Glencore scoops up 9.99% stake in Hot Chili for $14.4m, plus offtake deal

Hot Chili ASX HCH Glencore investment copper gold
Under the deal, Hot Chili will also grant Glencore offtake agreements for more than 60% of the concentrate it produces from Costa Fuego.

Hot Chili’s (ASX: HCH) ongoing copper exploration at Costa Fuego in Chile has attracted the attention of global major Glencore, with the company revealing today Glencore will acquire a 9.99% stake for $14.4 million.

In a binding agreement between the parties, Glencore will acquire the interest in Hot Chili and appoint a director to its board.

The $14.4 million investment will also give Glencore the right to appoint members to a technical steering committee which will advise on Hot Chili’s operational matters.

Additionally, Hot Chili will grant Glencore offtake agreements for more than 60% of the concentrate produced from its Costa Fuego project.

The offtake will be set over an eight-year term and at “arms-length commercially competitive benchmark terms”.

This offtake part of the deal is on the proviso Glencore maintains at least 7.5% of Hot Chili.

Hot Chili managing director Christian Easterday said he welcomed Glencore’s investment – especially as the company moves to a dual listing on the TSX Venture Exchange before the end of the year.

“We view this as a significant milestone event and a strong endorsement by Glencore,” he said.

“We believe Glencore will make an excellent partner in the development of Costa Fuego and are a testament to Hot Chili’s staff and consultants who are working tireless to transition Hot Chili into a tier-one copper developer,” he added.

Advancing Costa Fuego

Hot Chili’s Costa Fuego project hosts what the company says is the largest copper resource of any emerging company on the ASX.

The project’s global resource totals 724Mt at 0.48% copper equivalent for 2.9Mt copper, 2.7Moz gold, 9.9Moz silver and 64,000t of molybdenum.

This resource is made up of two major deposits within a 10km radius – Productor and Cortadera.

At Productora, resources total 273Mt at 0.52% copper equivalent for 1.2Mt copper, 800,000oz gold and 36,000t molybdenum.

At Cortadera resources stand at 451Mt at 0.46% copper equivalent for 1.7Mt copper, 1.9Moz gold, 9.9Moz silver and 27,000t molybdenum.

Hot Chili also noted Costa Fuego is one of the few low-altitude, no arsenic copper projects within a tier-one location with access to requisite infrastructure.

A pre-feasibility study was progressed during the June quarter for the entire Costa Fuego project with global consulting firm Wood appointed to act as the lead engineer.

This study is expected to be completed by late next year and builds on a 2016 evaluation of Productora.

To boost resources further, drilling and other field activities have advanced over the project, with an updated resource for Cortadera on track for later this year.

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