Teck moves forward on major copper mine project in Chile
VANCOUVER Teck Resources Ltd. has sold a 30-per-cent stake in its Quebrada Blanca Phase 2 project as it gives the go-ahead for construction of the transformative copper mine in Chile.
The Vancouver-based miner said it would sell the stake to Sumitomo Metal Mining Co. Ltd. and Sumitomo Corp. as part of a US$1.2 billion transaction that will improve the project’s economics and free up cash flow. “The partnering transaction further confirms that QB2 is one of the world’s premier undeveloped copper projects. And it significantly derisks Teck’s investment in the project,” said Teck president and CEO Don Lindsay in a conference call Tuesday.
He said the deal drastically cuts Teck’s equity requirements to US$693 million to finish the project, with no cash requirement between the deal’s close and late 2020.
The Us$4.7-billion QB2 project, expected to start production in 2021, should annually produce about 316,000 tonnes of copper equivalent in its first five years to shift Teck’s production profile towards the critical metal.
“QB2 will be a cornerstone asset in Teck’s portfolio,” said Lindsay. “When it is built, our copper production will increase significantly, and this will help rebalance our portfolio over time with the contribution from copper eventually similar to steelmaking coal.”
Scotiabank analyst Orest Wowkodaw said in a note that the deal was a boost to Teck after it secured great terms with Sumitomo.
“We view this update as very positive for the shares given the significantly higher than anticipated project buy-in proceeds, sharply reduced funding commitment attributable to Teck’s balance sheet (including no capital outlay until late 2020), and overall improved project economics.”