(Bloomberg) — Codelco plans to spend an additional $720 million overhauling its oldest mine as the world’s biggest supplier of the metal strives to bring late and over-budget projects on stream and arrest a slump in production.
The Chilean state-owned miner already spent $5.7 billion to convert the Chuquicamata open pit into an underground mine and was in the process of spending $1.3 billion in related infrastructure, according to a May 2 shareholders meeting. Now it’s seeking environmental approval for design adjustments and complementary works, according to a document posted on the regulator’s website.
The additional outlay, which won’t increase Chuquicamata’s capacity or useful life, is the latest example of how expensive and challenging it is to build mines amid heightened social and environmental scrutiny and deteriorating ore quality. Teck Resources Ltd. suffered a $4 billion cost blowout at an expansion of its Quebrada Blanca mine in northern Chile. Higher interest rates and lower metal prices generate further headwinds for investments.
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Under new Chief Executive Officer Ruben Alvarado, Codelco is battling to return production to pre-pandemic levels of about 1.7 millions tons a year by the end of the decade from around 1.3 million tons this year, the lowest levels in a quarter century.
The producer has embarked on a $40 billion overhaul of its aging mines, with Alvarado shaking up management in a bid to bring projects on stream. Codelco is playing catchup, juggling several large projects, after decades of underinvestment.
With output and earnings falling and costs and debt rising, Codelco is also exploring the possibility of forming more joint ventures with private-sector companies. Chairman Maximo Pacheco said he held talks with several large mining firms on a recent visit to London, including speaking with BHP Group about possible collaborations.
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