GOLDCORP INC. (TSX:G) (NYSE:GG) and Teck Resources Limited (TSX:TCK.A & TCK.B) (NYSE:TCK) today announced an agreement to combine their respective El Morro and Relincho projects, located approximately 40 kilometres apart in the Huasco Province in the Atacama region of Chile, into a single project.
Teck and Goldcorp will contribute their respective project interests into a 50/50 joint venture. The combined project will have the interim name of Project Corridor.
“Combining these two neighbouring assets is a common sense approach that allows us to consolidate infrastructure to reduce costs, reduce the environmental footprint and provide greater returns over either standalone project,” said Don Lindsay, President and CEO of Teck. “Through Project Corridor, we will work to establish meaningful relationships with the community, Indigenous Peoples and other stakeholders that will help guide the project’s development and create greater value for all parties.”
“The combination of El Morro and Relincho is consistent with our focus on maximizing value from our asset portfolio,” said Chuck Jeannes, President and CEO of Goldcorp. “We now have an improved development approach that we expect to significantly decrease initial capital requirements and increase financial returns, while ensuring the project is developed in partnership with our neighbours, creating lasting benefits for residents in the region and our shareholders.”
Based on the results of a Preliminary Economic Assessment Project Corridor contemplates a conveyor to transport ore from the El Morro site to a single line mill at the Relincho site. We expect that this approach will provide a number of key benefits, including:
-- Reduced environmental footprint: Project Corridor will reduce
infrastructure requirements, including utilizing a single desalination
plant, a single port, a single transmission line, a single concentrator
and a common tailings facility. As a result, the environmental footprint
of Project Corridor will be significantly less than the combined
footprint of the standalone projects. The use of a common tailings
facility located at the Relincho site responds to concerns expressed by
local communities regarding the location of the previously proposed El
Morro tailings facility within the agriculturally important Huasco River
-- Lower cost, improved capital efficiency: Common infrastructure will
significantly reduce project capital costs and ongoing operating costs.
Further, the PEA contemplates a phased development approach that will
allow future expansions to be funded from project cash flows, thus
significantly reducing the initial funding requirement. As a result, the
initial capital cost to bring Project Corridor into production is
targeted to be US$3.5 billion(1), with further capital required to
construct future phases being funded largely from project cash flows.
The feasibility studies of the standalone El Morro project and
standalone Relincho project had previously estimated development costs
at US$3.9 billion(2) in 2011 dollars and US$4.5 billion(3) in 2013
-- Optimized mine plan: Project Corridor is one of the largest undeveloped
copper-gold-molybdenum projects in the Americas. The integrated project
allows for the optimization of both resources, resulting in a longer
mine life of at least 32 years, based on existing proven and probable
reserves, with the scope for further extensions given the significant
exploration potential across the combined property. Initial stage
development contemplates a single line mill and concentrator facility
with an initial capacity in the range of 90,000- 110,000 tonnes per day
to produce an average of approximately 190,000 tonnes of copper and
315,000 ounces of gold per year over the first full 10 years.
-- Enhanced community benefits: Project Corridor is expected to provide
significant economic benefits to the local region. An estimated 4,000
jobs will be created during the construction phase and 1,400 jobs during
operation. The increased mine life will provide longer-term employment
opportunities and community investment.
-- Community engagement: Project Corridor will undertake extensive
engagement with communities, Indigenous Peoples and other stakeholders
to help guide the project's development. In the months ahead, project
staff will be meeting with the community and Indigenous Peoples to
explain the Project Corridor concept and work collaboratively to define
the project's engagement model. This process will be facilitated by two
independent organizations with expertise in community engagement and
experience in enhancing social performance and socially sustainable
outcomes for resource projects.
In combination with community consultation, a Pre-Feasibility Study is expected to commence in early 2016 and be completed in 12 – 18 months. Assuming a positive Pre-Feasibility Study, a Feasibility Study would be initiated thereafter.
Goldcorp’s El Morro project contained proven and probable reserves of 8.9 million ounces of gold and 6.5 billion pounds of copper as at December 31, 2014. Teck’s Relincho project contained proven and probable reserves of 10.1 billion pounds of copper and 464 million pounds of molybdenum as at December 31, 2014. Based on the December 31, 2014 mineral reserve figures reported by Goldcorp in respect of El Morro and Teck in respect of Relincho, the proven and probable reserves of Project Corridor would contain approximately 16.6 billion pounds of copper, 8.9 million ounces of gold, and 464 million pounds of molybdenum. Further work on Project Corridor, including updating reserves estimates at December 31, 2015, may lead to revised mineral reserve estimates that could be higher or lower than the combined figure presented. See Appendix A “Reserve and Resource Disclosure” below for important additional information regarding the mineral reserves and resources of the projects, including commodity price assumptions.
Goldcorp also announced earlier today that it has reached an agreement to acquire New Gold’s 30% interest in the El Morro project for US$90 million in cash upon closing, along with a 4% gold stream on future gold production from the El Morro property. Closing of the transactions contemplated by this news release is subject to customary conditions and is expected to occur in the fourth quarter of 2015.
CIBC World Markets acted as financial advisor to Teck and Goldcorp.
For more information about Project Corridor, go to www.proyectocorredor.cl.
Goldcorp is a leading gold producer focused on responsible mining practices with safe, low-cost production throughout the Americas. A portfolio of long-lived, high-quality assets positions Goldcorp to deliver long-term value. Headquartered in Vancouver, Canada, its shares are listed on the Toronto Stock Exchange under the symbol G and the New York Stock Exchange under the symbol GG.
Teck is a diversified resource company committed to responsible mining and mineral development with major business units focused on copper, steelmaking coal, zinc and energy. Headquartered in Vancouver, Canada, its shares are listed on the Toronto Stock Exchange under the symbols TCK.A and TCK.B and the New York Stock Exchange under the symbol TCK.
(1) Unescalated, as at August 2015
(2) Updated Feasibility Study & Basic Engineering Final Report for El Morro
Project 4,000 Case, Rick Collins (Hatch), Walter Bergholz (El Morro), Feb
(3) The Relincho Project Feasibility Study, Bechtel Chile Ltda and Teck
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