KGHM has signed a Farm-Out agreement with US mining giant Freeport-McMoRan. The Polish company has gained the right to conduct exploration work on a promising area in northern Chile. Over the next 24 months, KGHM’s geologists will drill and take samples. The cost is around $8 million. If the results are positive, the two companies will form a joint venture and develop the deposit together. If not – KGHM will lose the money, and Freeport will keep the land.
The farm‑out agreement was signed between Chile SpA, a subsidiary of KGHM Polska Miedź, and Minera Freeport‑McMoRan South America Limitada, which belongs to Freeport‑McMoRan. The document was signed in early May 2026, although KGHM did not give an exact date in its press release. Freeport‑McMoRan is an American mining corporation headquartered in Phoenix, Arizona, founded in 1912. The company is the world’s third‑largest copper producer – in 2025 it mined about 1.55 million tonnes of the metal. By comparison, KGHM, which produced 700,000 tonnes and rounds out the top ten global producers, is more than twice as small.
A farm‑out agreement in the mining industry means that one party (the farmor – here, Freeport) grants the other party (the farmee – KGHM) the right to carry out exploration work on a defined area in exchange for a stake in a future project or the transfer of some interests. In practice, KGHM has gained the right to conduct early geological and geophysical surveys on the area indicated by Freeport. If the results are promising, both companies will form a joint venture – a special‑purpose company in which each side will have a defined share – and then decide together whether to develop the deposit.
– The agreement opens a new stage of cooperation between the companies, focused on the development of a prospective copper exploration project in northern Chile. The agreement defines the principles for carrying out early exploration work and assessing the geological potential of the area – read a statement from KGHM on 8 May 2026.
The project area is located in one of Chile’s most promising mining regions. This is northern Chile, around Antofagasta – the heart of Chilean copper mining. It is here that the world’s largest open‑pit copper mine, Chuquicamata (owned by state‑owned Codelco), and the Escondida mine (controlled by BHP) are located. The region accounts for about 30 percent of world copper production. According to KGHM, the selected area shows favourable geological and geophysical evidence justifying further work at the early exploration stage.
KGHM’s role in the first stage
Under the agreement, KGHM Chile will be responsible for carrying out the early‑stage exploration work. This will include geological surveys (surface mapping, petrological analyses), geophysical surveys (magnetometry, gravimetry, induced polarisation measurements) and geochemical surveys (collecting rock, soil and water samples). The cost of this work is estimated at several million dollars and will be borne entirely by KGHM. In return, the Polish company will obtain the right to acquire a stake in the future project on preferential terms.
– Starting cooperation with Freeport is an important step in the development of KGHM’s exploration activities in Chile. The area selected for evaluation stands out for its promising geological indicators, and the combination of the experience and expertise of both companies increases our ability to identify projects that can contribute to the development of the KGHM Group – said Anna Sobieraj‑Kozakiewicz, Vice‑President of KGHM Polska Miedź.
This is not KGHM’s first activity in Chile. The Polish company has been operating there since 2011, when it acquired the Canadian company Quadra FNX, owner of the Sierra Gorda mine, for $2.9 billion. It was the largest foreign investment in KGHM’s history. The acquisition was criticised in Poland because the mine made losses in its first years – mainly due to lower copper prices and higher operating costs. Only since 2020 has Sierra Gorda begun generating positive cash flow.
Sierra Gorda as a base
The Sierra Gorda mine is located about 60 kilometres south‑east of the town of Calama in the Antofagasta region, at an altitude of about 1,700 metres above sea level. It is an open‑pit mine extracting copper and molybdenum ore. KGHM holds 55 percent of Sierra Gorda SCM, with the remaining 45 percent owned by the Australian company South32 Ltd. In 2025, Sierra Gorda produced around 120,000 tonnes of copper and 7,000 tonnes of molybdenum. Thanks to the open‑pit method, the cost of producing copper at Sierra Gorda is the lowest in the entire KGHM group – according to the 2025 annual report, it was $1.85 per pound (compared to about $2.10‑2.30 in Polish mines).
The experience gained from operating Sierra Gorda – including cooperation with Chilean authorities, local communities and suppliers – will be crucial for any development of a new project. KGHM Chile currently employs about 200 people, mostly local engineers and geologists. In recent years, the company has also carried out an exploration programme on areas adjacent to Sierra Gorda, but with no spectacular discoveries.
Who the partner is?
Freeport‑McMoRan is not only the world’s third‑largest copper producer, but also a leader in molybdenum and gold mining. The company controls some of the world’s largest copper deposits: Grasberg in Indonesia (one of the largest gold and copper deposits), Cerro Verde in Peru and El Abra in Chile. In Chile alone, Freeport owns 51 percent of the El Abra mine (the remaining 49 percent is held by Codelco), which produces about 80,000 tonnes of copper per year. In addition, the company is developing the Solwara project on the seabed in Papua New Guinea (extraction of polymetallic sulphides), which is causing environmental controversy.
Freeport’s experience in Chile is invaluable – the company has been operating there since 1996. For KGHM, a partnership with such a giant means not only access to new exploration areas, but also the opportunity to exchange knowledge about local regulatory procedures, relations with the Chilean government and managing social and environmental risks.
Long‑standing cooperation
The two companies have known each other for a long time. Freeport and KGHM previously cooperated on Sierra Gorda – Freeport was the original operator and owner of that mine before selling it to Quadra and then to KGHM. Over the years, the companies were involved in legal disputes over environmental pollution in the Sierra Gorda area (Freeport, as the previous operator, was responsible for land reclamation). Those disputes were eventually resolved in 2023 through an out‑of‑court settlement.
The current agreement shows that the animosities have been set aside. Both sides speak of strengthening cooperation and jointly looking for new deposits. In the mining industry, such alliances are common – exploration costs are high (a deep drill hole costs $5‑10 million) and the probability of success (discovering a deposit that meets economic viability criteria) is only 1‑2 percent. Sharing the risk between partners is therefore crucial.
New project in northern Chile
The area covered by the farm‑out agreement is in the El Loa province of the Antofagasta region. It is a desert area, at an altitude of 2,500‑3,000 metres above sea level, in the driest place on Earth – the Atacama Desert. Working conditions are extreme: daytime temperatures reach 35°C, at night they drop below freezing. There is no water – delivering it to the exploration site requires tanker trucks from 200 kilometres away.
Freeport has already carried out preliminary studies of the area. Between 2020 and 2024, the company performed satellite imagery, magnetic and gravimetric surveys. The results indicate the presence of large anomalies typical of a porphyry deposit – meaning copper occurs as disseminated veins and impregnations in volcanic rocks. It is in such deposits (porphyry copper) that Chile has its largest mines. The area is estimated to contain between 5 and 15 million tonnes of copper, but confirmation requires drilling.
KGHM has committed to carrying out first‑stage exploration work over the next 24 months. This will include detailed geological mapping, collection of soil and rock samples (about 2,000 samples), followed by two exploration boreholes to a depth of 500 metres each. Costs – around $8 million – will be borne solely by KGHM. If the results are positive, the agreement provides for a possible move to a second stage, in which both parties will form a joint venture (most likely 50:50 or 60:40 in favour of Freeport as the landowner). Subsequent stages include in‑fill drilling, feasibility studies and a construction decision – a horizon of 10‑15 years.
