Chile’s Codelco, the world’s largest copper producer, saw profit nosedive in the first three months of the year as prices for the metal dropped to an average of $2.49 a tonne in the period compared to $2.72 a year earlier.
The state-owned miner reported an 85% decline in profit to $54 million, in the first quarter of 2020, even though production climbed 6% to 361,000 tonnes.
Lower costs — they fell 2% to $1.327 per pound of copper were not able to offset the slump in prices either.
A global surplus of the metal may weigh further on Codelco. The glut is expected to get worse over the next 18 months as market disruptions have created greater uncertainty in the factors affecting supply and demand for the metal, the International Wrought Copper Council (IWCC) said this week.
At the end of March, the Santiago-based copper giant had to partially or fully suspend some third-party services, both in projects and operations. The measure aimed at keeping low numbers of employees amid the coronavirus pandemic. The measure affected around 30% of contractor workers.
Chief executive Octavio Araneda emphasized the company had “it foot on the gas” in terms of a sprawling 10-year, $40 billion mines overhaul.
Codelco, which hands all its revenue over to the state, has already finished one of its most ambitious projects — the $5.6 billion conversion of its giant Chuquicamata open pit mine into an underground operation.
Ongoing major mine overhauls include a $5.5 billion new level at the El Teniente underground mine, the company’s largest and the world’s no. 6 by reserve size, slated to begin operations in 2023.
It also involves converting the El Salvador mine to an open-pit mine from underground operations. The $1 billion project, known as Rajo Inca, is expected to extend the productive life the mine by 40 years and increase output by 30% from current levels.
In April, however, the company began ramping up operations, it said. The same month, it raised $800 million worth of bonds to boost it cash reserves and face market uncertainty.
In the copper giant’s pipeline of so-called structural projects there is also the $1.3 billion expansion of the Andina mine. The operation accounted for roughly 11% of Codelco’s output in 2018.
Codelco operates seven mines and four smelters, all in Chile. Its assets account for 10% of the world’s known proven and probable reserves and about 11% of the global annual copper output, with 1.8 million tonnes of production.
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