Hot Chili Limited (ASX: HCH) (TSXV: HCH) (OTCQX: HHLKF) (“Hot Chili” or the “Company”) is providing corrections to yesterday's news release announcing the Preliminary Feasibility Study (“PFS”) for Huasco Water, an 80% owned entity that controls strategic water rights in the Huasco Valley of Chile. The minor corrections are with respect to certain figures that did not align with the correct version that was previously announced on the Australian Stock Exchange.
Highlights
Strong EconomicsforaLarge,Multi-User,WaterBusiness
— Stage 11 Water Supply Preliminary Feasibility Study (PFS) for 500L/s of Potential Seawater Supply: Post-tax Net Present Value (NPV8%) of US$122 million and Internal Rate of Return (IRR) of 19%. Construction capital cost for seawater supply estimated at US$151 million with a 4.5-year payback
— Stage 2 Water Supply PFS for 1,300 L/s of Potential Desalinated Water Supply: Post-tax NPV8% of US$977 million and IRR of 19%. Construction capital cost for desalinated water supply estimated at US$1.4 billion with a 4- year payback. Stage 2 financial outcomes include Stage 1 capital and operating cashflows
— Stage 3 Conceptual Study for Expansion to 2,300 L/s of Potential Desalinated Water Supply
Stage 1-Multi-DecadeSeawater SupplytoCostaFuego
— 20 Year Seawater Supply with Foundation Off-taker: Memorandum of Understanding (MOU) executed for water supply of up to 500 L/s to Hot Chili's Costa Fuego Copper-Gold Project (Costa Fuego)
— Long Lead-times Permits Secured: Granted maritime water concession to extract seawater, permit for coastal land access, Stage 1 pipeline easements and connection to the electrical grid secured
— Near-Term Development Decision Tied to Costa Fuego: First water supply planned for end of decade
Stage2and3-Regional,DesalinatedWaterSupplyOpportunity
— Large Catchment of Potential Off-takers: Over 4,000 L/s of desalinated water demand identified, including six undeveloped mining projects without secured access to desalinated water supply. No offtake agreements have been secured for stage 2 or 3 and discussions with potential customers are ongoing.
— Staged Growth Approach: Establishment of seawater supply infrastructure toward the end of the decade, followed by the commencement of initial desalinated water supply shortly thereafter, and subsequent staged expansion. The staged approach enables long term scalable water supply to support mining, community, and agriculture in the Huasco Valley region with potential to extend well beyond the initial project horizons
First-MoverAdvantage
— Only Active Maritime License: HW Aguas para El Huasco SpA (“Huasco Water”), a joint venture between Hot Chili (80% interest) and Compañia Minera Del Pacifico “”CMP” (20% interest), is the only company with permitted access to supply seawater in the Huasco Valley region following a ten-year regulatory approval process
— Desalination Permitting Advancing: Over a year advanced on regulatory applications to enable the supply of desalinated water from the existing maritime concession and a second maritime concession application by Huasco Water
— Long Permitting Timelines Continue: No regulatory changes have been made to Chile's maritime permitting process since Huasco Water was granted its concession. Hot Chili maintains a competitive advantage as the first mover in the area for a water distribution business.
— Environmental Impact Assessment (EIA) Advanced: Stage 1 seawater supply is included within the Costa Fuego EIA, baseline studies complete.
Hot Chili's Managing Director Mr. Christian Easterdaycommented,
“WeareverypleasedtodeliverourPFSforHuascoWaterwhichoutlines preliminaryeconomicoutcomes for a potential long-life industrial water supply business.
TheWaterSupply PFShasbeenundertakeninconjunctionwiththeCompany'srecentlyannouncedPFS for our Costa Fuego Copper-Gold Project, which outlines a multi-decade project with top quartile copper production capacity and lowest quartile capital intensity.
The outcomesof theWaterSupply PFSprovidean opportunityforHotChili tofullyconsiderthestrategic value of its 80% owned subsidiary company Huasco Water, which controls all our critical water assets.
