'Overexploitation' by Canada's Lundin caused massive sinkhole near mine: Chile

Candelaria Acquisiton Presentation
Candelaria Acquisiton Presentation

A sinkhole near Toronto-based Lundin Mining Corp.’s copper mine in Chile was formed due to excessive mining, the nation’s investigative authorities said.

Chile’s mining minister Marcelo Hernando said in a press release that the initial investigation points towards “overexploitation” in the Gaby 4 cave — located in the vicinity of the 36.5-metre-wide sinkhole — by Lundin’s Chilean unit Ojos del Salado.

Lundin shares dropped on the news, extending a decline that began earlier this month after the company disclosed that the sinkhole had been discovered, exposing Lundin to delays, repair costs, and political risk in a country that has become less tolerant of the environmental impact of mining.

Ojos del Salado has extracted 300,000 tonnes of copper from Gaby 4, and the company anticipated the pit yielding at least another 300,000 tonnes, “which would be higher than the authorized volume,” Bank of Montreal analyst Jackie Przybylowski, who follows Lundin Mining, said in a research note on Monday.

“The government has also declared that the sinkhole is ‘related to mining,’ in contrast to the company’s investigation, which has not yet determined this to be the case,” Przybylowski added.

Cracks around the sinkhole are also under investigation, although the government said that the areas in which the cracks have formed are not seen as relating to mining activity.

In a statement, Lundin Mining said that Ojos del Salado was informed of the government’s latest conclusions and that it would “analyze” them, “see responsibilities, and take the pertinent measures.”

Lundin has temporarily suspended underground operations at its Alcaparrosa mine due to the sinkhole. The mine is a part of Lundin’s Candelaria mining complex, located in Chile’s Atacama Region, 20 kilometres south of the city of Copiapo.

The complex is expected to produce about 155,000 to 165,000 tonnes of the metal in 2022, or about 60 per cent of Lundin’s total copper output.

According to Lundin, the Alcaparrosa mine contributes about five per cent of the overall ore processed annually by the complex and its temporary closure isn’t likely to impact Lundin’s annual guidance for the Candelaria mining complex.

Lundin’s shares fell to $6.57, their lowest in a year, on August 3, two days after it reported the presence of a sinkhole near the mine. At around 9:45 a.m. Toronto time on Monday, the company was trading at $6.77, down 10 cents or 1.4 per cent within a 52-week trading range of $6.57 and $14. The company has a market cap of $5.2 billion.

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