Hot Chili Launches Standalone Water Company – Huasco Water

Highlights

• Hot Chili and its partner, Chilean iron ore company Compania Minera del Pacifico (CMP), have established a new water company called “HW Aguas para El Huasco SpA” (Huasco Water)
• Hot Chili owns 80% of Huasco Water and CMP 20%, in-line with the two company’s ownership interest in “Sociedad Minera El Águila SpA” (SMEA), holder of all critical water assets for the development of Hot Chili’s Costa Fuego copper-gold project in Chile
• Hot Chili and CMP underpin Huasco Water as potential foundation off-takers (Hot Chili’s Costa Fuego copper project – approx. 700 l/s of future sea water demand and CMP’s Los Colorados iron ore mine – approx. 200 l/s of future desalinated water demand)
• Copper major Antofagasta just sold 1,200 l/s of water capacity for US$600 million compared to initial capacity of ~300 l/s and total demand of 3,700 l/s for Huasco Water.
• Huasco Water aims to develop a multi-user seawater and desalinated water supply network to supply future water demand for communities, agriculture and new mining developments for the Huasco Valley region of Chile
• Discussions underway with nearby mine developers accounting for 3,700 l/s of potential future desalinated water demand

Hot Chili Limited (ASX: HCH) (TSXV: HCH) (OTCQX: HHLKF) announced the establishment of Huasco Water, a new joint venture water company (Hot Chili 80% and CMP 20%) formed to supply both sea water and desalinated water to the Huasco Valley region of Chile.

The Huasco Valley is located in the Atacama region – one of the most water stressed regions of the world and where Hot Chili has outlined approximately 3,700 l/s of potential future desalinated water demand from new mine developments alone (see announcement dated 26^th February 2024 and Figure 1) as well as other community and industrial sources of demand.

A conceptual study completed by Hot Chili in February 2024 (see announcement dated 26^th February 2024) outlined significant economic, environmental and social synergies for all potential customers in the Huasco Valley, especially given growing community and regulatory opposition to continental water extraction in the Atacama, and the long lead times involved in securing maritime concessions and associated permitting in Chile.

Transfer of water assets (previously held by SMEA) into Huasco Water has commenced and the new water company will soon hold the only active granted maritime water concession and most of the necessary permits to provide non-continental water supply to the Huasco Valley, following over a decade of permitting advance for Hot Chili’s coastal range, Costa Fuego copper-gold project.

Importantly, Huasco Water provides Hot Chili and CMP water supply security as potential foundation off-takers (Hot Chili’s Costa Fuego copper project – approx. 700 l/s of future sea water demand; and CMP’s Los Colorados iron ore mine – approx. 200 l/s of future desalinated water demand.

Discussions with other potential water off-takers are advancing well and the Company is pleased to confirm that several non-mining desalinated water customers have also been identified.  The Company is progressing discussions with several potential Tier-1 infrastructure partners and further updates are expected.

Recent Deal in Chile Highlights Growing Trends in Water Infrastructure Development for Mining

Hot Chili is pleased to note a recent announcement by Antofogasta Minerals (Antofogasta) on June 5^th 2024 in Chile (Source).

• Copper mining major Antofagasta have sold their water assets and water rights to the Centinella copper mine for US$600 million to a consortium (Transelec and Almar Water), which will also Finance, Build, Own, Operate (BOO) and sell seawater for the Centinella mine expansion, aiming to increase copper metal production by 140ktpa,
• The Centinella copper mine is operated using seawater for processing,
• The existing Centinella water assets include a 144km long seawater pipeline from port to mine, which Transelec and Almar will acquire and continue supplying Centinella with approximately 1,200 l/s,
• Transelec and Almar will build a parallel 144km long seawater pipeline using Centinella’s water rights to supply an additional 650 l/s to Centinella,
• Antofogasta to save $380M in capital expenditure for the construction of its stage 2 water infrastructure expansion,
• Centinella water expansion project will begin operations in 2026 following a 20-month construction process.

The transaction announced by Antofagasta highlights the strategic nature and implicit value of critical water access rights within the Atacama region, and an increasing trend in Chile towards outsourcing in the industrial infrastructure sector.

Figure 1. Location of a conceptual multi-user, desalination water network in relation to infrastructure and potential customers in the Huasco valley region of the southern Atacama, Chile

Figure 2. Location of Hot Chili’s existing water assets in relation to new potential customers in the Huasco Valley

Hot Chili Limited is a market awareness client of Capital 10X. For more information, including potential conflicts of interest please see our Content Disclaimer.