The Company views the potential to outsourcing of its seawater supply infrastructure as a key value- enabler andhasanchored HuascoWaterbyexecuting anMOUtonegotiate afoundational seawater off- take agreement for Costa Fuego.
TheCompanyhasreceivedsignificantinterestinHuascoWaterfrombothChilean andinternationalwater infrastructureinvestmentgroupsinaddition toseveralneighbouringminedevelopers,agriculturalgroups, community groups and government.
WithPFSlevelengineeringcomplete forstage1andstage2watersupply,theCompanyiswellpositioned to pursue potential strategic partnerships and additional off-taker discussions for Huasco Water.
We look forward to providing further updates on drilling results from our recently confirmed La Verde copper-gold porphyry discovery which is providing an exciting additional growth platform for our shareholders.”
The Company will be hosting webinars on Monday 31stMarch 10.00 am EST (for North American audience)tobriefshareholdersandinvestorsontheoutcomes oftheCosta FuegoandHuascoWater PFS.
Hot Chili's Chief Executive Officer Christian Easterday, Executive Vice President Jose Ignacio Silva, ChiefOperatingOfficerGrantKingandChiefFinancialOfficer RyanFinkelstein willbehosting thecall, which will also include a Q&A session.
The following links will provide access to the investor briefing webinar:
RegisterHereforNorthAmerican Webinar
Monday31st March at10.00amEST
After registering, you will receive a confirmation email containing information about joining the webinar.
ThisannouncementisauthorisedbytheBoardofDirectors forreleasetoASXandTSXV.
HotChili's ManagingDirectorandChiefExecutiveOfficerMrChristianEasterdayisresponsiblefor this announcement and has provided sign-off for release to the ASX and TSXV.
For more information please contact:
or visit Hot Chili's website atwww.hotchili.net.au
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DisclaimerandForward-LookingStatements
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
This news release does not purport to be complete or contain all the information that may be material to the current or future business, operations, financial condition, or prospects of Hot Chili, Huasco Water or the results of the Water Supply PFS.
Certaininformationcontained hereinisbasedon,orderivedfrom, informationobtainedfromindependent third-partysources,publicly availablereportsandothertradeandindustry sources.HotChilibelievesthat such information is accurate and that the sourcesfrom which it has been obtained are reliable; however, Hot Chili has not independently verified such information and does not assume any responsibility for the accuracy or completeness of such information.
Statements inthis newsrelease that arenot historicalfacts are”forward-looking information”or”forward- looking statements” within the meaning of Canadian securities legislation and Australian securities legislation (each, a “forward-looking statement”). The use of any of the words “anticipate”, “envisage”, “forecast”,”consider”,”proposed”,”conceptual”,”opportunity”,”designedto”,”believe”,”could”,”estimate”, “expect”,”may”,”plan”, “potential”,”project”,”should”,”will”, “would” andsimilar expressionsareintended to identify forward-looking statements. In this news release, forward-looking statements relate, among other things, to: prospects, projections and success of the Huasco Water project, including projected customerbaseandfinancial forecasts;potentialseawater anddesalinatedwatersuppliesandthedemand therefor; permitting timelines; expected tariffs and financial measures; anticipated NPV, project life, cashflows, production rates, start-up capital, sustaining capital and other cash costs; engineering and infrastructure design; financial modelling; expected demand; and potential opportunities, expected cost efficiencies, projected development timelines, engineering outcomes and growth potential analysis.
