BHP Group's (ASX:BHP) Vicuna joint venture project will boost the company's attributable copper production by around 150,000 tonnes per year, with the potential to form a core component of its portfolio over the next 70 years, Jefferies said in a Monday note.

"We remain convinced that the project offers substantial greenfield production growth, offsetting declining production from BHP's existing Chilean assets," the investment firm said following the release of the Vicuna preliminary economic assessment.

While arsenic treatment via roasting is well characterized and broadly in line with technical and cost expectations, high-arsenic concentrate is expected to account for 70% to 100% of stage three concentrate production after ramp-up. This is significantly higher than Jefferies' expectations and means that permitting for the project is still a key execution risk given its cross-border structure and proposed Chilean roaster location, the equity research firm said.

It added that large portions of the project remain unpermitted, and the execution of of stage 3B will need significant additional permits, potentially slowing project development.

BHP will likely accelerate investments in its longer-term copper project pipeline as growth in copper volume through mergers and acquisitions might not be viable, Jefferies said. The equity research firm expects the combination of falling copper volumes and rising capital expenditure to lead to declining free cash flow and a downward trend in capital returns until fiscal 2030.

Jefferies maintained a hold rating on BHP with a AU$65 price target.