Chile’s state-owned miner Codelco will produce between 2% and 3% more copper this year than it expected, despite the strike at its Andean operation, Juan Benavides, president of the world’s largest copper producer, told Reuters.
Record copper prices this year have caused mining companies’ revenues to soar and unions in Chile pushing for more beneficial contracts, creating tense negotiations that risk leading to strikes and production losses.
Codelco’s production in August fell 6.7% year-on-year to 144,500 tonnes, according to Chile’s state copper commission, Cochilco, affected by a strike at its Andina mine near Santiago at the end of the month. Andina produced 184,000 tons of copper last year.
“Of course Andina’s production will be reduced, but Andina and Codelco in general will be above the production budget of 1.6 million tons this year,” Benavides said Monday in an interview for LME Week, a metallurgical industry meeting in London.
“We have strong cash flows, which we are using to fund our operations and structural projects. We don’t need to take out short-term loans,” he said, adding that the cash would not go toward paying off the debt.
Copper prices sank last year as the coronavirus pandemic hit manufacturing activity, but the easing of lockdowns since late last year, especially in the main consumer, China, drove up prices.
Codelco is in the midst of a $40 billion, 10-year initiative to modernize its spleened but aging mines, which have suffered in recent years from a sharp drop in ore sterling.
Benavides is confident that Chile’s glacier protection bill will not derail Codelco’s plans for the Andina mine.
“We have decided to move the Andean mine away from the glaciers,” Benavides said. ” We are convinced that it is possible to continue with the development of the Andean mine and protect the glaciers at the same time.”
Chile has put forward plans to require the country’s mining companies to reduce water use amid a prolonged drought. It wants the water used by mining companies from glaciers, rivers and lakes to be reduced to 10% of the total by 2030 and 5% by 2050, from 18% today, and to reach carbon neutrality by 2040.
The world’s largest copper miner is offering to sell copper to European buyers at a premium of $128 per tonne in 2022, the highest since 2015 and an increase of more than 20% since 2020, two sources with direct knowledge said.
Premiums set by state-owned Codelco for the physical delivery of copper, paid above the London Metal Exchange contract, are considered a benchmark for global contracts, meaning other producers will likely follow suit.
