Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Codelco, the world’s largest copper producer, will adjust its strategy to produce more sustainable copper and meet the Andean country’s growing environmental demands, the chairman of the board Maximo Pacheco told Reuters in an interview in Santiago.
The mining firm is facing global clients and investors increasingly focused on environmental concerns while new leftist President Gabriel Boric has trained his focus on toughening regulation around water, glaciers, and pollution.
“It is not only complying with the new regulations but also having a true, sincere commitment to that environmental objective,” said Pacheco, a former minister who was appointed chairman by Boric in March.
Pacheco, who sees the global electrification push holding up copper prices over the long run despite a recent drop, said the firm’s priorities include recirculating water in tailings dams and shifting to renewable energy.
“No one consumes more electricity than us and we have to reach 2026 without electricity from fossil sources,” Pacheco said.
The company hopes to reduce its emissions by two-thirds, lower particulate matter emitted by 25% and recycle more than half of its industrial waste by 2026.
The company recently closed its Ventanas smelter, located in a saturated industrial area of the central coast that’s been the site of multiple pollution-related health incidents. The closure led to a brief strike by workers.
Increasing environmental regulations and pressure have also affected some of the company’s partnerships. Anglo American’s extended mining permit for its Los Bronces mine was rejected by the government earlier this year.
While Codelco is a partner in the Los Bronces mine, Pacheco said that Anglo American is responsible for guaranteeing the project complies with standards, obtains environmental permits, and complies with regulations.
“It seems to me that it is part of what they have committed to and I hope they do it and do it well,” Pacheco said.
Aside from strengthening regulations, a proposed new constitution that citizens will vote on in September could impact the company’s future projects. A proposed law expanding protection for glaciers could impact Codelco’s Andina mine, but Pacheco said the mine will “strictly” comply with any new regulations.
Pacheco said that some of the objectives will need additional investment in contracting services but did not quantify the magnitude of the necessary contributions.
Aside from regulations, Chile is also facing an ongoing water crisis due to a historic ongoing drought that’s lasted more than a decade and has impacted copper output.
“We already have the desalination project in its final phase for the north,” Pacheco said. “But the challenges of the water crisis cannot be solved with just this desalination plant.”
Pacheco said the model needs to be replicated for parched mines in central Chile, adding that the company needs to more precisely define the investment needed to develop these desalination projects.
(By Fabian Cambero; Editing by Alexander Villegas and Lisa Shumaker)
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