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Chile Cost Surge Eroding Mine Competitiveness, Antofagasta Says

Chile’s copper mining industry, the world’s largest, is losing competitiveness as costs surge on falling ore quality and rising energy and labor costs, said Diego Hernandez, who heads Antofagasta Plc’s mining division.

Costs are approaching the same levels as the mining industries of Australia, Canada and the U.S., Hernandez said today at the Exponor mining trade fair in Antofagasta, Chile.

Mining companies may have delayed or suspended more than a third of the $100 billion pipeline of projects that the government estimates will go ahead over the coming decade, Codelco Chief Executive Officer Thomas Keller said today at the same event. As a result, Chile is losing its attractiveness as a destination for mining investments, Hernandez said.

“We are going into a different stage,” Hernandez said. “In the high cycle of copper prices, the emphasis was on raising output, and now we have to look after costs and profit. If we don’t do that, we will become increasingly less competitive.”

Chile’s energy costs have tripled since 2000 and there are “no significant projects in the pipeline” to ease a growing power shortage, he said. The average cost of doing business in Chile has risen 46 percent since 2007, compared with an average of 25 percent in other mining countries, Hernandez said.

Chile will still account for about 37 percent of world copper output by 2020, compared with about a third now, Hernandez said. Peru will account for 16 percent of world output by the same year, he said.

The average copper content contained in ore has fallen below 1 percent in the last five years and is declining faster than in other mining countries, Codelco’s Keller said.

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