VANCOUVER (miningweekly.com) – Boosted by higher commodity prices in general, miners are increasingly focusing on project development as healthier balance sheets allow them the opportunity to return to their long-term growth strategies.
According to data supplied by Fitch-affiliated research firm BMI, two countries are positioned to lead the pack in South America – Brazil and Peru – where copper projects dominate and projects in general attract hefty capital requirements that tend to be spread over joint venture (JV) partnerships.
Peru stands out in particular, owing to its number of high-value projects and a faster-growing mining industry value. For instance, in 2017, Anglo American identified the $5.6-billion Quellaveco project, in Peru, as the firm's priority copper project, given continued copper price strength. The firm plans to start operations at the mine in March.
"While Brazil has the largest mining industry value in Latin America, we expect to see stagnant growth in the country due to weak iron-ore prices, political instability and a new mining code that includes higher royalties. These challenges will weigh on project development, meaning the country's robust project pipeline will be slow moving," BMI analysts said in a recent report.
Copper projects top the list in terms of volume and value in the Americas, including Anglo American's Quellaveco project, and First Quantum Minerals' $5.7-billion Cobre Panama project, in Panama. According to BMI, the latter is on track for phased commissioning during this year, and the production ramp-up over 2019 will nearly double Panama's mining industry value over the next two years.
In Chile – the world's largest copper producer by a significant margin – rising copper prices and the election of business-friendly Sebastian Pinera could prompt a number of investment decisions to expand and upgrade key mines, BMI said.
In August, BHP Billiton approved the $2.5-billion expansion project at the Spence mine, in Chile, to include a desalination plant and concentrator. BMI has forecast copper prices to average higher over the coming years, increasing from $6 300/t in 2018, to $7 000/t by 2021, and highlighted upside risks to this outlook.
A strong demand outlook will drive persistent deficits in the global copper market, pushing prices higher and incentivising project development.
"Miners will remain relatively cautious in terms of spending to better withstand future price volatility, meaning firms will prioritise brownfield investment over new projects and partner with peers to share costs and risks associated with larger greenfield projects, the analysts said, pointing out that Anglo American, for instance, will look into additional partnerships to develop the Quellaveco project, keeping at least 51% to operate the mine from its current 82% stake. Minority stakeholder Mitsubishi has an option to increase its stake from 18% to 30%.
Similarly, First Quantum has increased its share in the Cobre Panama project to 90% in 2017, by buying out minority shareholder LS-Nikko Copper, while Korea Panama Mining maintains the remaining 10%.
Meanwhile, BMI also noted that it expects the majority of new lithium capacity to come on line in 2019, while established producers in Chile and Argentina will ramp up output over the coming quarters. In January, Sociedad Quimica y Minera de Chile, or SQM, received approval from Chilean development agency Corfo to expand lithium carbonate production to 63 000 t in the second half of 2018, following a protracted dispute over royalties.
US-based FMC Corporation will also increase lithium carbonate output in Argentina, at the Hombre Muerto brine operation, to over 40 000 t over the next several years.
"Junior miners' projects set to begin production over the next few years include Galaxy Resources' Sal de Vida project, in Argentina and Bacanora Minerals' Sonora hard rock project, in Mexico.