ASX-listed Hot Chili on Monday announced the prefeasiblity study (PFS) results for its Huasco Water project, outlining economic outcomes for a potential long-term industrial water supply business in Chile. 

The study was conducted alongside the PFS for the company’s Costa Fuego copper/gold project, a multi-decade development with high copper production capacity and low capital intensity. The Costa Fuego PFS, released last week, confirmed a top-quartile copper production capacity and lowest-quartile capital intensity, positioning it as a globally competitive operation.

Hot Chili MD Christian Easterday stated that the outcomes of the water supply PFS provided an opportunity for Hot Chili to fully consider the strategic value of its 80% owned subsidiary company Huasco Water, which controls all the critical water assets.

Huasco Water has executed a memorandum of understanding (MoU) to negotiate a seawater offtake agreement for Costa Fuego, anchoring its development. The company has reported significant interest in the project from Chilean and international water infrastructure investment groups, as well as neighbouring mine developers, agricultural groups, community organisations, and government stakeholders.

The staged development plan envisions a seawater supply infrastructure coming online by the end of the decade, followed by the initial delivery of desalinated water and subsequent capacity expansions. The project aims to provide a scalable water supply for mining, agriculture, and communities in the Huasco Valley region, with potential to extend beyond its initial scope.

Stage 1 focuses on a 20-year seawater supply for Costa Fuego, with an MoU in place to supply up to 500 ℓ/s. The company has secured long-lead permits, including a maritime concession to extract seawater, coastal land access rights, pipeline easements, and grid connection approvals.

Stage 2 involves the development of a regional desalinated water supply, with a demand catchment exceeding 4 000 ℓ/s, including six mining projects currently lacking secured water supply. While no offtake agreements have been finalised for this stage, discussions are ongoing.

According to the PFS, Stage 1 is expected to deliver a post-tax net present value (NPV), using an 8% discount, of $122-million with an internal rate of return (IRR) of 19%. The estimated capital cost for seawater supply infrastructure stands at $151-million, with a payback period of 4.5 years. Stage 2, which would expand supply to 1 300 ℓ/s, carries a projected post-tax NPV of $977-million, an IRR of 19%, and an estimated construction cost of $1.4-billion with a four-year payback period.

Hot Chili holds the only active maritime licence permitting seawater supply in the Huasco Valley region, following a decade-long regulatory approval process. The company has also advanced environmental permitting, with Stage 1 seawater supply included in the Costa Fuego environmental-impact assessment.

With key permits secured and regulatory approvals progressing, Hot Chili is positioned to pursue strategic partnerships and expand offtaker agreements.

Meanwhile, Hot Chili's Costa Fuego copper/gold project has also reached significant milestones with its PFS released on Thursday. The project has demonstrated strong economics with a NPV of A$1.8-billion and an IRR of 33%. The feasibility study for Costa Fuego is expected to be completed by early 2025, with first production anticipated in 2027.

The Costa Fuego PFS highlights the project's potential to become one of Chile's top copper/gold producers, with a planned production of more than 100 000 t/y of copper equivalent. The project is located in a highly prospective region in the Huasco Valley, and the water supply from Huasco Water is expected to support its long-term operations.