Expected payback on the $5-billion copper project that Anglo American is leading, in partnership with Mitsubishi, is four years after initial production, Anglo CE Mark Cutifani said last week, when the company announced the go-ahead for the development of the new community-backed, low-cost, long-life Quellaveco copper mining project, in Peru.

“It’s a portfolio changer for us as a group,” said Cutifani, who sees significant potential beyond the stated 30-year reserve life.

“The mines next to us tell you there’s a good potential story there in the long term,” Cutifani said during a webcast in which Mining Weekly took part.

Neighbouring mines Cuajone and Toquepala have been operating for more than 40 years.

“We’d expect beyond 40 years from Quellaveco and we’d like to think that it’s beyond 60 years. A lot of work will have to be done to prove those sorts of numbers, but there’s significant potential,” he said, adding that there was also the potential to increase throughput above the initial capacity of 127 500 t/d.

The commitment to the syndication and the partnership with Mitsubishi is seen as key in that Anglo will not be required to put its hand in its pocket in funding its $2.5-billion to $2.7-billion share until well into 2019. Anglo’s 2018 share of $400-million will be fully funded from the proceeds received from Mitsubishi, which will also stretch well into 2019.

With the softer material to be mined in the first five years, the unit operating cost will be below the stated $1.05/lb. The strip ratio is below 1 and most of the haul for the first ten years will be downhill, which will lower transport costs.

Labour pay rates are described as being “very competitive” and access to hydropower as being “an energy advantage”.

The execution-ready, permitted project comes with strong social credentials as a result of an 18-month dialogue with local authorities and community representatives from the Moquegua region, at which 26 detailed long-term water management, environmental protection and social investment goals were agreed.

For example, river water unfit for human or agricultural use will be used and excess rainfall collected will be shared with the communities, which will be on the receiving end of R300-million in community investment, as well as 80% of the 9 000 jobs.

The $500-million already sunk into the ground just to keep the option open is seen as being well invested in understanding the geotechnical and community issues.

The project’s internal rate of return has been calculated at more than 20% once full production of 300 000 t/y is attained.

The development phase of the project will begin once Mitsubishi increases its interest to 40%, which will make it responsible for 40% of the $5-billion to $5.3-billion capital expenditure, with Mitsubishi prefunding the first $500-million of Anglo’s share.

First copper production is scheduled for 2022, ramping up to full production in 2023.