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THE Antamina copper and zinc mine in northern Peru will be processing 130,000 t/d of ore by 2013 following approval of a $1.3b expansion of the open pit mine by venture partners BHP Billiton, Xstrata, Teck Resources and Mitsubishi.

Announced earlier this month, the decision came after Peruvian prime minister Javier Velásquez  endorsed an arrangement which enables the partners to fund the expansion from cashflow.

Half the income tax paid by mining companies in Peru goes directly to the host regional authority, a system which will see the regional government of Ancash receive over $200m from Antamina this year.

Suggestions that Antamina would use profits to fund the expansion project had raised fears that this revenue stream would be reduced. Under the new arrangement Antamina has undertaken to directly fund projects in the region to compensate for any loss of tax income over 2011–2013.

Major partners BHP Billiton and Xstrata, both with a 33.75% stake in the venture, have each committed to contribute $435m to the expansion which is forecast to extend the mine’s working life by six years to 2029.

Vancouver-based Teck, with a 22.5% stake, has undertaken to contribute $293m to the expansion but Greg Waller, Teck's vice-president of investor relations, has told the Winnipeg Free Press that the project will be financed through Antamina’s cash flow. Waller said Teck will not invest cash in the mine but will reduce distributions by no more than $100m over the next two years.

The expansion will involve construction of a new 55 km electricity transmission line, acquisition of new mining equipment, expansion to the truck workshop and concentrator plant, and enhancements to the water management and tailings storage systems.

The project, which will increase the mine’s annual output by 38%, will create an estimated 2726 jobs in the construction phase and 500 permanent jobs in addition to the existing 1850 permanent staff.