Mexico’s proposed higher mining royalties could block nearly $7bn in investments
The Mexican government proposed raising mining royalties under the argument that metal prices have risen in recent years.
Mining costs in Chile, the world’s No. 1 copper producer, were among the highest in the world last year even though most companies spent 2015 cutting expenses and placing projects in the back burner, a new study released Monday shows.
Data from the Mining Council, which groups the largest copper, gold and silver miners operating in Chile, reveal that production costs in the country last year were 5.4% higher than its global peers’ average.
Production costs in Chile, the world’s No. 1 copper producer, were 5.4% higher last year when compared to its global peers’ average.
Mine level cash costs in the country that is responsible for nearly 6 million tonnes of global annual copper production of 21 million tonnes fell last year to an average of $1.3 per pound, local paper El Mercurio reports. In the rest of the world, the average was between 82 cents to $1.05 per pound.
The news comes as a bit of shock for the industry, as the costs of mining copper in Chile last year maintained the downward trend they had been following since 2013, reaching $2.16 per pound, which is about 3.5% less than the $2.24 they hit in 2014.
But the South American nation has also been hit by high energy costs, which threatens the competitiveness of the country’s copper industry and poses a major challenge for new developments.
Electricity costs in Latin America’s wealthiest economy climbed 11% per year from 2000 to 2015, making it one of the most expensive places in the world to secure energy for mining projects. But ever since, a boom in solar power installations has helped curb electricity costs.
The other issue is copper grades. While the nation has the world’s richest reserves of the red metal, grades are falling at its massive but aging copper mines, making it difficult to maintain output and putting pressure on costs.
Better times ahead
The future is suddenly looking brighter, with many analysts forecasting a spike in copper prices as the market begins to enter a supply deficit expected to kick off in 2021.
Copper market is poised to enter a “substantial” supply deficit from 2021 onwards, pushing prices of the industrial metal higher.
“In the near term, mining companies are not investing in additional capacity and copper demand is growing at a pace of around 2 percent a year,” the head of Chile’s national mining association Sonami, Diego Hernández, said Monday.
Speaking at the Copper 2016 industry conference in Kobe, Japan, Hernández said that supply growth will likely begin to drop from around 2019 and the market will face a “substantial deficit” in the next decade, coinciding with a demand recovery.
He noted that such demand and, therefore, copper price increase will be driven population growth and urbanization in China and other emerging countries, and less fossil fuel use amid climate change, Reuters reports.
Copper briefly surpassed $6,000 a tonne last week and headed for the biggest weekly rally ever as the metal became the target of Chinese speculators and bets that US President-elect Donald Trump will pour money into infrastructure.
Goldman Sachs analysts cautioned in a report Monday that such rally is coming “too much too fast,” because the impact of Trump’s infrastructure plan (he promised a “$1 trillion over a 10-year period” in his victory speech) on global demand was tiny compared to that of China.
Overall, US copper and steel demand shifts would represent just a 0.4% increase in total demand, with all else constant, the analysts noted.
Chuquicamata is one of the largest open pit copper mines and the second deepest open-pit mine in the world. (Image courtesy of Codelco via Flickr)
13 Comments
klgmac
“Electricity costs in Latin America’s wealthiest economy have climbed 11% per year since 2000, making it one of the most expensive places in the world to secure energy for mining projects.”
Chile has gone all in on expensive alternative energy. It’s an economy and job killer every time.
Oltman
Looking at the depth of this open pit it would be wise to mine a 3×3 tunnel or incline being mined from the inside of the pit and transport the ore via belt through the hill being mined and therefore a lot of time and fuel costs could be saved aswell as labour, the tunnel could lead to a dumping site where the ore can be transported towards the plant.
Oltman
if a tip could be sitsuated in the middle of the open pit on one of the side walls the trucks only need to go half the way and the amount of trucks could be half as well. then even using normal old school methods to do the tunneling until it holes on the outside of the hill being mined there a gravity sloop can be established by blasting the hillside at 55 degrees to the bottom where a belt is sitsuated at the collection point to transport to the plant
Maxime Jamaty
The RopeCon from Doppelmayr would be a good technology to get the material out of the pit saving lots of Opex
Christian Nieland
The future of the copper industry in Chile will be the choice of very energy efficient concentrator equipment. We have to think out of the box. About 50% of the energy consumption is related to the grinding and crushing circuit. thyssenkrupp i.e. (thyssenkrupp-industrial-solutions.com) is able to offer new grinding concepts with the use of HPGR’s in combination to the VELIX VX (stirred media mill). These new concepts can reduce the energy consumption significantly in comparison to a conventional SABC circuit.
Oltman
i totally agree with you
Oltman
the only problem with the ropecon system is the angle that it has to transport the raw material /ore and there will be significant roll back of ore on the belt ,hence my solution to a central tipping point and then through the side of the mount, if you guys need me i am a specialist in tunneling and would do this for sure for the company.we also have to look at the gradient of the tunneling as water would accumilate and run back into the open pit,therfore every 100 meters a sump needs to be established und pump water to a resevoir where it could be transported via pumps to the outer ring of the pit
Oltman
my email contact details : [email protected]
TheSkyIsNotFallingItWasABird
I’m confused. The following article from Bloomberg June 1, 2016, describes falling electricity prices in Chile. The article is mostly about solar energy development that almost makes sense in a desert like the Atacama. But it does discuss lower electrical costs.
http://www.bloomberg.com/news/articles/2016-06-01/chile-has-so-much-solar-energy-it-s-giving-it-away-for-free
Could it be that if the Chilean government has chosen to go alternate energy, the price increases are reflecting the cost realities of those systems?
It would take a hell of a lot of sunlight and dozens of acres of solar panels to power a primary crusher. Escondida alone has 5.
rodcha
Confusing or misleading headline?; highest cost in the world, or just above average costs?
Mining Matters
Reading comprehension problems?
Second paragraph clearly says: “Data from the Mining Council, which groups the largest copper, gold and silver miners operating in Chile, reveal that production costs in the country last year were 5.4% higher than its global peers’ average”
rodcha
Yeah, I think you have reading comprehension problems
klgmac
Would you expect anything different from a government run operation using expensive alternative energy?