Hot Chili sets up water company as drought racks Chile–but must also build communities a desal plant

ASX-listed copper miner Hot Chili (ASX:HCH) has announced its creation of a Chilean company to hold critical water assets needed for its Costa Fuego project.

At the same time, Hot Chili will also be required to build out desalination plants to supply water to nearby communities as part of the deal with Chilean iron ore company Compania Minera del Pacifico (CMP).

Hot Chili and CMP jointly own the water company on an 80/20 basis respectively. Both players also own a stake in a third entity transferring across the relevant water licences including a second maritime extraction application.

Named after the valley in which communities will receive water from an eventual desal plant on-site, the water company is called Huasco. Interestingly, the joint owners of the company also “underpin Huasco as potential foundation off-takers” – which might feel odd once you consider they both already own the water.

But in the background, conversations with other third parties are taking place.

“First water off-taker discussions [are] underway with nearby mine developers accounting for 3,700 l/s of potential future desalinated water demand,” HCH wrote on Monday.

“Additional non-mining, desalinated water customers also identified within the Huasco Valley, proximal to Hot Chili’s Costa Fuego copper hub.”

While that latter cohort sound more aligned with the vague mental images of ‘villagers’ one thinks of upon hearing the term “communities,” it’s clear Hot Chili isn’t adverse to making profit from Huasco where it can.

In the background of all this is a crippling drought in Chile that threatens, by some counts, to see water “run out” by 2040. In that environment, having a legal right to store water and sell it makes sense.

HCH last traded at 97cps.