Hot Chili advances Costa Fuego Copper-Gold Project with strong PFS

How Is Hot Chili Strengthening Its Position in Global Copper Mining With Costa Fuego and La Verde?

Hot Chili Limited delivered a substantial strategic update with the release of its March 2025 Quarterly Report, marking pivotal advances across its copper-gold projects in Chile. The standout development was the announcement of the Preliminary Feasibility Study (PFS) and maiden ore reserve for its flagship Costa Fuego Copper-Gold Project. Complementing these milestones were major strides in establishing a desalinated water supply business under the Huasco Water project and expanding copper-gold porphyry discoveries at La Verde. This activity underscores Hot Chili’s evolving role as a future heavyweight in global copper mining.

The Costa Fuego PFS set the tone for Hot Chili’s growth ambitions, confirming a globally significant project scale with a 20-year mine life. It highlighted average annual copper equivalent production of 116,000 tonnes, encompassing 95,000 tonnes of copper and 48,000 ounces of gold during the primary 14 years of operation. The study projected a robust financial outcome with a post-tax Net Present Value (NPV8%) of approximately US$1.2 billion and a post-tax Internal Rate of Return (IRR) of 19%. Furthermore, Hot Chili confirmed the maiden ore reserve for Costa Fuego, with probable reserves of 502 million tonnes grading 0.37% copper, 0.10 grams per tonne gold, 0.49 grams per tonne silver, and 97 parts per million molybdenum, enhancing project certainty.

What Is the Strategic Importance of Costa Fuego’s Low-Risk Coastal Location?

Hot Chili’s Costa Fuego project differentiates itself through its strategic low-elevation location on Chile’s coastline. In a global copper market increasingly wary of permitting and water access challenges, the project’s advanced permitting status and proximity to infrastructure offer substantial risk mitigation. Costa Fuego benefits from existing grid power access and a decade-long head start on environmental and regulatory approvals, positioning it among a rare group of development-ready copper projects.

The company’s Environmental Impact Assessment (EIA) for the project’s Stage 1 scope is underway, building upon its already significant water rights advantage. This low-risk profile has allowed Hot Chili to focus on enhancing project economics, including optimising capital efficiency and expanding exploration at nearby satellite targets such as La Verde.

How Is Hot Chili Tapping Into the Growing Water Infrastructure Opportunity in Chile?

Recognising the critical role of water access in mining development, Hot Chili accelerated the parallel development of the Huasco Water project. The PFS for Huasco Water outlined a scalable, staged development plan for seawater supply and desalination infrastructure. Stage 1 envisages a 500 litres per second seawater supply facility with a post-tax NPV8% of US$122 million and a 19% IRR, while Stage 2 proposes a 1,300 litres per second desalinated water facility with a projected post-tax NPV8% of US$977 million.

Hot Chili’s first-mover advantage in the Huasco Valley, where it holds the only active maritime water concession following a decade-long permitting process, is strategically significant. This position not only secures water supply for Costa Fuego but potentially unlocks a regional multi-user water business serving other mining and agricultural stakeholders. Early-stage discussions with potential off-takers are advancing, although no binding agreements for Stage 2 or Stage 3 customers have been finalised yet.

What Potential Does the La Verde Discovery Hold for Hot Chili’s Growth?

In addition to the PFS achievements, Hot Chili’s exploration efforts yielded encouraging results at the La Verde copper-gold porphyry discovery, situated 30 kilometres south of Costa Fuego. Extensive Reverse Circulation (RC) drilling intersected broad zones of mineralisation at shallow depths, with highlights including 320 metres at 0.3% copper and 0.1 grams per tonne gold from surface at hole DKP009, and 308 metres grading 0.5% copper and 0.3 grams per tonne gold at DKP002.

The discovery remains open in multiple directions and at depth, supported by a growing footprint spanning 1,000 metres by 550 metres. Phase 1 drilling concluded in April 2025, and Hot Chili has already initiated regulatory applications for expanded drilling under Phase 2, which will include deeper diamond drill testing to unlock further potential. Integrating La Verde into the Costa Fuego development framework through a second Environmental Impact Assessment is underway, with the objective of materially enhancing the project’s economics and extending mine life.

What Is the Sentiment Around Hot Chili’s Stock and Investment Potential?

As of April 27, 2025, Hot Chili Limited (ASX: HCH) is trading at A$0.48 per share, representing a substantial decline of approximately 63% from its 52-week high of A$1.30. This downturn reflects broader caution in junior mining equities due to global macroeconomic uncertainty and volatile commodity prices, despite the company’s strong project progress.

Institutional ownership in Hot Chili remains modest, accounting for about 1.72% of the company’s shares. Major stakeholders include Glencore Australia Holdings Pty Limited, holding a 7.78% stake, Murray Edward Black at 5.53%, and GS Group Australia Pty Ltd with 5.49%. Insider activity has been positive, with key executives such as Nicole Adshead-Bell and Christian Easterday increasing their holdings during late 2024, signalling internal confidence.

Hot Chili reported a cash balance of A$7.5 million as of the end of March 2025, supplemented by an expected A$5.0 million in recoveries. However, with an annualised cash burn rate around A$24 million, the company’s current liquidity covers less than six months of operations, highlighting the importance of upcoming strategic funding initiatives.

Market sentiment remains cautiously optimistic. While the stock has declined 32.39% year-to-date and 59.83% over the past year, the company’s leverage to copper price increases—particularly as spot copper trades above US$5.30 per pound—provides significant potential upside. Analysts suggest Hot Chili could see a dramatic valuation re-rating if it secures project funding, formalises offtake agreements, or advances La Verde materially.

From an investment perspective, Hot Chili could be considered a Buy for long-term investors bullish on copper and willing to tolerate near-term financing risks. Existing shareholders might Hold, watching closely for funding developments and project milestones. Conversely, more risk-averse investors might Sell to avoid exposure to dilution or operational delays if capital raising proves challenging.

How Is Hot Chili Managing Its Financial Position Amidst These Developments?

Hot Chili’s strategic cash management remains central to its operations. The company has implemented a cost-reduction strategy, targeting a 60% to 65% decrease in monthly expenditure over the next six months. With major PFS expenses completed and phase 1 drilling activities concluded at La Verde, the focus will shift to DFS planning, project optimisation, and securing funding.

The company is actively engaged in discussions around asset-level investments and alternative funding structures for Costa Fuego and Huasco Water. These options include debt financing, royalty sales, streaming agreements, and potential divestment of non-core assets.

Leadership changes also reflect a sharpening focus on project delivery, with the appointment of Mrs Fiona Van Maanen as Independent Non-Executive Director and plans for further board strengthening to navigate the definitive feasibility study phase.