BHP Billiton has approved a US$2.46 billion project to extend the life of its Spence openpit copper mine in Chile by more than 50 years.

During the first 10 years of operation, incremental production from the Spence Growth Option (SGO) will be about 185,000 tonnes per annum of payable copper in concentrate and 4,000tpa of payable molybdenum, with first production expected in 2021. Current copper cathode production will continue until 2025. Spence produced 167,000 tonnes of copper cathode in 2016 using the SX-EW process.

The new project, which will convert 1.3 billion tonnes of measured and indicated mineral resources to hypogene sulphide ore reserves, has an expected internal rate of return of 16% and 4.5-year payback.

The SGO expansion continues the push by CEO Andrew Mackenzie to increase copper production into a stronger copper market and rising prices, and follows the go-ahead for an expansion at the nearby giant Escondida mine a year ago that will provide an extra 150,000tpa of copper production. Escondida aims to produce about 1.2Mtpa of copper over the next decade, up from about 940,000 tonnes in 2015-16.

“Execution of the Spence Growth Option will create long-term value for shareholders in one of our preferred commodities. The project significantly extends the life of our Spence operation and unlocks the potential of the large, quality resource,” said Mackenzie in a news release.

The project includes the design, engineering and construction of a conventional large-scale sulphide concentrator for both copper and molybdenum with a 95,000tpd nominal ore throughput capacity.

SGO will also require a new 1,000 litres per second desalination plant that will be built near its Mejillones port that exports copper concentrates from the Escondida mine, together with a 154km water pipeline to the Spence site. These will be built and operated by a third party under a build, own, operate and transfer contract, with nominal, undiscounted value of lease payment obligations over the 20-year contract term totalling $1.43 billion.

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