Anglo American plc (LON:AAL) announced that its Board has approved the development of the world-class Quellaveco copper project in Peru.
Mark Cutifani, Chief Executive of Anglo American, commented: “Quellaveco is one of the world’s largest and most attractive undeveloped copper orebodies. We expect Quellaveco to generate a real, post tax IRR of greater than 15%, with a four-year payback(1) and an EBITDA margin of more than 50% due to its highly competitive first quartile cash cost position. We see significant potential to expand Quellaveco beyond its current 30-year reserve life as well as to increase throughput above the initial capacity of 127,500 tonnes per day.
“After several years of extensive preparatory work, we are very pleased to develop the project together with our partners Mitsubishi. We are grateful for the strong support we have gained from our host communities and at the national level. Quellaveco should bring very significant opportunities and sustainable benefits to the lives of those we employ, our business partners, the surrounding region and Peru as a whole, for decades to come.”
The development phase of the project will commence following completion of the transaction, announced in June 2018, whereby Mitsubishi Corporation will increase its interest in Anglo American Quellaveco S.A., which owns the Quellaveco project, to 40%. The development has an expected capital cost of $5.0 to 5.3 billion and will be funded on an attributable basis: 60% by Anglo American and 40% by Mitsubishi, with Mitsubishi pre-funding the first $500 million of Anglo American’s share of the capital expenditure.
First production of copper is expected in 2022, ramping up to full production in 2023. During the first ten years of full production Quellaveco is expected to produce approximately 300,000 tonnes per year at a cash cost of $1.05 per pound of copper.
The support of local communities is the result of an innovative 18-month consultation with local authorities and community representatives from the Moquegua region. Through this ‘dialogue table’, Anglo American agreed 26 detailed and specific long-term commitments relating to water management, environmental protection and social investment. For example, by ensuring that the water required by the operation is drawn mainly from a river whose water is naturally unfit for human or agricultural use and additionally by collecting excess rainfall and sharing it with the communities, Anglo American is delivering on its promise of a positive water impact for local people and their livelihoods.
Mark Cutifani added: “This is an exciting moment for Anglo American. The approval of Quellaveco is an important step in delivering the full potential of our world class asset portfolio, with an expected project ROCE in excess of 20%, and we look forward to working responsibly with all our stakeholders to make it a reality.”