Forward-lookingstatementsinvolveknownandunknown risks,uncertainties,andotherfactors, whichmay cause the actual results, performance, or achievementsofthe Company and Huasco Water(collectively, the “Companies”) to be materially different from any future results, performance or achievements expressedorimpliedbytheforward-lookingstatements.Anumberoffactorscouldcauseactual resultsto differ materially from a conclusion, forecast or projection contained in the forward-looking statements in this news release, including, but not limited to, the following material factors: industry-wide and project- specific risks; operational risks; sovereign risks associated with the Companies' operations in Chile; recruiting qualified personnel and retaining key personnel; future financial needs and availability of adequate financing; market volatility; financial failure or default of joint venture partners, contractors or serviceproviders;competitionrisks;economic andmarketconditions;riskstoemployee healthandsafety or disruption to operations in the event of an outbreak of disease; estimates and assumptions used in budgeting, design of the Huasco Water project (including engineering, pipeline and other infrastructure designs) and economic analyses proving to be incorrect and other risks and uncertainties described elsewhere in this news release and in the Company's public filings with the ASX and the Company's Canadian public disclosure record.
Although the forward-looking statements contained in this news release are based upon assumptions which the Company believes to be reasonable, there can be no assurance that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this news release, the Company has applied certain material assumptions including: the continuity of future commodity prices and demand; the availability of skilled labour; the timing and amount of capitalexpenditures; that future currency exchange and interest rates will be consistent with the Company's expectations; that increasing competition will not have a material adverseimpact; that generalconditions in economic and financial markets will be sustained or will improve; availability of construction and other required equipment; that regulation by governmental agencies and relations with local communities will notchange inamateriallyadversemanner; thatfuturetaxrates,tariffs, capitalandoperating costswillbe as expected; availability of future sources of funding; that requisite financing will be available and can be obtained on reasonable terms; that the assumptions underlying estimates related to the design of the Huasco Water project and financial analyses will prove to be as anticipated and that current exploration, development, environmental and other objectives concerning the Costa Fuego Project and the Huasco Waterproject canbeachievedandthattheCompanies'othercorporateactivitieswillproceedasexpected; and as set out under the headings “Customer Base”, “Basis for Financial Forecasts”, “Basis of Assumptions” in this news release.
Although the Company has attempted to identify important factors that could cause actual results to vary materially from those projected in such forward-looking statements, there can be no assurance that forward- looking statements will prove to be accurate. Accordingly, readers should not place undue reliance on forward- looking statements. The forward-looking statements in this news release is based on plans, expectations, and estimates of management as at the date hereof and the Company undertakes no obligation to update such forward-looking statements, other than as required by applicable law.
Customer Base
Huasco Water is the only company with permitted access to supply industrial scale seawater to the Huasco Valley region.Huasco Water is also advanced in its permitting application to enable its existing maritime concession to be upgraded to provide desalinated water.
The current maritime concession regulatory process in Chile is long, as evidenced by Hot Chili's 10-year lead time to secure its maritime concession. This combined with the current regulatory environment, restricting the use of continental water in the AtacamaregionofChile, placesHuascoWater's waterassetsasakeyenabler for industrial scale water supply to the Huasco Valley region.
Watersupply networksaretypically boundbyareas of influencerelatedtowatertransmission distancefrom intake. This distance has been determined by Huasco Water's independent consulting experts as an area defined by 75km north and 75km south of Huasco Waters permitted water intake location.Potential alternativefar-field watersupplynetworks fromthenorth (Copiapo)orsouth(LaSerena) havebeenassessed anddeterminedtobeeconomicallychallenged(fromtheperspectiveofcapitalandoperatingcost)toprovide water supply to the Huasco Valley region.
All parties identified in the water demand table for stage 2 and 3 require desalinated water supply in order to develop their projects and are engaged in ongoing discussions with HuascoWaterconcerningpotential water supply solutions.
All project development timeframes have been sourced from publicly available information and from direct discussion with each potential customer to determine a schedule of potential water supply. MOU's to study and negotiate off-take arrangements for 165 L/s of desalinated water demand for stage 2 have been executed with private parties (Agrosuper and Nutram) in the Huasco Valley already and further MOU's are expected to be executed in cooperation with other potential off-takers.
Rising global demand for copper is translating to rising long-term consensus price for copper.The Huasco Valley region represents one of the largest groupings of major undeveloped copper projects in the world and is attracting significant capital investment.
