Chile’s Maricunga belt set to revive country’s gold industry

A wave of new mines in the pipeline on Chile’s Maricunga gold belt are advancing towards construction just as the price of the precious metal hits its highest level in almost a decade.

Gold Fields (NYSE: GFI), Kinross Gold (TSX: K; NYSE: KGC), Rio2 (TSXV: RIO; US-OTC: RIOFF) and Kingsgate Consolidated (ASX: KNC) of Australia are all pushing projects that could enter production by the middle of the decade.

Together they promise to revive one of South America’s top mining districts and reverse the sharp decline in Chile’s gold industry over the last decade.

The Maricunga, however, is a tough place to work. Largely located 3,000 meters above sea level or higher, and snowbound in the winter, miners in the area also face scarce water sources and a delicate ecology. Kinross was forced to close its Maricunga mine in 2016 after a court ruled that its water wells had harmed an internationally-recognized wetland. In 2018, Kinross lost an appeal before Chile’s Supreme Court over the issue.

With the closure of Kinross Gold’s La Coipa and Maricunga mines in 2013 and 2016, respectively, gold production tumbled from more than 1.8 million oz. in 2013 to 1.3 million oz. last year, with copper mines now accounting for the bulk of gold production rather than primary gold mines. Over the same period, copper output has remained steady at 5.7 million tonnes.

The first of the new mines to enter production is likely to be a revived La Coipa. In February, Kinross approved plans to restart production by mining the adjacent Phase 7 deposit, of which the company acquired full ownership two years ago.

With an initial capital outlay of US$225 million (it will use the existing processing plant, camp and other infrastructure and employ vehicles from the Maricunga mine), the project is expected to produce 690,000 oz. gold-equivalent per year over three years, with production starting in 2022.

While the projected mine life is short, Kinross hopes this is a first step to becoming the top producer in the district again, a position it held for most of the 2000s.

In July, the company completed a prefeasibility study on the Lobo Marte project, a 6.4-million-oz. gold deposit located 50 km southeast of La Coipa. After an initial investment of US$765 million, the mine could produce 4.5 million oz. gold over 15 years at all-in sustaining costs (AISCs) of US$745 per ounce.

Kinross Gold’s Maricunga gold mine in Chile, which authorities ordered shut down over environmental concerns. Credit: Kinross Gold.

The company has now begun work on a feasibility study, which it hopes to complete by December next year, after which it will progress to permitting, with construction planned for 2025.

“The project represents a potential synergistic, long-term mine life extension in a favourable mining jurisdiction,” Kinross’ president and CEO, J. Paul Robinson, said in a statement.

Despite the constraints imposed by the Covid-19 pandemic, South Africa’s Gold Fields aims to take just under three years to build its US$860 million Salares Norte project, with production beginning in early 2023.

Located to the north of the Maricunga belt, around 100 km north-east of state-owned Codelco’s Salvador mining and smelting complex, the high-grade deposit has proven and probable reserves of 3.5 million oz. gold and 39 million oz. silver.

After obtaining the environmental license in December 2019, the board approved construction in February this year. Once in production, the mine is expected to produce around 450,000 oz. gold-equivalent per year during the first seven years at AISCs of US$465 per oz., one of the lowest in the industry.

Compared to Kinross, Gold Fields is a relative newcomer to Chile (although not to South America, as it has operated the Cerro Corono copper-gold mine in Peru since 2008). But Gold Fields is already looking to extend to its stay in Chile. Exploration within its 840-sq.-km land package has identified potential step-out targets within 20 km of Salares Norte, which could extend its 11.5-year mine life.

One of the newest companies on the belt, Rio2, is rapidly advancing its Fenix oxide gold project, 160 km northeast of Copiapó. The company acquired the project in 2018 (through its acquisition of Atacama Pacific Gold), and in April this year completed an Environment Impact Study (EIS).

Despite the difficulties caused by the pandemic, the company still aims to complete permitting in time to begin construction at the end of next year, CEO Alex Black told The Northern Miner. Given social distancing rules, the regional environment commission is planning virtual meetings to carry out mandatory consultations with local communities before the assessment can begin, he said.

According to an updated prefeasibility study completed in September 2019, a 20,000-tonne per day startup project concentrating on the deposit’s high-grade core could produce 93,000 oz. gold per year over a 13-year mine life.

Drilling at Chimberos West, part of Kingsgate’s Nueva Esperanza project in Chile. Credit: Kingsgate Consolidated.

Kingsgate Consolidated is also making progress. On July 14, the Australian company announced that it had obtained environmental approval for its Nueva Esperanza project, located 25 km northeast of the La Coipa plant. Formed through the consolidation of property around the old Arqueros and Chimberos mines that were once operated by Placer Dome and TVX Gold, the project has proven and probable reserves of 17.1 million tonnes grading 2.0 grams gold-equivalent per tonne for 1.1 million oz. gold-equivalent.

However, according to Executive Chairman Ross Smyth-Kirk, the company’s priority is reaching a settlement with the government of Thailand over the closure of its Chatree gold mine in December 2016.

The operation was placed on care and maintenance following accusations that waste leaking from the mine’s tailings pond had harmed the health of local people and ruined drops. Kingsgate denies all the allegations.

As a result, the company says it is no hurry to make a decision on developing its project in Chile, despite what Smyth-Kirk says has been significant interest from unnamed investors both in Chile and North America.

“Basically, we are sitting back and watching,” he said in an interview. “It’s going to get developed, but if we will do it ourselves, as a joint venture or sell it, I don’t know.”

The region’s other major project is the Norte Abierto alliance between Barrick Gold (TSX: ABX; NYSE: GOLD) and Newmont (NYSE: NEM). Formed by Goldcorp before its takeover by Newmont last year, the project aims to combine the undeveloped Caspiche and Cerro Casale deposits – two of the largest discoveries made on the Maricunga – into a single operation. Together they offer proven and probable reserves of 23 million oz. gold-equivalent and 5.8 billion lb. copper.

In uniting the two mines, Barrick and Newmont aim to reduce the project’s combined capital costs and environmental footprint, mirroring the approach adopted at Newmont’s Nueva Union joint venture with Teck Resources (TSX: TECK.A and TECK.B; NYSE: TECK), to develop the El Morro and Relincho deposits with a tailings facility, processing plant and other infrastructure.

The new projects could bring much-needed investment and thousands of jobs to the Chilean economy, which has been battered by the coronavirus pandemic.

To reactivate activity, the government has proposed a series of tax breaks for investors, including the instant depreciation of capital investments begun by December 2022 and a tax credit worth 25% of the salary of each new job created. This, coupled with the sharp rise in gold prices, could bring more investment dollars into these projects.