Hot Chili to begin pre-feasibility study that will factor in high copper, lower power prices

Chilean copper-gold explorer Hot Chili (ASX: HCH) will in the next few weeks begin a pre-feasibility study (PFS) on its 2.9 million tonne copper and 2.7 million ounce gold Costa Fuego project in Chile.

The new study will factor in the present high copper price in light of predictions that global copper supply will run well short of demand in coming years as the electrical vehicle numbers soar.

Costa Fuego is the combined Cortadera and Productora resources that lie 14km apart.

A PFS completed on Productora in 2016 was done on the then prevailing lower copper prices and higher electricity costs that applied five years ago.

Productora’s 2016 pre-feasibility assumption of US$3.00 per pound compares with present spot copper prices, the price on 20 May being US$4.62/lb (and US$4.52/lb overnight).

NPV up 500% since 2016

Since 2016, the net present value of Productora has increased by 500% to US$1.1 billion, while the internal rate of return is up 38% to 150%.

Overnight the three-months copper price closed at US$9,979 per tonne and, while down from its 11 May all-time high of US$10,747/t, is still regarded as extremely bullish for the copper sector.

Hot Chili says work over several months has re-shaped the Productora resource as a potential higher-grade, open pit, satellite option for Costa Fuego.

A resource re-modelling there, along with underground mine reconciliation, has confirmed that the higher-grade resources at Productora (above 0.4% copper) are “robust and shallow”.

One of the largest copper developments in Chile

Hot Chili says that combining Cortadera and Productora into Costa Fuego as one central development hub has cemented the project as one of the largest copper developments in Chile.

Cortadera has a maiden resource of 451Mt at 0.46% copper equivalent, with that estimate to be upgraded this year.

Productora has a current resource of 273Mt at 0.44% copper and 0.09 grams per tonne gold, and the company says this supports a bulk tonnage open pit ore reserve estimate of 166.9Mt.

Power prices have been cut

Hot Chili says Productora’s value has been enhanced by the high copper prices, but also because electricity prices are now lower than what they were in 2016.

Since that year, the central and southern Chilean power grids have been connected, allowing a large influx of solar power from the Atacama region.

In addition, several large solar projects are operating in the vicinity of Costa Fuego.

The company says these developments have allowed it to consider a finer grind size, increasing copper recoveries by 2% to 88% at Productora.