Goldcorp (TSE:G), the world's most valuable gold miner, agreed with diversified miner Teck Resources (TSE:TCK.B) to form a joint venture to combine and develop neighboring projects in Chile.
Goldcorp and Teck will contribute their projects, which are located about 40 kilometers apart, into a 50/50 joint venture, the Vancouver-based mining companies said in a statement on Thursday.
Goldcorp will combine its El Morro project with Teck's Relincho project to cut development costs as metal prices languish at multi-year lows.
An initial capital cost target of $3.5bn to bring the two projects into production, compared to previous estimates of $3.9bn for El Morro and $4.5bn for Relincho.
A preliminary economic assessment plans a conveyor to transport ore from the El Morro to a single line mill at Relincho.
“Combining these two neighboring assets is a common sense approach that allows us to consolidate infrastructure to reduce costs, reduce the environmental footprint and provide greater returns over either standalone project,” Teck CEO Don Lindsay said in the statement.
The companies estimated the combined mine with have a 32-year lifespan and produce an average of 190,000 tonnes of copper and 315,000 ounces of gold annually over the first full decade.
The mines also have significant reserves of molybdenum, a base metal used in steel production.
Copper touched a six-year low of $4,855 on Monday and is down 19% this year. Prices for industrial metals are pressured by slower economic growth in China, which consumes about 40% of the world’s copper.
In a separate statement on Thursday, Goldcorp said it agreed to buy New Gold’s 30% stake in El Morro, giving it 100% ownership of the project.
Goldcorp said it will pay New Gold $90mln and a 4% gold stream on future gold output at El Morro.
Shares of Goldcorp rose 2.6% to C$17.92 at 1:42 p.m. in Toronto. Shares of Teck leaped 19.4% to C$8.79.