Hot Chili’s Huasco Water PFS Reveals US$122M NPV and 19% IRR for Stage 1
Hot Chili Limited has released a robust Preliminary Feasibility Study for its Huasco Water project in Chile, outlining a multi-stage water supply network to support mining, agriculture, and communities in the water-stressed Huasco Valley. The project boasts strong financial metrics and key MOUs with major mining and industrial clients.
- Preliminary Feasibility Study (PFS) shows post-tax NPV of US$122M and IRR of 19% for Stage 1
- Multi-stage water supply network planned – seawater supply (Stage 1), desalinated water expansion (Stage 2), and further network extension (Stage 3)
- MOUs signed with Hot Chili’s Costa Fuego Project and other mining and non-mining clients
- Project benefits from existing maritime concession enabling seawater extraction and desalination
- Focus on environmental stewardship and community engagement to address regional water scarcity
Strategic Water Supply Initiative in Chile’s Huasco Valley
Hot Chili Limited (ASX – HCH) is advancing its Huasco Water project, a pivotal infrastructure development designed to address critical water scarcity in Chile’s copper-rich but arid Huasco Valley. The project aims to establish a multi-user water supply network that supports mining operations, agriculture, and local communities, leveraging an existing maritime concession for seawater extraction and desalination.
The recently released Preliminary Feasibility Study (PFS) outlines a staged development approach. Stage 1 focuses on supplying raw seawater to Hot Chili’s Costa Fuego copper-gold project, with a construction capital estimate of US$151 million, a payback period of 4.5 years, and a post-tax net present value (NPV) of US$122 million at an internal rate of return (IRR) of 19%. Subsequent stages envisage expanding desalinated water supply to additional mining projects and community users, with Stage 2 and 3 involving significant capital investments and extended project life.
Robust Economics and Client Engagement
The PFS highlights strong economic fundamentals, with Stage 2 projecting a post-tax NPV of US$977 million and IRR of 19%, supported by a large catchment of potential off-takers. Memorandums of Understanding (MOUs) have been executed with key clients including Hot Chili’s Costa Fuego Project, Agrosuper SA (a major food producer), and Nutram SpA (copper processing), as well as potential mining clients such as Compañía Minera Del Pacifico’s Los Colorados iron ore operation and the Nueva Union copper-gold project.
These MOUs, while non-binding, indicate significant interest and underpin the project’s staged expansion plans. The water supply network is designed to be flexible and scalable, with infrastructure including seawater intake systems, pipelines, pumping stations, and desalination plants tailored to client needs and environmental considerations.
Environmental and Community Focus
Hot Chili emphasizes the project’s low environmental impact, incorporating marine baseline studies, passive intake screening to protect marine fauna, and pipeline routing to minimize visual and ecological disturbance. The project also aims to preserve scarce groundwater resources and integrate renewable energy sources to reduce its carbon footprint.
Community engagement is a core component, with public consultations and stakeholder dialogues ongoing. The project promises regional water security benefits, job creation, and infrastructure improvements for the Huasco Valley’s communities and agricultural sectors.
Navigating Regulatory and Market Challenges
The Huasco Water project benefits from having secured long lead-time permits, including the maritime seawater extraction concession and coastal land access. However, the regulatory environment in Chile, especially concerning water rights in the Atacama region, remains complex and lengthy, underscoring the strategic advantage of Hot Chili’s existing permits.
Financial forecasts are underpinned by independent engineering studies and water industry expert reports, with tariff structures designed to achieve targeted returns between 12% and 19% IRR. While no binding water offtake agreements have yet been executed, the MOUs and ongoing discussions with potential clients provide a solid foundation for future contract negotiations.
Outlook for Huasco Water and Regional Development
As global copper demand intensifies, the Huasco Valley stands out as a critical region with multiple undeveloped copper projects requiring secure water supplies. Huasco Water’s multi-stage approach positions it as a key enabler for sustainable mining growth and regional development.
Looking ahead, the project’s success will depend on converting MOUs into binding agreements, advancing regulatory approvals, and managing construction and operational risks. The integration of community and environmental priorities alongside commercial objectives reflects a modern approach to resource infrastructure development in water-stressed regions.
Bottom Line?
Huasco Water’s progress signals a promising solution to Chile’s water scarcity challenges, but execution risks and contract finalizations remain key hurdles ahead.
Questions in the middle?
- When will Hot Chili convert MOUs into binding water supply contracts with key clients?
- How will regulatory timelines and permitting impact the staged development schedule?
- What financing strategies will be employed to support the substantial capital requirements of later stages?