There are currently no other alternatives to industrial scale water supply for the Huasco Valley region over the next ten years given current regulatory timeframes. Given global copper supply and demand fundamentals, it is expected that the majority of these projects will advance into production should copper incentive price be sufficient and water supply be available within the coming ten-year period.
Huasco Water's approach to developing a regional multi-user water network to reduce environmental and social impacts and drive commercial and community synergies is aligned with the Chilean government's approach to addressing water scarcity in the Atacama region.
Whileapproximately4,000L/sofpotentialdesalinateddemandhasbeenidentifiedfromundevelopedmineral resource projects intheHuasco Valley area of influence, only 1,300 L/s in stage 2 and 2,300 L/s of demand in stage 3 have been forecast.
Huasco Water has determined that these projects, their forecast demand and timing are considered reasonable grounds for forecasts as determined by independent water industry expert reports (PFS engineering report) commissioned by Huasco Water and taking into consideration direct discussions with potential customers.
Basis for Financial Forecasts
The basis for forecasting the tariff (or price) that customers pay for water supply is as follows:
Ourindependentwaterindustryexpert report(PFS engineering report) outlined engineering designs for water transmission for Stage 1, Stage 2 and Stage 3 and designs werecosted for construction and operation. Capital and operating costs formed the basis of the tariff estimation, with the fixed tariff established to service capital cost repayment and the variable tariff established to service operating costs to supply. Capital and operating cashflows and discount rate are combined to estimate the levelised cost of water for each stage and client.
For the Huasco Water PFS financial model, the capital and operating cashflows require a margin to make a minimum return on capital investment. The combination of cost and margin produce a tariff that is specific to each client and represents the price of water supply to the location of their demand. The tariff is estimated to a value that will produce a target IRRforHuasco Water.ForahigherorlowerIRRtarget,ahigherorlower tariff is estimated that achieves target IRR and provides a sensitivity range of water price for the financial model forecast.
AreasonablerangeofIRR valueswasdefinedfromconsultationwithindependent waterindustryexpertsas being from 12% to 19% and these returns form the basis of the range of tariffs presented in Table 1.
Waterprices areestimatedusingthisapproach insteadof amarket based,long-term priceforecastasthere is no existing market for water supply in the Huasco Valley region.
Given potential earnings forecasts are for periods of more than two-years, financial forecasts have been supported by independent water industry expert reports and are considered by the Company as being objectively verifiable sources of information.
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The Water SupplyPrefeasibility Study (PFS) and conceptual engineering study have been undertaken by two independent engineering groups: Wood Australia Pty Ltd; and ILF Ingenieria Chile Limitada part of ILF Consulting Engineers Group, in co-operation with Huasco Water's management team.
Table 1 Huasco WaterPFS Key Outcomes
Figure1displaysHuasco Water's key water assets including the granted maritime concession, coastal land access , easement corridors and the desalinated water application.
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Stage 1 – PFSSeawater Supply
Stage1ofthePFS encompasses the supply of seawater to the Costa Fuego Project by a 62 km over-land pipeline. Table 2 presents the base case economics for stage 1.
Table 2 Stage 1 Base Case Financial Outcomes
Asummaryofkeyengineeringoutcomes isasfollows:
— A robust PFS process was undertaken with two engineering groups generating alternative designs for the pipeline and pumping to supply Stage 1. Both independent consultants undertook separate studies in order to determine optimal design, while ensuring robust cost engineering
— Engineering studies for the development of the seawater intake infrastructure mitigated key risks by incorporating advanced studies on wave propagation (including tsunamis) to ensure a 50- year life span
— Single pumping station employed for stage 1. Both an above ground and below ground solution were designed to provide optionality for both above ground and below ground pipeline alternatives.
— Real-time control and monitoring system to enhance operational efficiency and avoid down-time
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Stage 2 -PFSDesalinatedWaterSupply
Stage2ofthePFSencompassesthesupplyof desalinatedwatertotheHuasco Valley region by initiallyutilisingthesameeasementcorridorsofstage1.Table3presentsthebasecaseeconomicsforstage2.
