TORONTO (miningweekly.com) – Gold major Goldcorp and Canadian diversified miner Teck Resources will combine their El Morro and Relincho projects, in Chile, to leverage increased financial returns and dramatically reduce capital expenditure.

The miners announced on Thursday that both companies would contribute their separate project interests, located about 40 km apart in the Huasco province, in the Atacama region of Chile, into a 50/50 joint venture, which would be temporarily named Project Corridor.

Project Corridor would be one of the largest undeveloped copper/gold/molybdenum projects in the Americas.

In a separate deal, Goldcorp on Thursday announced that it would consolidate ownership in the El Morro project by acquiring Canadian miner New Gold’s 30% interest in the project for $90-million in cash upon closing, along with a 4% gold stream on future gold output from the property.

"Combining these two neighbouring assets is a common sense approach that allows us to consolidate infrastructure to reduce costs, reduce the environmental footprint and provide greater returns over either standalone project," Teck president and CEO Don Lindsay said.

Based on the results of a preliminary economic assessment (PEA), Project Corridor considered a conveyor to transport ore from the El Morro site to a single line mill at the Relincho site.

"We now have an improved development approach that we expect to significantly decrease initial capital requirements and increase financial returns, while ensuring the project is developed in partnership with our neighbours, creating lasting benefits for residents in the region and our shareholders,” Goldcorp president and CEO Chuck Jeannes said.

COMBINATION BENEFITS
The combined projects were expected to reduce the environmental footprint, in that Project Corridor would reduce infrastructure requirements, including using a single desalination plant, a single port, a single transmission line, a single concentrator and a common tailings facility.

The companies said using a shared tailings facility, located at the Relincho site, would address concerns expressed by local communities regarding the location of the previously proposed El Morro tailings facility within the agriculturally important Huasco river watershed.

Goldcorp had in November withdrawn its environmental-impact study for the El Morro project, after an October ruling by the Chilean Supreme Court halted development on the grounds that local indigenous groups opposing the project needed better consultation.

Further, the PEA envisioned a phased development approach that would allow future expansions to be funded from project cash flows, therefore, significantly reducing the initial funding requirement.

As a result, the initial capital cost to bring Project Corridor into production was targeted to be $3.5-billion. The feasibility studies of the standalone El Morro project and standalone Relincho project had previously estimated development costs at $3.9-billion, in 2011, and $4.5-billion, in 2013, respectively.

The integrated project would allow both resources to be optimised, resulting in a longer mine life of at least 32 years, based on existing proven and probable reserves, with the scope for further extensions, given the significant exploration potential across the combined property.

First-stage development planned for a single line mill and concentrator facility with an initial capacity in the range of 90 000 t/d to 110 000 t/d to produce about 190 000 t/y of copper and 315 000 oz/y of gold over the first full ten years.

Based on the December 31, mineral reserve figures reported by Goldcorp for El Morro and by Teck for Relincho, the proven and probable reserves of Project Corridor would contain about 16.6-billion pounds of copper, 8.9-million ounces of gold and 464-million pounds of molybdenum.

In the coming months, project staff would be meeting with the community and indigenous peoples to explain the Project Corridor concept, while two independent firms, with expertise in community engagement and experience in enhancing social performance and socially sustainable outcomes for resource projects, would work together to define the project's engagement model.

Work on a prefeasibility study was expected to start early in the New Year and would be complete within 12 to 18 months. Pending a positive result, the partners would undertake a feasibility study.

CIBC World Markets acted as financial adviser to Teck and Goldcorp.

Subject to customary conditions, the transaction was expected to close in the fourth quarter.