BHP, Rio, approve “milestone” Chilean project

Last week, mining heavyweights BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) both approved a water supply project to sustain operations at Escondida in Chile, whereby a seawater desalination facility will be constructed to process 2,500 litres of water per second.

The investment – worth a total of US$1.972 billion for BHP and US$1.03 billion for Rio (as per their ownership proportion) – is considered by BHP’s copper president Peter Beaven to be “a significant milestone” as a sustainable water supply is considered vital for Chilean copper producers. Furthermore, the facility will also aid the corporation to meet environmental commitments and will help it towards its long-term business strategy.

The approval by BHP and Rio Tinto reflects each company’s heavy focus on long-term sustainability, which was labeled as a priority as demand for commodities globally continue to decrease.

According to the media report, the project will ensure continued water supply to the site – which sits 3,100 metres above sea level – whereby the water use is increasing upon completion of the 152,000 tonne per day copper-concentrator.

BHP acts as the operator of the mine with a 57.5% interest, whilst Rio Tinto holds 30%. JECO Corporation also holds 10% of the mine and JECO 2 maintains a 2.5% interest.

Foolish takeaway

Although the industry remains volatile, both BHP and Rio are making provisions to ensure future profitability. However, at today’s prices they still pose a risk to your portfolio. It may be a good idea to await each company’s annual report before making a decision, or at least until volatility begins to subside.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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