Brazil’s mining giant Vale (NYSE: VALE) has announced that its Salobo mine has reached a capacity of 32 million tonnes per annum, following the successful completion of the throughput test for the first phase of the Salobo III expansion project.
The $1.1 billion expansion plan, launched in 2019, is set to increase the mine’s throughput capacity to 36 million tonnes per year by the final quarter of 2024.
“This achievement is a significant milestone under the Salobo streaming agreement with Wheaton Precious Metals,” Vale said in the statement.
Under the terms of the deal with Wheaton, Salobo will receive $370 million for completion of the first phase of the Salobo III expansion project.
The remaining balance of the expansion payment will be triggered once Vale expands actual throughput above 35 Mtpa for a period of 90 days.
In addition, Wheaton (TSX: WPM) (NYSE: WPM) will be required to make annual payments of between $5.1 million to US$8.5 million for a 10-year period should the Salobo complex continues to produce within certain copper grades.
At around 1,800km2, Carajás is Vale’s second largest land holding in a region known for iron oxide copper-gold deposits of which Salobo is the prime example. The mine, the largest copper deposit ever discovered in Brazil, is estimated to hold more than 1 billion tonnes of the red metal.
The operation expansion comes at a time when miners are scrambling to either acquire copper reserves or boost production amid forecasts that demand of the metal will outstrip primary supply within the next four years. The mismatch in supply and demand is likely to result in copper prices surging 20% by 2027, according to BloombergNEF analysts