Anglo American says Peru copper mine a ‘licence to print money’

Anglo American's $5 billion copper project in Peru has the potential to be a "generational" asset with enough reserves to supply a century of production, according to the executive leading its development.

The reserves at Quellaveco have only been defined to a depth of 400m but drill samples suggest mineralisation could extend to 1,000m, according to a company presentation.

"This is not going to be a 30-year mine. My personal opinion is that it is going to be closer to 100 years," said Tom McCulley, the head of Anglo American in Peru, at a briefing in Lima on Monday. "It will be a licence to print money for a long period of time."

Quellaveco is the first new mine sanctioned by Anglo American since Minas Rio, an iron ore project that ran billions of dollars over budget and ultimately cost the company's former chief executive Cynthia Carroll her job.

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With Anglo now led by Australian executive Mark Cutifani, analysts say Quellaveco is a chance for the London-listed company to show it can deliver big projects on time and on budget.

Mr Cutifani, who took Anglo’s helm in 2013 and has transformed its fortunes, has said he will not leave the company until he has delivered the project.

Four decades

Two adjacent copper mines have been in production for more than four decades at much greater depths than Quellaveco, which is located in the Moquegua region of Peru.

“We know this will continue to get bigger,” said Mr McCulley.

Copper is tipped by analysts to be one of the beneficiaries from the global shift to low carbon power because of its use in electric vehicles and renewable energy.

Quellaveco is due to start production in 2022. Once it reaches full capacity, it will produce an average 330,000 tonnes a year of copper in its first five years.

“This is high grade ore - over 1 per cent copper - it’s soft [SO]it will go through the mill very easily,” said Mr McCulley.

Exploration outside the main project areas suggested there could be another major deposit close to Quellaveco on Anglo’s tenements.

“We actually have done a few drill holes recently and come across some of the best ore we have outside the pit,” he said. “We’ve seen enough to know that there is probably another Quellaveco out there.”

Mr McCulley said a 95km water pipeline and community relations were two of the biggest risks facing the project.

MMG, the Chinese controlled miner, said last week it would be forced to halve production at its giant Las Bambas project in Peru if protesters continued to block roads. Activists have also disrupted access to Peru's main copper port this month.

Residents of Peru's so-called southern copper belt are protesting against the government's granting of a construction licence to another miner, Southern Copper Corp, to build its Tía María facility, Reuters reported, amid concerns over local water resources. – Copyright The Financial Times Limited 2019