, is increasing. And so it’s appropriate that we’re here talking about transformations in mining. But what is it that we’re transforming to? What are we seeking to become?

The world is starting to wake up to the role of the resources sector to support the global trends that are changing the world.

These trends will feed demand for metals and minerals for decades to come.

But new deposits are harder to come by. 

What remains is deeper, harder to find, more difficult to access, or in more challenging locations.

And we have to produce those commodities in those locations with less – less energy, less water, less waste, less disruption – a fraction of the impacts traditionally caused by intensive mining activity.

I would ask us all to stand in the future for a moment – what do we see? 

I see people removed from the line of fire, reducing both the risk of both safety and health impacts as we automate the work we do.  

I see value chains with automated decision processes that lead to reduced power and water use and improve our productivity, contributing to responsible mining, and enhancing our ability to increase return on capital every day. 

I see the democratisation of data with citizen developers throughout the value chain making processes run more efficiently, and digital twins enabling accurate prediction of problems to allow better maintenance and operational upgrades.  

Under this vision, the processes we will be working on will be fundamentally different – we will have solved for in situ recovery, we will have eliminated energy hungry mill and float to use new and different ways to liberate the minerals we seek.  

In doing so, we will have the ability to produce the commodities we need with a fraction of the waste, and whatever waste we do produce, can be repurposed into useful products. 

Our power will have zero greenhouse gas emissions – and I believe nuclear energy will be a part of the baseload mix in the global elimination of carbon emissions rich energy.  

As more of our systems and decisions are automated, we will become the orchestrators of improvement and innovation – the skills we need for the future must embrace highly digital operational and project management as the way we deliver value and efficiency. 

We will fundamentally change what we consider to be an attractive resource. 

The sub 0.5% copper resources of tomorrow will be just as attractive as the 2% copper resources of yesterday, delivering the critical minerals the world needs to decarbonise at low cost.  

This means the mine waste of the past, will become some of the new resources of the future.

As we stand in the future I see an exciting, safe and automated sector, valued by society for the types of work it provides.

How do we set ourselves up to do this? At BHP we want to Think and Act Differently. But we also need to do it with urgency.  

So how do we build a solution?  What are we doing in BHP?

The solution

It’s been said before that data is the new gold – but we have to know how to use it.

Every mining operator generates reams of data. But it is how this information is captured, distilled, analysed, stored and used that makes the difference. You get out what you put in – quality outputs from quality inputs – or the alternative, garbage in, garbage out.

The opportunity – the prize – is clearly massive. 

But there is no change without innovation.

Building the ecosystem

Firstly, we need to expand the ecosystem of ideas that we are exposed to – we are not in every pool of expertise, but we must be more open to conversations and ideas than ever before.

We know that not every good idea is our own idea. 

I’m sure all the companies, universities, research groups represented here today have some very smart people working for them. We certainly do at BHP. But we know that the world of ideas is broader than our own company or our own industry.

And so we’re looking outwards to build an ecosystem of ideas, with a partnership mindset.  So what have we done…

We are changing the way we work…

BHP Innovation has adopted an open innovation model, we are transparent about the ambitious opportunities and challenges we are working on and invite collaborators from universities, industry peers, adjacent industries and start-ups to join us.

We work with expert scanning and scouting partners, as well as ecosystem collaborators, like Deloitte’s new GreenSpace Tech ecosystem or MIT’s Industrial Liaison Program including their Startup Exchange.

We want to accelerate the technology development roadmaps of our partners and share in their success, not lock up their IP or restrict their growth potential. 

We intend to Think and Act Differently in all our interactions.

We are also willing to invest.  

BHP Ventures, our own Venture Capital arm, has been in action now for about 3 years. It is focused on emerging technologies that can help grow and improve our existing operations, our resource base, and our value chain.

It has screened more than 1,200 opportunities and built a high-quality global portfolio of over 20 holdings and continues to go from strength to strength. 

We are thinking and acting differently about exploration. 

