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Chile's Codelco has delayed plans to increase copper production to 2
million mt/year until 2025, back four years from previous forecasts, as
the state mining firm negotiates with the government how to finance a
$23 billion investment program to overhaul its aging mines.
"Our commitment is to fulfill production targets of more than 2 million
mt/year from 2025 in order to maintain our leadership position," Codelco
Chairman Oscar Landerretche told the Chilean Senate Mining and Energy
Commission on Wednesday.
The state-owned mining firm is the world's largest producer of copper,
with output of 1.792 million mt last year. It is planning to expand
production through a series of major projects, required to continue
production at its huge mines, some of which have been in production for
over a century.
The projects include new underground operations at Chuquicamata and El
Teniente, a major expansion of the Andina mine, and development of
sulfide resources at Radomiro Tomic. The size of the project portfolio
is unmatched in the global mining industry, Landerretche added.
However, the principle hurdle is how to finance the projects. Codelco's
development plan for 2014-2018 requires average annual investment of
$4.5 billion, of which $1.7 billion would be financed through debt, $2
billion through internal funds, amortization and depreciation and the
remaining $800 million through the reinvestment of profits. But that
requires government approval. Earlier this month, Finance Minister
Alberto Arenas approved the reinvestment of just $200 million, against
the $1.2 billion requested by the Codelco board.
Landerretche warned that while Codelco remains "financially healthy," it
could not further increase debts totaling $12 billion without risking
its investment grade status.
Without invest grade status, "the number of potential investors would
shrink, the rates we pay for our debt would rise and put up our
financial costs," he said.
President Michelle Bachelet has promised to send legislation to Congress
to meet Codelco's long-term financial needs. But the bill has yet to
appear, rankling labor unions. Uncertainty has increased since the
firing of CEO Thomas Keller in early June.
Union leaders on Wednesday warned that workers could hold a protest
strike unless the government took action fast to resolve the firm's
financial uncertainty and name a new CEO. Landerretche said he expected
to name Keller's replacement within two weeks.
Source: Platts |
