Codelco signals pause in copper recovery due to maintenance

Top copper supplier Codelco is warning that production this quarter will be similar or slightly below year-ago levels due to maintenance work, though its annual growth target remains intact.

The state-owned firm just completed a major maintenance program at its El Teniente underground operation in central Chile and is striving to recover lost production following a national power cut late last month, chairman Maximo Pacheco said in an interview Thursday.

The prospect of flat or even lower output in the first three months of the year underscores the challenges to Codelco’s recovery from near 25-year lows after decades of underinvestment. Management is overseeing an unprecedented investment program of more than $4 billion annually to return production to 1.7 million metric tons by the end of the decade, but has been hampered by a string of setbacks and overruns.

Still, Pacheco said the first-quarter maintenance work was planned, that El Teniente is back up and running and that the company is set to meet its internal quarterly target.

He “categorically” denied reports Codelco delayed maintenance and ran down inventories last year in order to meet its annual target: “When you postpone or modify maintenance, it’s a case of bread for today and hunger for tomorrow. You pay for that.”

Codelco, which isn’t scheduled to report fourth-quarter results until later this month, produced 1.328 million tons last year at the mines it operates in Chile, Pacheco said. It expects to churn out 65,000 tons more this year, an increase of almost 5%, followed by an even bigger increase next year, he said.

“Structural projects that have taken a long time to design, execute, and launch are reaching their final phase,” Pacheco said. “Some are in ramp-up, while others are soon to be in ramp-up.”

Trade turbulence

The production recovery is all the more important as Codelco looks to deliver more copper to its US clients as part of a surge in shipments ahead of potential tariffs.

Codelco met last month with its US customers, all of whom sought more shipments, Pacheco said. “They’re asking for more copper because, in part, there’s an open discussion about whether copper will have a tariff, and also because inventories are indeed very low.”

Codelco is “calm” amid the global trade turbulence on the grounds of the trust it’s built up with American customers and the fact that the firm’s copper is needed along US supply chains, Pacheco added.

The state copper company is also moving forward with its foray into lithium. Pacheco expects to finalize a deal with Soc. Quimica & Minera de Chile SA in the third quarter of this year, turning it into one of the world’s biggest producers of the battery metal.

Codelco is in the final stages of choosing a partner for its Maricunga lithium project, hosting site visits and fielding final questions from a short list of candidates, he said.

Smelting project

That follows the recent purchase of a stake in Teck Resources Ltd.’s Quebrada Blanca mine and an operational tie-up between its Andina operation and an adjacent mine operated by Anglo American Plc.

Codelco has also received expressions of interest for a greenfield smelting project, in which the state miner would be an off-taker in what would be a privately run initiative. Pacheco hopes to have news on that project this year in the form of agreements with investors.

“Codelco’s growth and development is going to be a model that will have a very strong foundation in partnerships,” he said.

Codelco may return to the bond market this year to help finance a $4 billion-plus investment program — but only if it sees an opportunity to do so, he said, adding that banks offer another financing option.

(By James Attwood)