Our exploration accelerator, BHP Xplor, merges concepts from venture capital and early-stage accelerators. We announced BHP Xplor in August 2022 and had many applications from all around the world, focused on the discovery of copper, nickel and other critical minerals. We’ve worked with seven companies, to provide funding and support to accelerate their growth.  Wave 2 is coming soon…and I hope that all those from our first cohort can speak to this as a positive experience.

Operationally we also seek to be different, we have evolved our relationships with many of our vendors – we seek to partner to solve some of our biggest opportunities… this maybe quite tactical such as the partnership between Minerals America Technology, Escondida Operations and Microsoft to improve Escondida Concentrator recoveries… 

A program that uses artificial intelligence and machine learning, to combine real-time plant data from the concentrators and AI-based recommendations from Microsoft’s Azure platform to feed our operations team information so they can adjust variables that affect ore processing and grade recovery.
This is the building of an eco-system, the setting of a foundation of partnerships and ways of working that is different – so what is that making possible.

What it’s delivering

Using these ecosystems, we must use data to drive solutions to make systems run better.

Partnering on tech and innovation is making our sites safer and more sustainable as we think and act differently to deliver real results.

One of the best ways we can reduce safety risks is through removing people from the frontline. 

Where we have implemented truck automation at Jimblebar and Newman in Western Australia, there has been a 90% reduction in near miss events involving vehicles with a fatality potential.  

We have extended automation to our fleets in Western Australia and here in Queensland and we are in implementation at Spence and Escondida in Chile.

Decision automation using real time data feeds from on the board fleet management systems provides a more efficient and productive result, shift in and shift out, delivering more safe tonnes per truck per year.

The advance of autonomous haulage by OEMs like Komatsu, Caterpillar – delivered in partnership with companies such as BHP are the first stage for decarbonisation…

The next stage is zero emission trucks…and at BHP we are investing in electric – even as we watch the hydrogen journey like hawks. We have a great partnership with Caterpillar and have a prototype truck running about in Arizona.  We have advanced plans that consider trolley assists, recharging station distribution and dynamic charging as a part of the mine design of the future.  Anna Wiley has presented BHPs vision of the electrified future here this week.

We can only create future value by through strong partnerships with our OEMs.

The other side of the equation is the need for sensible, innovative solutions to be shared for the collective benefit of the sector.

Our Operation and Technology teams at our Newman operation recently won their category at the Safety Excellence Awards run by the Western Australian government, for a remotely operated thermal lance for removing debris jams in crushers. It connects to a boom, meaning no more handheld thermal lances, removing people from potential harm from uncontrolled energy release.

BHP is licensing the design on a royalty-free basis so it can be used across the industry, worldwide – so please do get in touch with us if you want more information.

Tech and innovation supports better exploration.

Over the last couple of years BHP has re-organised our exploration team to seek out new deposits located across four global regions.  We recognise that the old ways in which we approached exploration will not serve us as well in a new deeper, under-cover type of world.

We have leveraged the systems thinking of the petroleum industry and seek to understand the dynamic system required to emplace a new ore deposit – we aim to look at the earth in a different way.

I have to acknowledge the many BHP Petroleum colleagues who worked with the mineral geologists to develop and mature a minerals systems model using the extensive BHP datasets. 

They have built a new way of thinking of the accumulations and concentrations of metals in given regions to inform our exploration search spaces. Those interested in more deeply understanding this can refer to the paper presented yesterday in this conference by Dr Cam McCuaig.

We also partner with those who bring new eyes, a different way of thinking and challenge to our process – the AI/ML partnerships such as those with DeepIQ/SRK, and Kobold are such examples.  

And as we home in on our new targets we recognise the importance of new ways of using and collecting data.  BHP Innovation, the Resource Centre of Excellence and Olympic Dam geologists and geometallurgists, have applied the first sparse 3D Hardrock Seismic Survey across the Olympic Dam deposit with very interesting results.

