Innovative Water Infrastructure for Centinela Mining Reaches Financial Closure
Yesterday, we announced a significant milestone for Almar Water Solutions. After three years of development and negotiations with Antofagasta Minerals SA (AMSA), the project has reached its financial closure and construction phase for a new water infrastructure for Centinela Mining in the North of Chile. This project involves the construction of new infrastructure and the renewal and operation of existing facilities.
The project entails pumping 56,333 cubic meters per day of seawater to an elevation of 2,200 meters for mineral processing, a necessity due to the expansion of the Centinela Mine. This expansion, recently announced by AMSA and its partner Marubeni, will add 144,000 tons of copper, 3,500 tons of molybdenum, and an additional 130,000 ounces of gold extraction per year through a second concentrator plant.
Seawater will be captured in the town of Michilla (about 60 km north of Mejillones), where the company’s port is located, and pumped at a rate of 1,950 liters per second through a 144 km pipeline towards the district’s mining operations. The company’s operation will be sustainable as it will not use continental water or undergo a desalination process.
This project is undoubtedly a major achievement for the consortium of Almar Water Solutions and Transelec, but there are other significant aspects worth highlighting:
1. Industry as an Accelerator
For years, I have been predicting a shift in the drivers that propel and accelerate the development of water projects. The industrial sector has begun to respond to the risks associated with the uncertainty of their water security by initiating their own projects rather than compromising their operations in the face of potential relocations due to water scarcity. In this case, the resource is located at the mine itself, making it unviable to relocate. Thus, this project consolidates the trend of industrial interest in new water projects, adding to those already initiated in the sector, such as the project Almar Water Solutions has contracted with Saudi Aramco for the regeneration of water from oil extractions in Zuluf in the Arabian Gulf, Saudi Arabia.
2. Outsourcing as a Model
The BOOT (Build, Own, Operate, Transfer) model is being reaffirmed as a contracting method over the more widespread D&B (Design and Build) model. This efficient model distributes risks, incorporates companies with technological capability and experience in construction and operation, and reflects a long-term vision and commitment to projects of this magnitude. Centinela Mining has optimized the project’s financials by taking the assets off their balance sheet, thereby improving both their balance sheet and cash flow. AMSA mentioned in a press release that this contract saved $1 billion in their mine expansion project.
3. Size and Scale
Projects of this size are uncommon in the water sector, but this will likely be one of the largest locally and possibly globally under the BOOT model. This sends a positive message to the financial sector, reinforcing interest in the water sector with the potential for new projects in other regions and with other clients.
4. Financial Sector Appetite
The project has been leveraged 85%-30% with debt complementing the equity provided by the two partners. The process involved over ten associated banks, contributing $1,1 billion. It is noteworthy that the interest and firm commitments received far exceeded the requirements for closing the structuring.
5. Technological Innovation
At this point, I want to comment on Ivan Arriagada’s, CEO of Antofagasta Minerals, presentation at the ACADES 2024 Congress held last March in Santiago, Chile. The mining sector has evolved to develop efficient processes for working with seawater instead of freshwater, significantly contributing to preserving local water reserves for communities. This achievement deserves commendation for raising awareness about the responsible use of scarce resources in the region.
I would like to conclude with a personal thank you to the Antofagasta Minerals team for the trust they have placed in our consortium for this project, especially Andres, Eduardo, and Mauricio. Congratulations to the teams of Transelec and Almar Water Solutions for their dedication and faith over the years, acknowledging the sacrifices made. Lastly, a nod of confidence to the contractor consortium of Bonatti and Sigdo Koppers, who are prepared to execute the great work ahead.
