On December 24, 2020, Mina Justa team received the best Christmas gift ever: the port operation license that makes possible the arrival of sulphuric acid – essential for the production of copper cathodes – to the port that was specially built for that purpose.

After a year marked by the difficulties brought by the Covid-19 pandemic, which forced the company to delay works by five months, but without altering largely the budget, the start-up of Mina Justa marks Empresas Copec’s entry, hand in hand with subsidiary Alxar, into the medium-large copper mining. A much longed-for dream of the Company, that demanded a thorough search for projects matching the Company’s vision and strategy.

The foray began to be planned in 2014, when the goal of seriously pursuing this industry was set. “What does that mean? Making more significant investments, which could move the needle of the Group’s results,” explained Erwin Kaufmann, Alxar ‘s Chief Executive Officer, who added that the priority was copper, which given the current and forecasted demand, has a very good future. “In addition, because in Chile and South America we have competitive advantages for production, and because mining of this metal shares certain basic principles regarding what we have also done in pulp, for example. They are assets that require high investment, a cost-driven approach, thorough care of resources and environment and are subject to the price of a commodity, among others,” the executive added.

For several years, Alxar was focused on exploring opportunities that complied with parameters such as size, competitiveness and cost structure, as well as high sustainability standards. Although the initial approach was to search for operations or deposits in Chile, they found Mina Justa in Peru, owned through Minsur by Grupo Breca, a holding company with more than 130 years of history and with presence both in their home country and the rest of Latin America. “The opportunity arose to associate with them in a project with in a nutshell very in line with what we were looking for: a significant magnitude without being extremely large and a very favorable location,” Kaufmann explained. Furthermore it would work with sea water, therefore it was environmentally friendly. In addition, it was planned to start production at a time where there was some unanimity among the experts that there would be a relative shortage of the red metal. “One of the aspects that we found most relevant was that Grupo Breca was an excellent partner with which we shared many principles regarding long-term investments, environmental care, workers safety, relationship with the community and also a highly professional team ,” he added. This is how the longing for venturing into the copper mining sector began taking shape, with a company in which Empresas Copec, through Alxar International, owns a 40% stake, while the remaining 60% belongs to Minsur, owned by Grupo Breca.

A unique site

Mina Justa is a rather peculiar site. Because the usual thing for a mining operation is to be located thousands of meters high and hundreds of kilometers away from the ocean, while in this case it is only 800 meters above sea level, 38 kilometers from the port, 8 kilometers from the Panamerican Highway and 14 kilometers from a major substation of Peru’s power grid , all of which has made the logistics much more expeditious. Specifically, the site is located in the department of Ica, bordered on the north by Lima and on the south by Arequipa.
Enrique Rodríguez, CEO of Marcobre, the company that owns Mina Justa, explained that it is made up of two open pit sites. The largest and most important one is a copper oxide and sulphide deposit, while the smallest, with mining activities starting in four more years, is a copper oxide deposit. This year approximately 100 thousand tons of fine copper should be produced and from that point a production peak of about 150 thousand tons per year would be reached for four to five years, “and then it goes down a little from that point because mine grades and capacity start declining,” he said. While the lifespan of mine is 16 years, the idea is to go beyond that. “We hope we can extend them, like all mines, because we hope to find more resources or technology upgrades, and something you considered it was not useful, now it is. You always have that expectation,” the executive added.

The above, he explained, should be translated into annual copper sales revenue exceeding US$ 1 billion. “For the next 10 years, 70% of the concentrate output is already committed, at spot price, to some of the entities that took part in the project financing, since out of the US$ 1.600 billion investment for this project, US$ 900 million came from external sources. Regarding cathodes, there is also a percentage of output already committed to such agencies,” Rodriguez said.

As for the operation, Alxar is very involved in development. The CEO of the Empresas Copec subsidiary said that at the time of setting up this joint venture, their wish to participate actively in the construction and later in the management was explicitly stated. “Unlike other projects that have passive partners, we participate actively in the development of the company,” Kaufmann said. Meanwhile, his counterpart at Marcobre, added: “We have had total support. It is true that the mining arm of Empresas Copec is small, but its professionals have interacted very well with us and they manage the relevant topics perfectly.”

Mina Justa is currently in the process of plant start-up, or production ramp-up, which allows testing their processing capacity to achieve 100% of their nominal production capacity, which would be achieved by December 2021. By the end of June, commercial production should be reached. “It is a period of a lot of testing, with the aim of achieving a stable operation by the end of the year. In addition, simultaneously we continue with exploration plans,” Alxar CEO emphasized.

