Top Copper Miner Seeks Savings as Record Spend Consumes Earningsby
Projects being reviewed for possible downsizing or slowdowns
Record-high output would start to fall without new projects
Codelco is rethinking key development projects and chasing more operational savings as the biggest copper producer seeks to preserve cash and contain borrowing costs with metal prices expected to stay low.
While some of its major projects -- such as converting the century-old Chuquicamata pit into an underground mine -- have passed the point of not return, others are being reviewed for possible downsizing or slowdowns, Chief Executive Officer Nelson Pizarro told reporters in Santiago on Friday.
Pizarro has managed to bring down costs more than some private-sector peers by adapting a bloated state company to low prices. But his productivity efforts are being diluted by a spending program that was budgeted at more than $20 billion as Codelco digs deeper to profitable ore after decades of under investment. Without the new projects, the company’s record production levels will begin to slide.
“We are working on a business and development plan, a review that we will present within a month,” Pizarro said. “We need to be very careful because it will impact production, so we need to double our efforts on costs.”
Seeking to align spending with the company’s financial health, Codelco may proceed in stages with the expansion of its biggest mine, El Teniente, he said. At the Andina mine above Santiago, the company is redesigning expansion plans, Pizarro said.
Copper futures are little changed this year at about $2.11 a pound after slumping to the lowest in almost seven years amid a broad commodity downturn. Assuming a price of about $2.17, Codelco should be able to generate more than $800 million for the Chilean state this year.
Production for the first quarter rose to a record 470,000 metric tons from 433,000 tons a year ago, with sales steady at $2.7 billion, the company reported. Still, it posted a net loss as currency swings inflated provisions.