Anglo American has announced it will spend $5.3bn on the Quellaveco project, a new copper mine in Peru, following a sharp increase in the company’s profits in the first half of the year.

The London-based mining giant’s profits increased 11% to $4.58bn in the first six months of this year. As such, the company is eager to invest in copper, which is expected to increase in demand due to its uses in power grids and electric vehicles. The world’s largest mining companies have also been drawn to copper recently as it has been trading at a one-year low, representing a relatively safe investment.

Anglo American chief executive Mark Cutifani said: “After several years of extensive preparatory work, we are very pleased to develop the project together with our partners Mitsubishi. We are grateful for the strong support we have gained from our host communities and at the national level.

“Quellaveco should bring very significant opportunities and sustainable benefits to the lives of those we employ, our business partners, the surrounding region and Peru as a whole, for decades to come.”

The company expects the Quellaveco project to generate a post-tax internal rate of return of 15%, with a four-year payback and an EBITDA margin of more than 50%. The mine is expected to have a lifespan of 30 years and Anglo American plans for production to reach 300,000t per year by 2023.

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By GlobalData

Anglo has also partnered with Japanese firm Mitsubishi to fund the project; Mitsubishi will be responsible for 40% of the total cost and will fund the first $500m of Anglo American’s share of the capital expenditure.

The Quellaveco project will be Anglo American’s first new mine since the disastrous Minas Rio iron ore mine in Brazil, a $13bn development that was plagued by permitting problems, spiralling costs and mechanical faults which led to leaks in pipes carrying iron ore slurry. Anglo American is estimated to have lost up to $400m this year alone on the project, which has twice been fined for a total of $59m over leaking pipes.

Moving out of Brazil and working with a partner in Japan represents a new direction for the company. Anglo American has also claimed to have agreed 26 ‘detailed and specific long-term commitments relating to water management, environmental protection and social investment’ with local communities around the Quellaveco project following 18 months of consultation.

Quellaveco has an expected project return of capital employed of 20% and Cutifani said: “we look forward to working responsibly with all our stakeholders to make it a reality.”