Table 3 Stage 1 and Stage 2 Base Case Financial Outcomes
Asummaryofkeyengineeringoutcomes isasfollows:
— Engineering studies designed an upgraded seawater intake and a reverse osmosis desalination plant with scalable capacity
— Seven strategically located pumping stations and the installation of a large-diameter pipeline system enables efficient water transmission to potential clients
— Service area and growth potential analysis of the service area for Huasco Water was conducted
— Potential clients were identified within a strategic influence window of 150km centred on the Huasco Water intake. Water transmission cost is considered prohibitive beyond the strategic influence window
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Stage 3 – Conceptual Study Expansion of Desalinated Water Supply
Stage 3ofthePFSencompassesthesupplyofdesalinatedwater totheHuasco Valleyregionbyexpanding and extendingthestage2 network withascoping-level engineering design. Table4 presentsthebase case economics for stage 3.
Table4Stage 3BaseCaseFinancialOutcomes
A summary of key engineering outcomes is as follows:
— Engineering studies utilised stage 2 designs with expanded flow rates for one potential client, with an extension to include one additional potential client
— Extension of the stage 2 water network increases capital costs associated with provision of water supply to potential higher Andean clients
— Potential for future water easement corridors to contemplate downhill slurry pipelines, power transmission and access roads
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Basis of Assumptions
Water Demand
Table 5 Water Demand
Totals are rounded for significant figures
Waterdemand wasmodelledwithinthewatersupplyPFSwithtable 5. Potentialclientswereidentifiedbased upon:
A description of each potential client is provided within this section. Water demand was based on publicly available data where available or is stated as assumptions based on reasonable projections based on the scale of the project.
Water demand assumption benchmarking included an assessment of the installed capacity of beneficiation plants in the Atacama region1 and flow rates published by companies identified in the benchmarking assessment2. For companies that have not declared their water consumption, an estimate was made based on water make-up for the flotation and leaching processes, using a factor of 0.76 m3/tand 0.10 m3/t processing material, respectively.
AgrosuperSA
Agrosuperisafoodcompanywithover65yearsofexperienceintheproductionandmarketingofchicken,pork, turkey, and processed food. Production is vertically integrated with production of animal feed, breeding farms, processing, distributionand sales.Agrosuperisshown as”non-mining”within theHuascoWaterstages, with a facility near the town of Freirina.
Water demand from Agrosuper is sourced directly from engagement with Agrosuper. A MOU is in place with Agrosuper for desalinated water supply.
AtexResourcesInc
AtexResources'flagshippropertyistheValeriano coppergoldproject located125kmeastofVallenar city,within the Link Belt, in north-central Chile. The Company is focused on delineating and growing the copper-gold porphyryresourceunderlying asurfaceoxidegold deposit. Drill resultstodate confirm thepresenceof amajor copper-gold porphyry system that is open in all directions.
Valeriano is adjacent to the El Encierro deposit, a joint venture between Antofagasta (51%) and Barrick Gold (49%).Theproject iswithina120-kmlongzone-internallyreferred astheLinkBelt-connectingtheMaricunga gold porphyry belt to the El Indio high-sulphidation gold-epithermal belt that hosts significant copper-gold deposits.Othercompaniesactiveinthisareainclude FiloMining, TeckResources, NewmontMiningaswellas Lundin Mining and BHP.
Valeriano hosts a large copper gold porphyry Inferred resource: 1.41 billion tonnes at 0.67% CuEq (0.50% Cu, 0.20 g/t Au, 0.96 g/t Ag and 63.80 g/t Mo), which includes a higher-grade core totalling 200 million tonnes at 0.84% CuEq (0.62% Cu, 0.29 g/t Au 1.25 g/t Ag and 55.7 g/t Mo), reported in September 20231.
Noagreement isinplacewithAtex Resources.
