Precious Metals
New projects can raise the production profile of Chile’s gold sector
Despite its geological endowment, Chile is not known for its gold mining. It was the 27th ranked producer in 2020, according to figures from the World Gold Council, behind Venezuela, Argentina, Colombia, Peru, Mexico and Brazil. Furthermore, although large producers including Gold Fields, Yanama Gold and Kinross are active in the country, Chile lacks producing gold assets on the level of Newmont’s Yanacocha in Peru or Barrick’s Veladero in Argentina. However, there is no shortage of potential to raise the production profile of Chile’s precious metals segment as a number of interesting development projects are in the works.
The standout precious metals development project in Chile’s pipeline is Gold Fields’ Salares Norte. Currently under construction, with production expected to start in 2023, Salares Norte has an 11.5 year life of mine with a production average of 350,000 oz/y of gold, including 450,000 oz/y for the first seven years, which would make the project Chile’s most prolific gold mine from an annual production standpoint by some distance.
On May 31st, 2022, the news that Gold Fields had entered into an agreement to acquire Yamana Gold in a deal worth US$6.7 billion means that the new entity, which will become the world’s fourth biggest gold producer, will add Yamana’s El Peñón and Minera Florida operations to its Chilean portfolio.
Another greenfield asset currently under construction is Rio2’s Fenix gold project, which is expected to achieve its first gold pour in 2023, according to president and CEO, Alex Black. Discussing the timeline for development at Fenix, Black explained that it takes a few months between getting the EIA and the construction permit. “In the meantime, we bought an infrastructure site about 20 km from the Fenix mine site, at the turnoff from the main road that goes from Copiapó to Argentina and close to Kinross’ La Coipa camp (...). We can do a lot of fabrication of plant components at the site, so when we receive the construction permit it becomes more of an assembly project.”
Black mentioned that the characteristics of Fenix are very similar to the two mines that the Rio2 management team built in Peru – La Arena and Shahuindo – under its previous company Rio Alto Mining, which was acquired by Tahoe Resources for C$1.2 billion in 2015. Fenix lends itself to simple gold heap leach ADR operations where material does not have to be crushed and therefore does not require large capex to build. Black added: “When you talk about inflation, a 10% increase on a US$120 million build is a lot more manageable than on a US$1 billion project. From our experience, we know we can move things around to save costs in different areas.”
“When it comes to decarbonization, as gold operations are developed, you will see more copper-gold mines coming online. Copper and gold produced together will go hand in hand as a very important metal for decarbonization, along with a very important metal in terms of a store of wealth that improves lives.”
Tom Palmer, President and CEO, Newmont
The attraction of low-capex start-ups was highlighted by Randy Smallwood, president and CEO of Wheaton Precious Metals (WPM), who helped finance the construction of Rio2’s Fenix via a US$50 million gold streaming agreement. “We have seen so many examples in the mining industry where people are too aggressive in terms of their first buildout, and this is particularly relevant in an era of supply chain delays and rising inflation,” observed Smallwood, mentioning that he particularly liked Rio2’s strategy of opting for a staged approach to grow the mine, adding that Alex Black’s track record of delivering high quality projects on time and on budget also influenced WPM’s investment decision.
On the brownfield side, Kinross announced that on February 1, 2022, its La Coipa processing plant (located near Rio2’s Fenix Gold project) had restarted operations. The restart comes after a year of mechanical maintenance, rehabilitation of electrical systems and instrumentation, and restitution of equipment that had been preserved since 2013 after a Partial Temporary Stoppage (PTP) for eight years, according to Rolando Cubillos, vice president and general manager of Kinross Chile.
Cubillos listed the pending items to optimize the Phase 7 mine plan at La Coipa: “Plant renovations are currently focused on the crushing, grinding, leach pads, refinery, filtration and tailings areas, making sure critical components are complete to start first-stage production and move towards full operating capacity by the middle of 2022.”
On March 12th, 2022, Kinross announced it had poured its first gold bar at La Coipa, and the company is eyeing expansion at the nearby Lobo-Marte project, located about 50 km from the main pit, after the conclusion of mining at Phase 7.
Looking further forward, exploration, development and consolidation in the southern Maricunga belt in the area surrounding Norte Abierto, the Barrick/Newmont JV comprised of the Caspiche and Cerro Casale gold-copper porphyry deposits offers the potential for a large-scale operation. While a Supreme Court order to redo an EIS has stalled progress, Barrick’s president and CEO, Mark Bristow, has been outspoken on his intention to grow organically through exploration, with the Pascua-Lama and Norte Abierto deposits in Chile included in these plans.
Image courtesy of Kinross