Auspicious forecast

As one of the leading characters in Chilean history, the copper resource has been, is and will be its most relevant export product, Erwin Kaufmann said. In that sense, the Company’s entry in this sector has much to do with its mission and vision. “Empresas Copec’s interest is to be in industrial businesses related to natural resources that have competitive advantages, and here we have that. And we entered this business because we think we can do it well and add value as a Chilean company.”

In addition, he explained that operations that prove to be efficient in the copper sector are medium or large size, a scale that suits the Company, which has always been a very relevant player in the economic sectors in which it has participated. On the other hand, there is the supply-demand factor. While the increase in the first is seen rather restricted, both due to the growing difficulty in developing projects, and due to declining grades, copper demand continues to climb. And not only in China, that continues to require the metal, but in the other Asian giant, India, which will also have a high need for this resource in the coming years. In addition, innovations such as electromobility would keep demand high, because, as Kaufmann explained, “an electric car requires four times more copper than a conventional car.”
In the medium and long term, Alxar’s CEO explained that the subsidiary’s strategy aims to remain in the sector through two methods: acquisition of up-and-running operations, on the one hand, and greenfield projects, on the other, preferably in a state near the project start. “We will continue to be very active in exploring opportunities, which can be in Chile or Peru, in copper or gold. Our priority is copper in Chile and Peru. If it is Peru, our vision is that it has to be with a local partner, and if that can be Minsur, it would be fantastic, because we have had very good results. If it is in Chile, it can be by ourselves or with a partner, but we as operators.”

With a sustainable stamp

Mina Justa is located in a desert area that has rather low biodiversity. However, near its northern border is the San Fernando Natural Reserve, that is home to guano birds, Humboldt penguins and sea lions on its coast, as well as guanacos, that come down from the mountains to feed on plants called Tillandsia, and even condors. “This is wildlife that is protected, so we have constant monitoring processes,” Enrique Rodriguez said, who emphasized that for both Marcobre and Empresas Copec, environmental care is essential. “We comply with all World Bank standards, because funding entities are governed by them. But on the other hand, regardless of whether it is required, it is also within our sustainable management policies as a mining company.”

The above is reflected also in the management of water resources. Since there are no aquifers, after conducting metallurgical studies, it was decided to use seawater and maximize its use as untreated seawater, that is to say, without desalinization, except for what relates to human consumption and specific processes, such as electrowinning. Meanwhile for dust control in mine roads, the brine from the desalination process is used. Enrique Rodríguez also noted that as there is no surface water runoff in Mina Justa , no sediments are generated which, when not properly managed, can affect the flora and fauna, as well as people.

While the site is located in an area without large and dense human settlements, there are two nearby communities with whom a fruitful relation has been developed. In addition to programs to support education, tourism and health, among others, a fluent cooperation relationship has been developed regarding the core business. The provincial capital, Nazca, is home to the San Luis Gonzaga University’s Faculty of Mining and Metallurgy Engineering, in Ica, with which an exchange of knowledge is taking place through lectures for students, for instance, who also have the possibility to complete professional internships at Mina Justa. To the southwest is San Juan de Marcona, a district that in the 1950s began to grow thanks to iron ore operations in the surrounding area, thereby turning from a camp site to a city itself. “As it usually happens with a community used to the mining activity, it has provided us with labor during construction and now also with the operation,” Marcobre CEO said. In the first case, at the peak we had 5,500 workers, 1,300 of them were from the local area. Meanwhile the current phase requires 1,100 workers, and more than 250 of them will come from Marcona. “The community is grateful that we will generate employment in the area and from our side, it’s been an advantageous opportunity to find labour and with a good level of qualification and experience,” Rodriguez said.

Talent on both sides of the border

Mina Justa is Empresas Copec’s first big bet in this sector, and it is also its industrial debut in the neighboring country. Erwin Kaufmann, who developed much of his career at ARAUCO, said that an initiative like this has many similarities with, for example, building pulp plants from the point of view of the investment size, scale, subextensions and complexity. “There are several similarities in terms of security and financing. Copper is a commodity, and we have a lot of experience in this type of industry, so we have been able to contribute with this general knowledge that is also applied here.”

This contribution is determined by a high-standard performance on both sides of the border. Enrique Rodríguez said that there is a clear vocation among the employees for the work well done. “It has been a team effort to do things right, because it is the right thing.” Erwin Kaufmann stressed that in Alxar there are workers with a lot of experience both in this sector and in other areas. “It is a highly committed, consolidated human group that complements each other. As we are small, we do a little bit of everything, we work very well as a team. We know the importance for the Company of this first experience in the great copper mining and therefore we want everything to go perfectly, so we are committed to it being a successful experience, because depending on that we will be able to grow in the future.”