Codelco to receive US$975mn in govt funding

Thursday, December 1, 2016

The Chilean government has agreed to inject US$975mn in fresh funds for copper giant Codelco. Of the total, US$500mn will come from the 2014 capitalization law, which will be used to fund the company's so-called structural projects aimed at maintaining and/or increasing current production levels.

The announcement was made by finance minister Rodrigo Valdés on Thursday.

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Additionally, the government will send a bill to congress to provide Codelco with an additional US$475mn to help lower its debt, due to the impact that the "copper law" has on the company.

Under the copper law, 10% of Codelco's sales revenue goes to fund the country's armed forces. During the first nine months of the year, the company handed to the Chilean state a total of US$733mn, US$707mn of which was due to the copper law.

Valdés said in a statement that the decision to send a bill to congress to partly compensate for the effect of the copper law in 2016 and 2017 was made by President Michelle Bachelet, and it is expected to be submitted in the coming weeks.

He said next year's capital injection will be contingent on the speed of Codelco's investments. In the case of the copper law, it will depend on the price of the metal.

"If, for instance, the price of copper goes up and Codelco generates pre-tax profits, it won't be necessary to do that [mitigate the impact of the copper law]."

The bill will also extend the 2014 capitalization law by one more year to February 2019, as Codelco's investment program has suffered delays.

The 2014 law establishes a US$4bn capital injection program through 2018, US$1bn from reinvesting profits and the other US$3bn from state-issued debt.

Codelco chairman Óscar Landerretche said in a statement that the US$975mn represents "an enormous effort that comes at a difficult time in which state coffers are facing significant restrictions."

For his part, CEO Nelson Pizarro said that Codelco has fulfilled its commitments and production goals, resulting in major cost-cutting efforts.

Codelco, the world's largest copper producer, reported a pre-tax profit of US$79mn in the third quarter. Production in the first nine months was 1.38Mt.


Pictured: Codelco CEO Nelson Pizarro (left), finance minister, Rodrigo Valdés (center) and Codelco chairman Óscar Landerretche after meeting on Thursday