Teck sells stake in Chile Cu project to Sumitomo

Canada's Teck Resources has agreed to sell a 30pc indirect interest in the company that owns the Quebrada Blanca Phase 2 (QB2) copper project in Chile for $1.2bn to Japan's Sumitomo Metal Mining and Sumitomo.

The board of Teck also approved the QB2 project for full construction, with first copper and molybdenum production targeted for the second half of 2021. Full output is expected in mid-2022, effectively doubling Teck's copper production.

Compania Minera Teck Quebrada Blanca (QBSA) owns the the project, which is targeting 316,000 t/yr of copper equivalent production for the first five years at cash costs of $1.28/payable pound. Initial mine life is calculated at 28 years using less than 25pc of the current reserve and resource.

"QB2 will be a long life, low-cost operation with major expansion potential, including the option to double production or more, to become a top five global copper producer," Teck chief executive Don Lindsey said.

Closing of the transaction is expected by April 2019, subject to customary conditions and regulatory approval.

The $1.2bn for the indirect interest in QBSA consists of an $800mn earn-in contribution and a $400mn matching contribution. Sumitomo will pay Teck an additional $50mn upon QB2 achieving target mill throughput of 154,000 t/d by end December 2025.

QBSA will use the proceeds from the transaction to begin construction on the project, with another $2.5bn coming from project finance loans.

Capital expenditures for QB2 will be funded two-thirds by Teck and one-third by Sumitomo and Sumitomo Metal Mining. Chilean state-owned minerals company Enami has a 10pc non-funding interest.

The social and environmental impact assessment for the QB2 project was approved in August 2018 and early field work began in September.

The project will include construction of a 143,000 t/d concentrator and related facilities, which will be connected to a new port on the Pacific ocean.

QBSA is also assessing the development of a further QB3 phase, which could more than double production to make the mine complex one of the largest producers in the world.

The existing Quebrada Blanca mine is in northern Chile. Its copper output fell to 23,000t last year from 84,000t in 2010 and is expected to continue output through mid-2019 as the deposit is exhausted.

Teck is a diversified miner, producing copper, zinc, coking coal and oil sands, with operations in Canada, the US, Chile and Peru.

Teck is currently targeting total copper output of 278,000t in 2018, down from 358,000t in 2015.