Hot Chili’s new JV to ensure water supply security for Costa Fuego

Copper-gold developer Hot Chili is pairing up with Chile’s Compania Minera del Pacifico to form a water joint venture.

Seawater will flow to the Huasco Valley, supplying communities and mine developments such as Hot Chili’s Costa Fuego copper-gold project. Pic: Getty Images

• Hot Chili forms water joint venture with Chilean iron ore company Compania Minera del Pacifico

• Huasco Water will develop a multi-user seawater and desalinated water supply network

• This will supply future water demand for communities, agriculture and new mining developments for the Huasco Valley region

Special Report: Water is a valued resource that is scarce in areas like the Atacama, which is why copper-gold developer Hot Chili is pairing up with Chile’s Compania Minera del Pacifico to form a water joint venture.

The Atacama region includes the Atacama Desert – the world’s driest nonpolar desert in the world – and is unsurprisingly one of the most water stressed regions of the world.

It is also where Hot Chili’s (ASX:HCH) Tier-1 Costa Fuego copper-gold project is located – specifically within the Huasco Valley that has a long history of mining.

Costa Fuego includes the outstanding Cortadera deposit with an indicated resource of 798Mt grading 0.45% copper equivalent for contained resources of 2.9Mt copper, 2.6Moz gold, 12.9Moz silver and 68,000t of molybdenum.

Costa Fuego also holds a further inferred resource of 203Mt @ 0.31% copper equivalent for 0.5Mt copper, 0.4Moz gold, 2.4Moz silver and 12,000t molybdenum.

Mines typically need considerable amounts of water to operate, a point highlighted by Hot Chili’s estimate the Huasco Valley may need up to 3,700 litres per second of desalinated water in the future for its new mine developments.

A water supply concept study released in February this year confirmed the potential for a large-scale, multi-user desalinated water network serving the entire Huasco Valley, which rather neatly aligns with the Chilean Government’s push for such networks in the Atacama.

The conceptual multi-user, desalination water network. Pic: Hot Chili

Water supply security

Given how important a secure water supply is to mining developments – including Costa Fuego – agriculture and communities in the Huasco Valley, HCH and Chilean iron ore company Compania Minera del Pacifico have established a new water company HW Aguas para El Huasco SpA (Huasco Water).

The 80-20 joint venture will hold the maritime water extraction licence, water easements, costal land accesses and second maritime application previously held by Sociedad Minera El Águila SpA (SMEA), which is also jointly owned by the two companies.

Huasco Water aims to develop a multi-user seawater and desalinated water supply network to supply future water demand for communities, agriculture and new mining developments for the Huasco Valley region of Chile.

HCH and CMP will be foundation offtakers for Huasco Water with the former’s Costa Fuego project expected to consume some 700l/s of sea water while CMP’s Los Colorados iron ore mine will require about 200l/s of desalinated water.

Water offtake discussions are also underway with nearby mine developers and additional non-mining, desalinated water customers situated close to Costa Fuego.

Water infrastructure trends

The company noted that its approach towards potential outsourcing and development of shared infrastructure, in addition to preserving scarce continental water sources, is fast becoming the accepted and responsible approach for unlocking future mining developments in the world’s most prolific copper producing region.

It highlighted Antofagasta’s recent sale of their water assets and water rights to the Centinela copper mine for US$600 million to a consortium of Transelec and Almar Water, which will finance, build, own and operate an expansion project that will sell seawater to the Centinela mine expansion.

The consortium will build a 144km long seawater pipeline using Centinela’s water rights that will parallel the existing pipeline from port to mine, allowing Antofagasta to save US$380M in capital expenditure for the construction of its stage 2 water infrastructure expansion.

HCH said this highlights the strategic nature and implicit value of critical water access rights within the Atacama, and an increasing trend in Chile towards outsourcing in the industrial infrastructure sector.

This article was developed in collaboration with Hot Chili, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

Originally published as Hot Chili’s new JV to ensure water supply security for Costa Fuego