Codelco, the world’s largest copper producer, will appeal for Chile’s newly-elected President Michelle Bachelet to continue financing record investments designed to stem output declines at its aging mines.
Chief Executive Officer Thomas Keller will present his investment plan to the government by the end of the month, he told reporters in Santiago today, declining to say how much the company will request. The government approves state-owned Codelco’s three-year revolving plan in June each year.
Keller will make the request with copper prices 12 percent lower than a year ago as the outlook for Chinese demand dims, a slowing Chilean economy and a new government promising to increase social spending and raise taxes. He previously said Codelco must spend more than $20 billion on revamping mines to avoid a 50 percent production slump.
The proposed “investments will be in the range of what we have estimated and what we are currently executing in terms of our structural projects,” Keller said.
The former managing partner for Latin America at Toronto-based Brookfield Asset Management Inc. oversaw $8 billion of project spending in the past two years, including a record $4.2 billion last year, as the company seeks to bolster its leadership of the copper market. Keller publicly criticized Codelco’s funding constraints last year as he battled to obtain financing to carry out the projects.
Codelco’s output from its own mines slid 1.5 percent last year to 1.62 million tons. Total production rose 2 percent to 1.79 million tons because of minority stakes it owns in Anglo American Plc’s Sur division in central Chile and the El Abra mine it operates with Freeport-McMoRan Copper & Gold (FCX) Inc.
China’s economy will continue to grow at 7 percent to 8 percent a year while the country’s copper demand growth will be “slightly less than that,” he said. The metal’s long-term fundamentals are “solid,” the company said in a statement accompanying annual results.
Copper futures for delivery in May rose 1.5 percent to $3.039 a pound at 10:18 a.m. on the Comex in New York, heading for the biggest weekly advance since September, on speculation that demand will rise as the government takes steps to bolster growth in China, the world’s biggest consumer. The metal has slumped 10 percent this year.
Price swings are within an “expected range,” Keller said. “We have to get used to a more volatile copper price.”
The global copper market will have a small surplus in 2014 akin to last year, he said. Codelco will increase its production this year, he said, without elaborating.
Codelco produces about a 10th of the world’s copper and owns 9 percent of the world’s proven reserves of the metal used in power cables and electrical wire.
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