Chile: Copper Production Costs Increase as Output Drops

Researched by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--The Chilean Copper Commission (Cochilco) says copper production costs at Chile's largest mines have increased significantly over the past year. Cochilco cited a decline in Chilean copper production and steeper service costs, such as higher electricity and materials prices, as the major reasons.

Cochilco released a presentation this week detailing the rising cost of copper production at 22 Chilean mines. According to the organization, copper output costs increased by 39.6 U.S. cents per pound in the first half of the year, when compared with the same period last year, to close at 198.8 U.S. cents per pound.

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Based on Cochilco's analysis, rates have risen since 2020, when the cost per pound was 122.8 U.S. cents.

On the other hand, sales of molybdenum and gold, as well as lower freight and diesel prices, helped to offset higher cost between January and June of this year.

The study was conducted at 22 of Chile's largest mines, which account for 93.5% of the production. Of those, 19 mines, representing 88% of the production, increased their direct costs, while only three saw their costs decline.

Cochilco also said smaller mines are more affected by increased production costs.

The growing costs affect most companies operating copper mines in Chile, especially Cochilco. Based on the analysis, Cochilco's mines show some of the highest drops in production from 2022 to present.

The top five mines with production declines (all of which are from Cochilco) are:

• Salvador mine, with a production drop of 36.3%; see plant profile
• Ministro Hales mine, with a production drop of 35.9%; see plant profile
• Gaby mine, with a production drop of 18.1%; see plant profile
• Cuquicamata mine, with a production drop of 16.5%; see plant profile
• Andina mine, with a production drop of 16.5%; see plant profile

The Chilean state miner is facing significant production setbacks. It has reduced its guidance for 2023 to between 1.31 million and 1.35 million tons, one of its lowest in recent years. As a result of volume drops at operational mines, Cochilco is developing its new structural projects to offset production losses.

In a presentation in August, Cochilco's former CEO said that without the construction of these structural projects, the company's output will drop significantly by 2030. Nevertheless, investments of about US$15 billion are still required to finish these structural projects.

Any drop in Cochilco's production is a setback to the market, given that the Chilean company is the world's largest copper producer.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).