Hot Chili Limited
Hot Chili holds an 80% ownership of Huasco Water and is developing the Costa Fuego copper gold project located 15km south of Vallenar city. Costa Fuego released the results of the Costa Fuego PFS on 27th March 2025confirminga20-yearproject lifewithseawaterdemand (500L/s)associatedwiththeprocessingactivities of the project. An MOU between Hot Chili and Huasco Water is in place for seawater supply in Stage 1.
Freirina HVC
FreirinaHuasco ValleyCommunity(HVC)relatestothelocalgovernmentforthetownship ofFreirina.Quantities forsupplyofdesalinatedwaterhavebeenobtaineddirectly throughengagementwithFreirinalocal government officials. No agreement is in place with Freirina HVC.
HuascoHVC
Huasco (HVC) relatesto the local government for the township of Huasco. Quantitiesfor supply of desalinated water have been obtained directly through engagement with Huasco local government officials. No agreement is in place with Huasco HVC.
CompañiaMinera DelPacifico
CMPoperates theLosColoradosironoremine,whichisthelargestironoredeposit inChile.Themineislocated north of Huasco and, with an expansion plans out to 2033.
CMPholdsa20%ownershipofHuascoWater. NoagreementfordesalinatedwatersupplyisinplacewithCMP.
NutramSpA
Nutram Investments operate a copper processing facility in Vallenar, which includes crushing, grinding and flotation to produce concentrates. A MOU is inplace with Nutram for desalinated water supply in stages 2 and 3.
Teck Resources Limited
Teck Resources, in a joint venture Newmont Corporation combined their respective Relincho and El Morro projects, locatedapproximately40kilometresapartintheHuascoProvince intheAtacamaregionofChile,into a single project named NuevaUnión.
Based on the results of a Preliminary Economic Assessment, initial stage development of Project NuevaUnión contemplates a conveyor to transport ore from the El Morro site to a single line mill and concentrator facility at the Relincho site.
The Relincho deposit includes a Mineral Resource Estimate1: 782 million tonnes of Measured & Indicated classification at0.23% Cu,0.008% Mo, 1.12g/t Ag, and 725 million tonnes of Inferred classification at 0.36% Cu0.012% Mo, 1.29g/t Ag.1
The La Fortuna deposit includes a Mineral Resource Estimate1: 246 million tonnes of Measured & Indicated classification at0.51% Cu,0.59 g/t Au, 1.10g/t Ag, and 480 million tonnes of Inferred classification at 0.43% Cu 0.39g/t Au, 0.96g/t Ag.1
Noagreement isinplacewithTeck Resources.
VallenarHVC
Vallenar(HVC)relatestothelocal governmentforthetownshipofVallenar.Quantitiesforsupplyofdesalinated waterhavebeenobtained directlythroughengagementwithVallenar localgovernment officials. Noagreement is in place with Vallenar HVC.
Reasonable Prospects For Funding
The Company has formed the view that there is a reasonable basis to believe that requisite future funding for developmentoftheHuascoWaterProjectwillbeavailable whenrequired.The WaterStudyPFSdemonstrates that the Project has robust technical and economic fundamentals for Stage 1, having regard for an MOU executed with Hot Chili Limited with tariff costs already incorporated in the Water Study PFS as of the date thereof.
The Company has received significant interest in Huasco Water from both Chilean and international water investment groups in additionto severalneighbouring minedevelopers, agriculturalgroups, community groups and government to support the reasonable prospects for funding of Stage 2. Stage 3 remains at a conceptual level of study.
The Company notes that it's approach to potentially outsourcing its water infrastructure aims to provide capital costsavingsandprojectfinance optionality.ThereisanincreasingtrendinChilean miningtowardsoutsourcing of water supply to the industrial infrastructure sector.
Hot Chili notes other transactions for funding of water infrastructure projects such as that reported in Chile on 29 August 20241that Chilean power generation company Colbún has formed a strategic alliance with Desala Petorca,aseawaterdesalinationprojectinRegion Vdesignedtobeamulti-clientsupplier ofdesalinatedwater. Colbúnhascommittedinvestmenttocontinuewiththedevelopmentphaseandhastakencontrol oftheproject's investment vehicle. Icafal, one of the largest construction companies in Chile, has joined as a minority partner.
