Cochilco: Chile's High Costs Could Discourage Greenfield Copper Investments

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Written by Amir Richani for Industrial Info Resources (Sugar Land Texas)

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Summary

High electricity, labor and capital costs in open-pit operations with concentrators make Chile's copper sector the most expensive in the Americas, which could affect companies' interest in investing in the country.

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Greenfield Copper Projects Considered

Chile is the world's largest producer of copper and contains vast reserves of the high-demand mineral. However, a recent study by Cochilco, the government mining authority, suggests that the costs of Chile's open-pit copper mining with concentrators are the highest in the Americas, driven by electricity and labor costs and lower grades.

The study considers 67 greenfield projects across the continent, of which eight are located in Chile. The portfolio includes 52 open-pit projects (six in Chile), but Cochilco's benchmarking focuses on open-pit projects with concentrator plants.

Chile's High Copper Costs

Chile has the highest capital intensity costs for open-pit concentrator projects for mid-size operations (50-100 kilotons per day (ktpd)) at US$36.67 per ton per annum. For large operations (more than 100 ktpd), it stands second in the Americas at US$34.18 per ton per annum, only behind Mexico.

These high costs are attributable to lower mineral grades, rock hardness and the remote locations of the projects. For Chile, the location of the projects, especially for those in the Atacama Desert and remote areas, entails higher transportation and equipment costs.

The South American nation also exhibits the lowest copper grades for medium-sized projects (0.22%) and the second-lowest for large-scale projects (0.29%). This means that the amount of ore that must be processed to obtain the same volumes is higher in those with lower grades.

Based on Cochilco's analysis, Chile records the highest grinding costs on the continent, ranging from US$2.4 per ton processed for mid-size operations to US$3 per ton processed for large operations. These numbers are considerably higher than those in the region, with Peru ranking second in both categories at US$1.6 and US$1.8 per ton, respectively.

High Power & Labor Costs

This is the result of high electricity prices of US$0.111 per kilowatt-hour (kWh), about 27.58% higher than in Mexico, which has the second-highest prices. This is the outcome of Chile's reliance on imported fossil fuels for domestic thermal plants and high transmission costs.

Over the last few years, Chile has increased its renewable energy capacity; however, these developments still require substantial investments in transmission and system backup and integration, thereby increasing costs. At the same time, Chile's geography also represents a transmission challenge for mining operations.

Chile also ranks among the highest labor costs on the continent, with US$0.9 per ton extracted across a mid-size plant, some US$0.27 more than Canada, which is second. In terms of large-scale operations, it ranks second at US$1.08, about US$0.05 behind the United States, which is first.

For Cochilco, the high energy and labor costs, as well as lower grades, pose a key challenge for the development of greenfield projects in Chile. However, the nation's geological potential and the opportunity to promote investment in innovation, technology and efficiency could help improve its cost competitiveness.

Recently, Cochilco announced a mining portfolio of US$104.5 billion for 2025-34, of which only 19% pertained to greenfield projects.

Key takeaways

• The Chilean copper sector high capital and operating costs are the highest in the Americas.
• Chile has the highest costs for open-pit concentrator projects for mid-size operations at US$36.67 per ton per annum.
• Chile records the highest grinding costs on the continent, ranging from US$2.40 to US$3 per ton processed.

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