Exclusive: Mitsui, Cobra in talks with BHP over desalination plant - sources

By Gram Slattery

SANTIAGO (Reuters) - A consortium made up of Mitsui & Co and Grupo Cobra is in exclusive talks with BHP Billiton Plc to build an $800 million desalination plant at its Spence copper mine in Chile, two sources with knowledge of the process told Reuters this week.

This means BHP, the world's biggest mining house, is advancing the contracting process for a planned $2.5 billion expansion at Spence, a project that has been on ice for years.

A number of other companies bid on constructing the plant, including a consortium of Canada's Brookfield Asset Management and Spain's Acciona, but BHP has selected the Mitsui group to go ahead with bilateral negotiations, said the sources, who requested anonymity because the matter is private.

Japanese trading company Mitsui and BHP declined to comment, while Acciona, Brookfield, and Cobra, a subsidiary of Spain's ACS, did not respond to requests for comment.

Mining companies in copper powerhouse Chile have begun to look into reactivating investments in recent months on supply shortages and solid Chinese demand.

The bilateral talks at Spence also come during a burgeoning desalination boom in Chile. Northern Chile's Atacama Desert is the most important copper belt in the world, but it is also one of the world's driest regions, with some areas never having recorded rainfall.

To supply the water-intensive process of copper mining without coming into conflict with local communities, miners have increasingly looked to the Pacific Ocean for their needs.

In 2013, BHP began building a $3.4 billion desalination plant at its Escondida copper mine, the largest in the world. Chilean state copper company Codelco opened a tender process for a $1.2 billion plant in January and has since indicated it has received several expressions of interest.

(Reporting by Gram Slattery; Editing by Lisa Von Ahn)