Petorca will supply water to Los Andes Copper's Vizcachitas copper project under a 2022 letter of intent, in which the developer agreed to become an anchor client for the desalination project's development.
This follows earlier newsthat copper mining major AntofogastaMinerals announced2on 5 June 2024 that they had sold their water assets and water rights to the Centinella copper mine for US$600 million to a consortium (Transelec and Almar Water), which will also Finance, Build, Own, Operate (BOO) and sell seawater for the Centinella mine expansion.
Hot Chili's approach to monetising it's water assets through potential sell down of it's 80% interest in Huasco Water to potential Chilean or international water infrastructure investment groups aims to assist in financing of the Company's Costa Fuego project while also facilitating funding of Huasco Water's potential regional water supply business. The Company is in ongoing discussions with several potential Chilean and international water infrastructure investment groups in this regard.
IdentifiedRisks
ThePFS processidentifiedthefollowingrisks:
Demand Risks
— Forecast demand of water from the identified customer base may not be realised as assumed within the PFS
— Timing of demand of water from the identified customer base may not be realised as assumed within the PFS
EnvironmentalandRegulatoryRisks
— Potential delays in obtaining environmental and sectoral permits.
— Community opposition due to perceived environmental impacts of the water intake or desalination system.
— Regulatory changes affecting maritime concessions or brine discharge standards.
Technical Risks
— Challenges in aligning designs produced by different consulting firms (ILF/Wood).
— Topographical and hydraulic uncertainties, particularly in high-altitude areas.
Financial Risks
— Volatility in investment and operational costs.
— Reliance on securing new client contracts to validate project expansions.
Operational Risks
— Challenges in operations due to complex geography or adverse climatic conditions.
— Exposure to natural hazards, such as earthquakes and tsunamis, impacting marine infrastructure.
Risk Mitigation Strategies
ThePFS processidentifiedthefollowingriskmitigationstrategies:
Demand Risks
— Financing and construction are contingent upon contractual offtake agreements
— Stage 1 supply will underpin the establishment of the Huasco Water business, in advance of contractual supply from Stage 2 customers
DesignIntegration
— Continuous technical coordination between consulting firms to ensure seamless integration of project designs.
Layout and Hydraulic Validation
— Technical validation of the proposed layout and hydraulic requirements during Stage 3.
Regulatory Compliance
— Early initiation of the modification process for the existing maritime concession.
Environmental Approvals
— Phased submission of Environmental Impact Studies Costa Fuego scheduled for 2026, followed by Huasco Water Stage 2.
Contractual Stability
— Execution of Water Purchase Agreement contracts with firm commitments to underpin expected demand projections.
Second sea water concession to mitigate upgrade of existing concession or change of use to brine discharge
— North and south route assessments to mitigate the risk of easements being agreed across the southern route which is preferred on the basis of cost of delivery.
— Below ground pipe costing for Stage 1/2/3 to improve likelihood of approvals.
Strategic Opportunities
ThePFS processidentifiedthefollowingstrategic opportunities:
Pioneering Initiative
— The project benefits from an existing maritime concession, significantly reducing lead times and regulatory challenges.
Multi-Client Integration
— In Stages 2 and 3, the project enables the integration of industrial, community, and agro-industrial water demands, establishing a consolidated multi-client solution.
Economies of Scale
— By replacing multiple individual water intake and desalination systems, the project achieves cost efficiencies.
Sustainability Potential
— The system offers the feasibility of integrating renewable energy sources for pumping operations, contributing to a reduced carbon footprint.
Community Opportunity & Regional Water Security
— The project enhances water security across the region, delivering a positive impact on local communities.
— BHP & Lundin Joint Venture: This may require in the region of 2000L/s
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SOURCE Hot Chili Limited
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