Can you explain Amerigo Resources’ business model and the evolution of the MVC operation?

Amerigo produces copper but we do not have a mining business model behind us that involves the typical long-term cycle of exploration, development and construction before production. Instead, we get our material through a contractual relationship with Codelco’s El Teniente division, where we have the rights to process their fresh tailings and a series of their historical tailings deposits. Essentially, Amerigo works with an environmental liability – tailings – and extracts further economic value from that by producing copper concentrates. We are by no means a small operation, as we have to process a tremendous amount of material, given the low grade that by definition is contained in tailings. In many ways, we are more of a copper factory than a mining operation.

The Minera Valle Central (MVC) operation was founded in 1992 and purchased by Amerigo in 2003. We used to produce around 25 million pounds of copper per year, but have grown this figure to 63 million lb Cu in 2021. This was achieved by investing US$300 million into the facility, doubling the capacity of our concentrator plant, and incorporating the rights to process historical tailings.

What do Amerigo’s 2021 results and guidance for 2022 indicate about the state of the company today?

Every copper producer is doing well these days, but what has changed in the mentality of many producers compared to the previous high cycle is that we have gone through very harsh times in recent years. The industry has learned to survive under low copper prices, so it can thrive under high copper prices. Amerigo’s focus is essentially on producing margin – not just how many more tonnes of copper we can produce, but how we can produce in the most economic way. Our team is very focused on three fronts: production; operational continuity; and financial performance. Previously, I think we were more focused on the operational side of things, but we have expanded that view to encompass all aspects that need to be taken care of to ensure operational continuity including safety, environmental compliance, water supply, and maintaining processes and costs under control. This approach to running the business and the effect of strong copper prices have dramatically improved the company’s finances.

How has the company resolved issues to guarantee a sustainable and economic water source?

The single most important water source for us is the water  which comes with the fresh tailings. In addition, we have water rights at MVC, as well as three water thickeners that increase water circulation efficiencies. We can store surplus water at Colihues, which is an historical tailings deposit adjacent to MVC. Two years ago, we went through a critical situation with respect to water supply, and as a result we are closely monitoring our sources and uses of water eighteen months ahead at all times. While we do not face the same pressures as miners in the north of Chile which have faced the most dire effects of the drought conditions, for us water management is still vital.

It is important to note that mining does not consume a lot of water in Chile, representing approximately 3% of water use in the country. The metals the mining industry produces are required to meet global decarbonization goals, and in doing so, the mining industry in Chile is using less water than agriculture or manufacturing and in most cases self-investing to ensure water supply for our processes.

What potential is there to replicate the tailings processing work Amerigo does at other mines in Chile?

For many mining companies, tailings represent an inherent long-term responsibility and an environmental liability. On the other hand, grades are getting lower and the industry needs to look at ways to maintain production levels. The notion of tapping into tailings to derive further economic value is very compelling. However, producing copper from tailings is not easy and requires art and science, as no two deposits are alike. For example, even at MVC we have had to make adjustments to fine tune the processing of the fresh and historical tailings from El Teniente.

I think that when the right decision makers at mining companies start adjudicating the potential value to their existing tailings and seeing them as an opportunity to top up production, rather than just a liability, there could be tremendous opportunities for Amerigo given its existing operational experience.. We are interested in exploring opportunities under the right conditions which include the size of the deposit and location, for example.

Which factors contributed to MVC receiving the 2021 San Lorenzo award from Chile’s National Mining Society (SONAMI)?

We received the San Lorenzo (Chile’s patron saint of miners) award for mid-tier mining companies, essentially based on our innovative business model which economically produces copper through a process that no one else uses. Amerigo is the only company in the world solely focused on production through the processing of copper tailings on this scale.

MVC is also a highly respected corporate citizen in the region. MVC is essentially a surburban operation where most of our people live close to our facility, are from the city of Rancagua, and are proud of working for two strong employers in the area – El Teniente and MVC.