Southern Peru Copper Corp has awarded an engineering contract to modernise its Ilo copper smelter to Swedish company Xstrata Technology and US based Fluor.

The project will utilise Xstrata's Isasmelt technology to process 1.2 million tonnes of copper concentrate per year. SPCC said the project would improve copper production and capture more than 92% of sulphur dioxide by 2007, which would comply with the environmental management and compliance program in Peru (PAMA).

"For some years Southern Peru Copper Corporation has been assessing their option to modernise the Ilo plant with the aim of reducing operating costs and improving environmental performance," Xstrata Technology pyrometallurgy business manager Philip Arthur said.

"Recent successes at Mt Isa other Isasmelt plants around the world have convinced SPCC that Isasmelt is the preferred technology."

The project will be developed in two or three phases, depending on the evolution of international copper markets. SPCC said it estimated project construction would take about thee years and be completed before January 2007, which is the deadline established by the PAMA.

SPCC has signed a letter of intent with Fluor-Xstrata to immediately proceed with the basic engineering, which will detail the project and the cost of the investment, after which construction would commence.