Sumitomo Metal, Sumitomo Corp hike Chile copper project cost estimate by 60%

TOKYO, Aug 8 (Reuters) - Japan's Sumitomo Metal Mining Co Ltd and Sumitomo Corp said on Monday they had raised their estimate of the construction cost for the Quebrada Blanca phase 2 (QB2) copper project in Chile to about $7.5 billion from $4.7 billion.

The 60% increase comes as the COVID-19 pandemic has delayed construction which started in 2019 and boosted expenses to deal with the outbreak, they said in a statement.

The move also follows a revision of the estimated project cost by Canadian miner Teck Resources Ltd, which holds a 66.67% stake in the project, to $6.9 billion-$7.0 billion from $4.7 billion last month, based on updated assumption of forex rate and other factors, the Japanese companies said.

Teck has said previously it expects the QB2, considered one of the world's largest undeveloped copper resources, to begin production in 2021, but it now targets to start the initial production in late 2022.

The higher cost estimate by the Japanese partners compared with Teck's is due to their assumption of the forex rate going forward at 775 Chilean pesos a dollar, against Tech's assumption of 850 pesos a dollar, a spokesperson at Sumitomo Metal said. Currently, $1 is equal to around 916 pesos.

Sumitomo Metal, a Japanese miner and smelter, owns a 27.77% stake in the QB2 while Sumitomo Corp, a Japanese trading house, holds 5.56%.

The higher project cost will start affecting their earnings starting in 2023 as the depreciation of construction costs will be booked after next year when a commercial operation is expected to begin, the Sumitomo Metal spokesperson said. (Reporting by Yuka Obayashi Editing by Bernadette Baum)