(Adds details on output, costs, comments, background; previous dateline WARSAW)
By Rosalba O‘Brien
ATACAMA DESERT, Chile Oct 1 (Reuters) - The first copper shipments from KGHM Polska Miedz’s new Chilean mine will reach customers next month, the company said on Wednesday as it inaugurated the project that marks the Polish industry’s attempts to expand internationally.
Scratched out of the seemingly endless brown sands of the Atacama desert in Chile’s northern copper belt, Sierra Gorda is targeting 220,000 of tonnes of copper a year by the time it ramps up to its second phase.
That should be around 2018 or 2019, project head Maciej Sciazko said in an interview at the mine launch on Wednesday. Sierra Gorda is slated to produce 120,000 tonnes of copper annually by the end of its first ramp-up phase next year and has a projected life of 23 years.
About 6,000 tonnes of copper concentrate from the mine is expected to arrive at the Toyo Smelter and Refinery in November, KGHM said. Sierra Gorda began operating on July 30.
KGHM confirmed that the final cost of launching production at the project reached about $4.2 billion, over a third more than initially expected.
Sciazko said the cost overrun was due to “a mixture of extra engineering work” needed to prevent delays.
“In order to complete it on time, that cost us extra money,” he said, adding that the budgeting for running costs was still being hammered out and it was not yet possible to say if the original cash cost target of $1.15 per pound had changed.
A falling copper price and high energy costs, which have squeezed margins for producers of the base metal throughout Chile, were both a concern, said Sciazko.
Like other mining firms, KGHM is looking to combat this by developing its own energy supply in Chile, in particular via renewable sources like solar power, but this was still in the early trial stages, he said.
Sierra Gorda is a joint venture that is 55 percent owned by Europe’s No. 2 copper miner KGHM and 45 percent by Japan’s Sumitomo Metal Mining. The mine is the Japanese company’s biggest investment in history, said its president, Yoshiaki Nakazato, on Wednesday.
The mine is also set to produce an annual 64,000 ounces of gold and 25,000 pounds of molybdenum, used to strengthen steel. In the first five years it will cover around 10 percent of the global demand for the latter, Nazakato said.
Additional reporting by Wiktor Szary in Warsaw; editing by David Evans and Richard Chang