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.
Chile’s Codelco, the world’s top copper producer, has secured a $22 million-refund corresponding to damages caused to the company and its workers as a result of life insurance overpricing between 2005 and 2018.
The state-owned miner filed a lawsuit in January after an internal investigation concluded that insurance firm Chilena Consolidada had overcharged Codelco for 14 years on premiums to coverage acquired by unions at its Chuquicamata and Radomiro Tomic divisions.
The copper giant said that half of the fraud-related costs had been borne by the company and half by its workers.
The unions said at the time that all insurance agreements had been signed off by Codelco’s human resources managers.
The company noted it would not withdraw the lawsuit against the union leaders until those responsible are identified.
Chilena Consolidada, a unit of Zurich Insurance Group, has already transferred $11 million to Codelco and signed a contract to transfer the other half owed directly to the workers and former workers affected by the fraud.
Copper output levels have held up so far in Chile, despite the coronavirus pandemic.
In the first six months of the year, Codelco boosted output by 4.7% to 744,000 tonnes of copper even as it had to rely on skeleton crews at its deposits because of covid-19.
The company has also plowed ahead with an ambitious 10-year, $40 billion mines overhaul to keep up production rates.
It has already finished one of its biggest projects — the $5.6 billion conversion of the Chuquicamata open pit mine into an underground operation.
Ongoing major mine upgrades 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 of the mine by 40 years and increase output by 30% from current levels.
Salvador is Codelco’s smallest division by production. Last year, it churned out 50,600 million tonnes of copper, down 16.8% from 2018.
In the copper giant’s pipeline of 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.
