Riesco Island Project, Chile

Chile imports 96% of its coal for its power generation requirements from Columbia and Australia. A $300m project in Riesco Island in the south of the country is set to change this and give Chile a coal region that could replace 30% of its imports.

The project is being undertaken on three proven sub-bituminous coal deposits and will involve the development of mines and the construction of a mechanised sea port to ship the coal. The port is being constructed at a cost of $50m and will be able to accommodate colliers up to 140,000t with 43 ship calls per year.

The first stage of the project is set be completed by 2011 and should see coal production achieve four million tons annually. The coal will be shipped to power plants in urban areas in the north and centre of Chile. The full production of this coal resource is estimated at six million tons per annum and is expected to be accomplished by 2013 (some coal may eventually be exported).

The Riesco Island deposits are Río Eduardo, Elena and Estancia Invierno, and are thought to contain relatively low-quality coal in proven quantities of 300 million tonnes but it is thought this might go as high as 670 million tonnes.

Development and construction

The project is a long-term undertaking by a 50:50 joint venture interest between Copec (Angelini) and Ultramar (Von Appen) trading as Minera Isla Riesco. Copec (fuel distributor) and Ultramar (shipping company) have a long established relationship with the Magallanes region (Chilean XII region) where they have been involved in mining since 2003.

The coal mining project was begun by Chile’s Development Corporation in 2003 with the award of a 15-year lease to Corfo for the Estancia Invierno deposit with 270 million tonnes of proven reserves over an area of 4,000 hectares. This stage was ended in 2007 when a bidding process was opened and three adjacent areas were finally awarded to Minera Isla Riesco which took over the assets in February 2008. The two major bidders in August 2007 were Anglo-Australian BHP Billiton ($27m) and Chilean-based Copec/Ultramar (Minera Isla Riesco) with a $300m bid.

Geography

Riesco Island is a sparsely populated land mass that lies at west of the Brunswick Peninsula of Chile. The island has an area of 5,110km² and the highest point on the land is Mount Atalaya, which has a height of 1,830m. The island is bordered by two large piedmont embayments called Otway Sound and Skyring Sound.

In addition, a narrow channel connects both of these bodies of water, separating the island from the Patagonian mainland. The island is separated from the southern part of the Muñoz Gamero Peninsula by a further narrow channel. The geography of the island also includes glaciers with an ice field in the north having seven glaciers, the Cerro Ladrillero having 12 glaciers on its slopes and the Cordova Peninsular in the south delineating the eastern edge of the Strait of Magellan and having several mountain glaciers.