Chile to reap benefits of multibillion-dollar copper investment
The world’s largest copper producer expects to return to record output in just two years as it bounces back from disruptions from Covid-19 and as new projects start, Chile’s mining and energy minister, Juan Carlos Jobet, said.
For SA, Chile’s fortunes in the copper industry are of interest. Companies are exposed to the sector either directly and operating mines, as in the case of Anglo American, or indirectly, as for example Master Drilling, which provides rigs to stateowned miner Codelco, the world’s largest copper miner.
At the virtual World Copper Conference in Chile on April 12 and 13, Jobet said the country’s copper output is forecast to be 5.9-million tonnes in 2021, a 3.6% increase from a pandemicdisrupted 5.73-million tonnes the year before.
By 2022, Chile expects copper output to top 6-million tonnes, a sizeable jump from the previous record of 5.83-million tonnes in 2017. Copper accounts for 90% of minerals mined in the country.
The Chilean government will not support an “unconstitutional motion discussed in Congress on a potential royalty”, Jobet said. “We believe that the structure of the specific mining tax currently in place is adequate and the best way to increase government revenue from mining is to increase production and improve competitiveness.”
The Chilean Chamber of Mines said the national talks about constitutional reform, which encompass the talks about royalties, have to consider the history of mining in Chile and its contribution to the country.
“Legal security and regulatory stability are factors that
have sustained Chile’s investment growth and development in mining for the past three decades,” chamber chair Diego
Hernandez said.
Exploration activity jumped 14% during 2020, Jobet said. Codelco and private companies have 19 projects either under construction or about to start in the next few years. The investment in these mines will be almost $20bn and create 30,000 new jobs.
In the decade from 2020, the Chilean government expects expenditure in mining of more than $74bn.
For Codelco, the implementation of new projects is “vital” to replace old mines and sharply decreasing production.
By 2030, three-quarters of production will come from the new projects under construction now, including the deepening of mines, and those in the next few years, Codelco CEO Octavio Araneda said.
Among the new projects are four large ones valued at $11.6bn, while two more future projects will cost about $6.7bn, he said.
“These are enormous efforts we are making that are in turn making a very important physical reconstruction of the company,” Araneda said.
To give a sense of the scale of the investment plan up to 2030, he said Codelco plans to spend $35bn on new projects, development, plant upgrades and refurbishment. In the 49 years up to 2020, the company spent $69bn on growing its business.
To offset the size of investments, Codelco plans to strip $8bn out of costs, positioning the company as a globally competitive source of copper and to fund its project pipeline, he said.
Codelco was formed during the nationalisation of copper assets in 1971.
S&P Global, which recently released an annual mineral exploration study, noted that spending on copper exploration in Chile fell 30%, or $196m, the largest decline in 2020 among the countries in the report.
Copper prices ended 2020 at $7,749/tonne, up a quarter from the previous year’s closing price, and it has continued to rise as demand backed by growth plans in China, the US and elsewhere underpin the outlook for copper.
China, a major consumer of copper, is coming close to its peak smelting and refining capacity as the government enforces environmentally friendly industrial operations, meaning energy-intensive and polluting plants are no longer part of the country’s minerals strategy.
In 2020, China had 8.34-million tonnes of smelting and 12.1-million tonnes of refining capacity, but it has now started looking at encouraging imports of scrap copper and aluminium, with a 60% increase in imports in January and February of nearly 200,000 tonnes, said Duan Shaofu, secretary-general of the copper branch at China Nonferrous Metal Industry Association.