Hot Chili Limited (ASX: HCH) (TSXV: HCH) (OTCQX: HHLKF) announced the results of a Pre-Feasibility Study (“PFS”) for the Company’s subsidiary Huasco Water, an 80%-owned entity that controls strategic water assets in the Huasco Valley of Chile.
Financial Highlights
Strong Economics for a Large, Multi-User, Water Business
- Stage 1 Water Supply PFS for 500L/s of Potential Seawater Supply: Post-tax Net Present Value (NPV8%) of US$116 million and Internal Rate of Return (IRR) of 19%. Start-up capital cost for seawater supply estimated at US$151 million with a 4.5 year payback
- Stage 2 Water Supply PFS for 1,300 L/s of Potential Desalinated Water Supply: Post-tax NPV8% of US$958 million and IRR of 19%. Start-up capital cost for desalinated water supply estimated at US$1.4 billion with a 4 year payback
- Stage 3 Conceptual Study for 2,300 L/s of Potential Desalinated Water Supply: Post-tax NPV8% of approximately US$1.3 billion and IRR of around 19%. Expansion capital cost for desalinated water supply estimated at US$1.9 billion with a 3.5 year payback
Stage 1- Multi-Decade Seawater Supply to Costa Fuego
- 20 Year Seawater Supply with Foundation Off-taker: Memorandum of Understanding (MOU) executed for water supply of up to 500 L/s to Hot Chili’s Costa Fuego Copper-Gold Project
- Long Lead-times Permits Secured: Granted maritime water concession to extract seawater, permit for coastal land access, Stage 1 pipeline easements and connection to the electrical grid secured
- Near-Term & Tied to Costa Fuego Development Decision: First water supply planned for end of decade
Stage 2 and 3 – Regional, Desalinated Water Supply Opportunity
- Large Catchment of Potential Off-takers: Over 4,000 L/s of desalinated water demand identified, including six undeveloped mining projects without access to desalinated water supply. No off-taker agreements have been secured for stage 2 or 3 and discussions with potential off-takers is continuing.
- Staged Growth Approach: Establishment of seawater supply (20-year duration) at the end of the decade, followed by initial desalinated water supply (20-year duration) two years later, and then an expansion of desalinated water supply at year 22, culminating in 42 years of potential water supply to community, agriculture and mining in the Huasco Valley region
Two Independent Engineering Groups Utilised
- Water Supply PFS and conceptual engineering studies undertaken by independent Engineering Groups Wood Australia Pty Ltd and ILF Ingenieria Chile Limitada part of ILF Consulting Engineers Group in co-operation with Huasco Water’s owners’ team.
First-Mover Advantage
- Only Active Maritime License: HW Aguas para El Huasco SpA (“Huasco Water”), a joint venture between Hot Chili (80% interest) and Compañia Minera Del Pacifico (20% interest), is the only company with permitted access to supply seawater in the Huasco Valley region following a ten-year regulatory approval process
- Desalination Permitting Advancing: Over a year advanced on regulatory applications to enable the supply of desalinated water from existing maritime concession and a second maritime concession application by Huasco Water
- Long Permitting Timelines Continue: No regulatory changes have been made to Chilean maritime permitting process since grant of Huasco Water’s maritime concession. Hot Chili continues to have the competitive advantage of having the first position in the area for a water distribution business.
Environmental Impact Assessment (EIA) Advanced: Stage 1 seawater supply is included within the Costa Fuego EIA, baseline studies complete.
[1] The Huasco Water PFS has been aligned with the Costa Fuego PFS, shares the same assumptions for Costa Fuego in stage 1. See announcement dated 27th March 2025 “Hot Chili Announces PFS & Maiden Mineral Reserve for the Costa Fuego Cu-Au Project”.
We are very pleased to deliver our PFS for Huasco Water with first economics outlining potential for an attractive long-life industrial water project. The Water Supply PFS has been undertaken in conjunction with the Company’s recently announced PFS for our Costa Fuego Copper-Gold Project, which outlines a multi-decade project with top quartile copper production capacity and lowest quartile capital intensity.
The outcomes of the Water Supply PFS provide an opportunity for Hot Chili to fully consider the strategic value of its 80% owned subsidiary company Huasco Water, which controls all our critical water assets. The Company considers the potential to outsource its water infrastructure for seawater supply to be a value-enabler and have anchored Huasco Water by executing an MOU to negotiate a foundation seawater off-take agreement for Costa Fuego. The Company has received significant interest in Huasco Water from both Chilean and international water investment groups in addition to several neighbouring mine developers, agricultural groups, community groups and government.
With PFS level engineering complete for stage 1 and stage 2 water supply, the Company is well positioned to pursue potential strategic partnership and additional off-taker discussions for Huasco Water. We look forward to providing further updates on drilling results from our recently confirmed La Verde copper-gold porphyry discovery which is providing an exciting additional growth platform for our shareholders.Christian Easterday, Managing Director & CEO, Hot Chili Ltd.
Table 1 Huasco Water PFS Key Outcomes
Map of Proposed Water Assets
For more details about Huasco water included detailed financial forecasts visit: https://www.hotchili.net.au/investors/
Hot Chili Limited is a market awareness client of Capital 10X. For more information, including potential conflicts of interest please see our Content Disclaimer.