Codelco Vows to Continue Spending as Chile Mine Output Falls

Codelco, the biggest copper miner, said it will forge ahead with investments at its aging mines where first-half output slumped on deteriorating ore quality.

Production fell 1 percent to 758,000 metric tons from a year ago, including a 9 percent drop at the Chuquicamata mine, Chief Executive Officer Thomas Keller told reporters in Santiago today. Chile’s state-owned miner is studying finance options including bank loans to complete $4 billion of investments this year, Chief Financial Officer Ivan Arriagada said.

The company, based in Santiago, operates some of the world’s oldest mines, including Chuquicamata, first exploited by the Guggenheim family in the 1900s, where Codelco wants to build a tunnel network to access ore underneath an open pit already more than half a mile deep. Keller, who has cut this year’s capital expenditure program by about $1 billion, is seeking funding for investments over the coming years to take annual output above 2 million tons as ore quality falls.

“Our plan is still to go ahead with the structural investments,” he said.

First-half output declines at the Chuquicamata, Salvador and Andina mines were countered by increases at El Teniente and Gabriela Mistral. An expansion at El Teniente, now Codelco’sz most productive operation, is 13 percent complete.

Funding Shortfall

Including the state-owned company’s share of copper from mines operated by Freeport-McMoRan Copper & Gold Inc. and Anglo American Plc, production rose to 843,000 from 803,000 tons.

Keller is trimming this year’s capex budget after the government approved less funding than the company requested. Copper prices are “still attractive” and the global market “won’t be dramatically different to this year,” he said.

Codelco’s board approved an $1.4 billion project at he Andina mine that will maintain current production levels, the company said in a filing to Chile’s regulator today. The board is still evaluating a $6.8 billion expansion at Andina that holds the company’s biggest copper reserves.

Before it's here, it's on the Bloomberg Terminal.