2018 Capital Expenditure Guidance
Capitalized stripping expenditures are estimated to be $200 million in 2018 under the new mine plan as more waste material is moved to ensure production requirements and flexibility for future years. Short term use of a mining contractor is planned to accelerate stripping rates, supporting both the short-term mine plan changes and the new improved life of mine production plan.
The Los Diques Tailings Project remains on budget and on schedule for tailings deposition in the first quarter of 2018. Estimated costs to complete remain unchanged at $295 million with $45 million to be spent in 2018, from $30 million previously disclosed due to timing of payments, to complete the construction of the first phase of the main embankment. Future lifts of the embankment have been initiated ahead of schedule to benefit from synergies with the current project and readily available mine waste. An additional $15 million of capital is forecast in 2018 to construct two additional lifts, bringing the forecast total capital expenditures on the facility to $60 million for the year.
New Mine Fleet Investment is estimated to be $75 million in 2018. Ongoing exploration efforts have significantly increased Candelaria Mineral Reserves and extended mine life well beyond the original 20-year life when the open pit began production in 1994. Mine equipment has been rebuilt and maintained in line with industry standards, however reinvestment in a latest generation loading and haulage fleet is expected to generate a positive payback gained through increased ore loading and haulage capacity and efficiency, while improving equipment availability and reliability. Management believes upside potential exists, for additional productivity gains which have not yet been reflected in the open pit plan.
Mill Optimization Investment studies have identified several low-risk improvements to increase metal production, reduce maintenance costs and improve safety. Mill Optimization Investment capital expenditures are expected to be $50 million in 2018. Upgrades are planned for the primary crusher, cyclones, ball mills, pebble crushing and flotation circuits. In addition, desalination plant debottlenecking and pipeline improvements will increase fresh water supply. These investments are forecast to take approximately two years to come on line and are expected to increase mill throughput by approximately 4,000 tonnes per day and improve metal recovery rates for an approximate increase of more than 6,000 tonnes of copper per year. The Mill Optimization Investment presents near-term low-risk initiatives that would also provide benefit under potential future expansions.
Increased production from Candelaria underground mines also contribute meaningfully to the improved forecast production profile. In the third quarter of 2017 the Company received an environmental permit to expand production from the Candelaria underground deposits to 14,000 tonnes per day from 6,000. Production ramp-up from Candelaria underground North sector has begun with levels currently in the range of 8,000 tonnes per day and 10,000 tonnes per day targeted by 2019. Development of Candelaria underground South sector (Susana-Damiana deposits) has been brought forward and is expected to contribute to production in the second half of 2019 at a mining rate of 4,000 tonnes per day. The total pre-production capital is $47 million, $20 million of which will be spent in 2018.
The Other Sustaining Capital noted in Appendix A includes funds for horizontal and vertical development, ventilation, self-perform mining equipment purchase and supporting infrastructure being invested to expand the Candelaria, Alcaparrosa and Santos underground mine production.
2018 Exploration Investment Guidance
Exploration expenditures are planned to be $83 million in 2018. This is a 12% increase over estimated 2017 expenditures reflecting a results-driven commitment to aggressive exploration programs. Approximately $70 million will be spent on in-mine and near-mine targets ($34 million at Candelaria, $18 million at Eagle, $13 million at Zinkgruvan and $5 million at Neves-Corvo), with the remainder to advance exploration activities for new South American and Eastern European exploration projects.
1Forecast capital expenditures have been reported on a cash basis. Discrepancies may exist with other external reports which have been reported on an accrual basis, most notably for the Los Diques Tailings Project in 2018.