MMG's Peru copper project faces cost blowout and delays
Company's shares drop after copper project expected to need up to US$3.2 billion more to complete, raising investment to US$10 billion
Shares of MMG fell yesterday after the overseas non-ferrous metals mining unit of state-owned China Minmetals said a copper mine it took over in Peru in August would cost much more to finish than the previous owner Glencore's estimate.
The mine was also expected to take longer to complete, MMG said in its third-quarter performance update yesterday, citing labour shortages, project scope changes and higher costs for resettling villagers.
Chief executive Andrew Michelmore told an analysts and media teleconference that these factors, identified by MMG when it conducted due diligence on the project, were behind earlier protracted talks with Glencore on the acquisition.
"During the subsequent owners' review, the following factors have been noted as having impacted the project schedule leading to an increase in capital expenditure," MMG said.
They include tight supply of skilled labour to fill temporary construction jobs, revised project scope including the design of the tailings dam and delays and higher costs to complete the town to relocate affected residents.
About US$7 billion had been spent on the project by the end of July, Michelmore said.