This work is an adaption of modern-day hard-rock seismic methodologies (again borrowed from the petroleum industry) and successfully applied across an ore deposit.  This will accelerate resource characterisation and the targeting of drillholes – ultimately reducing cost and time to production.  

If you are interested, check out a series of three papers presented at this year’s Australasian Exploration Geoscience Conference, led by Kathy Ehrig, Heather Schijns, and Jared Townsend, that explore these concepts more deeply. 

And so what is old, or known in one industry, is being refashioned, accelerated and innovated to deliver new and exciting results today.

Collaborating on tech and innovation changes production and reduces waste. 

At BHP, we have organised to have Digital Factories at all our operated assets, seeking to resolve problems through application of digital solutions using agile methodologies and strong asset sponsorship.

Let me give you an example. We all know product variability is a challenge across the industry. When we over or underestimate the quality of ore shipped to customers, it impacts the value we create.

So our digital factories got to work and came up with the Product Variability program, which we’ve been using at West Australian Iron Ore.

The technology used a Grade Adjustment Model that uses data sources to capture movements of ore across the supply chain in real time to map the grade coming from the mine.

We then use an application called StacksOn to maintain a 3D model of material in the stockyard, so we know what to load when.

The program addresses a fundamental issue in an innovative way. It is materially adding value to our operations, and we’re rolling it out across other commodities.

We have a Value Engineering team who work with operations to build dynamic models to answer questions about value chain performance and anticipated improvement options – able to define where capital spend, operational or improvement effort should be applied to maximise value, the team is in high demand across our business. 

From modelling capital spend at NiWest, to defining the improvement activities to maximise throughput in the Escondida Concentrators, to predicting maintenance in train loadout stations in the WAIO, we are using data to define, measure and solve for the production impacts of tomorrow through dynamic modelling and digital twins.

At all stages of production, whether in exploration, in trucking, or extraction, we seek ways to innovate or disrupt… but we can only do this by thinking and acting differently.

How to support it

The evolution of the new mine site – safer, smarter, more automated and less manual – means the capabilities we need to run these operations are changing

We’re moving to a world where we are less hands on. 

We increasingly need more people with digital skills right through our sector from the innovators to the front lines of production and maintenance. We need to bring workers with us on that journey. We simply don’t have enough of them.

The good news is that today’s generations of primary and secondary students are picking up digital skills as they learn coding etc at school; the base language of digital analysis is being engrained early. 

The concept of a ‘citizen developer’ is built on this growing familiarity and comfort with code – and it’s important that the industry recognises the opportunity in these new generations of future resource sector workers.

At BHP, we enable people to register as a citizen developer to work on BHP problems. They are formally onboarded, supported with access to resources like security groups and environment access, and provided with education and training. There are more than 300 registered citizen developers at BHP, working individually and in collaborative communities.

The outcomes are exciting – for example, an app that improves on a complex escalation process for safety and environment events within our integrated remote operating centre has been a game changer for that team. The app was built by a processing specialist with no coding experience – he just saw a process that could be improved and set about doing it. 

The industry needs more citizen developers. We need to train them now, and we need to make sure they see the mining industry as stable, attractive – dare I say exciting and future facing. 

Conclusion

In conclusion, to deliver what the world needs, means identifying, developing and implementing digital and technical innovations – some of it novel and maybe a little scary(!)… and investing now in the people we need to find, build and work the mines of the future.

We all need to be thinking about setting ourselves up to do this now; Build our ecosystems, be open to new partnerships and ways of working, and be organised to move faster – driving ourselves forward with data, with people close to the opportunity finding the solution and then sharing the outcome for us all to use. 

The data this industry can capture is increasing apace with the speed and quality of our capability to analyse it the only limiter. The opportunities to improve will be driven by our use of this data as much as by any other factor.

These mines of the future are vital to help to deliver the world of the future and a surer pathway to net zero. A transformation of mining, to deliver a global transformation by mining.