Antofagasta completes strategic water transportation agreement for Centinela Project

Antofagasta plc has successfully concluded a significant water transportation agreement for its Minera Centinela division, marking a major step forward in the development of the Centinela Second Concentrator Project in Chile. This development comes after the initial announcement on March 19, 2024, and involves the transfer of existing water transportation assets and rights to an international consortium.

Details of the Agreement

Under the terms of the agreement, the consortium, which includes Transelec and Almar Water Solutions, will take over Centinela’s existing water infrastructure. The deal provides Centinela with cash proceeds of $600 million during 2024. Furthermore, the consortium will handle the planned expansion of the water transportation system, which is expected to reduce the overall capital costs of the Centinela Second Concentrator Project by approximately $380 million over the construction period.

Strategic Impact and Financial Benefits

This transaction is strategically significant for Antofagasta, as it not only secures the necessary infrastructure support for the upcoming concentrator project but also enhances financial flexibility. By transferring the asset management responsibilities to experienced partners, Antofagasta can focus more on its core mining operations and growth initiatives. The reduction in capital expenditure is particularly beneficial, allowing the company to allocate resources more efficiently across its portfolio.

Antofagasta’s Position in Global Copper Market

The deal comes at a critical time when the global demand for copper is rising, primarily driven by the global energy transition. Antofagasta’s CEO, Iván Arriagada, emphasized the importance of this agreement in supporting the company’s ambitions to produce responsible copper crucial for the energy sector. “Following today’s news and the recently announced Centinela Second Concentrator Financing, we are in a good position to advance our growth ambitions in producing responsible copper for the global energy transition at a time when the global supply of copper has a limited ability to meet the expected medium-term rise in demand,” he stated.

Future Outlook and Operational Efficiencies

Antofagasta’s CFO, Mauricio Ortiz, highlighted the agreement’s alignment with the company’s strategic goals and capital allocation framework. “By entering into this value accretive agreement, we have been able to reduce the capital intensity of the Centinela Second Concentrator Project, whilst protecting Centinela’s competitiveness,” Ortiz explained. This move is expected to bolster Antofagasta’s long-term competitiveness by ensuring sustainable and cost-effective water supply solutions for its operations.

This strategic divestment of water transportation assets to a reliable consortium allows Antofagasta to not only secure the needed infrastructure for the Centinela project but also to strengthen its financial standing and strategic focus on copper production. The arrangement reflects a prudent use of capital and resource management that could serve as a model for other mining operations facing similar challenges.