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Hot Chili buoyed after nationalisation push rejected

Chilean resource developer Hot Chili has tabled a mineral resource upgrade with Canadian regulators for its exciting Costa Fuego copper gold discovery. At the same time the Chilean Congress watered down the possibility of constitutional change that spooked the local mining industry and could have impacted the development of Hot Chili’s world-class copper gold Costa Fuego project.

In February, Chile’s constituent assembly started thrashing out proposals for a new Constitution to replace the current market-focused one – proposals that included plans to nationalise mining and an expansion of environmental governance.

The raft of motions, led by environmental activists and others from the political left who were elected in the wake of protests that began in October 2019 over inequality has been causing some consternation in the world’s leading copper producer. After going to a vote, the proposals to overhaul the resource sector failed the reach the required two thirds majority in a final vote on Saturday. The result provides some immediate relief for local operators, including Hot Chili however it’s true – that battle is far from over.

Saturday’s vote does seem to confirm the draft constitution will lack a clear mandate for mining rights, however it also leaves legislation more vulnerable to changes in the future. That said, Hot Chili’s Managing Director Christian Easterday, says the political winds are blowing favourably in its direction.

We are very pleased with the recent news that the Chilean constitutional process has ended with virtually all proposals for radical change to the mining sector being rejected. Chile is one of the premier mining jurisdictions of the world and this latest news confirms that is not about to change anytime soon.

Chile is a leader in the global supply or critical future facing metals such as copper and lithium. Hot Chili and a raft of major developers are now able to advance with certainty in relation to mining regulation in Chile – a great outcome for the world’s push towards a decarbonised future.

The news is positive for Hot Chili that augmented its ASX listing with a C$30 million raise on the Toronto Stock Exchange listing in January this year as its fast tracks plans at Costa Fuego.

Looking ahead and perhaps of vital concern to the considerations being mulled over in the halls of Government in Chile, Managing Director Christian Easterday tipped the project to generate revenues around US$1 billion per year from producing around 100,000 tonnes per annum copper concentrate and 70,000 to 80,000 ounces of gold a year with a 20–30-year mine life.

With Costa Feugo’s capex tipped to be US$1.5 billion, Easterday said the revenue of US$1b per year was a very good return on investment.

The company is aiming to be in production within five years – a timetable Easterday is very comfortable with given its low altitude and proximity to port and export facilities.

Earlier this month Hot Chili upgraded the mineral resource estimate by an impressive 67 per cent to 725 million tonnes grading at 0.47 per cent copper equivalent for 2.8 million tonnes of contained copper and 2.6 million ounces of gold.

There are 80-90 employees currently on the Hot Chili payroll in the current exploration and development drilling phase, with a construction workforce forecast in excess of 2000. When mining operations commenced management said there would be a fulltime labour force of around 400.

Easterday is also supported by having one of the world’s largest copper traders, Glencore, as both a shareholder and as an offtake buyer. Notably, Glencore was only able to put its foot on 60 per cent of the Costa Fuego product leaving Hot Chili free to trade the balance for upside on the copper spot market. “You don’t often see deals like this,” he said.

Given the history of its exploration results, Hot Chili appears to be sitting on a couple of world class deposits. This fact, supported by the company having global gorilla Glencore on its register may combine to prove too compelling even for the vagaries of South American politics to deny…..watch this space.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au

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