Drop in output hurts Chilean miners' cost containment efforts

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Monday, November 6, 2017

The lower copper output of Chilean miners in the first six months has affected cost containment efforts underway since the end of the commodities supercycle, according to state copper commission Cochilco.

The latest costs report by the agency shows C1 costs of the country's 21 largest copper mines averaged US$1.378/lb in January-June compared with US$1.297/lb in 1H16.

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Cochilco said costs fell 13.5 cents in the first six months thanks to lower prices and lower quantities of supplies needed by the industry, such as fuel, steel and others. However, dwindling production and the impact of foreign exchange and inflation pushed costs per pound higher by 21.6 cents.

The C1 costs of the country's 19 largest mines fell to US$1.274/lb in 2016 from US$1.535/lb in 2015.

Chile's copper production in the first half of the year was 2.52Mt, down 9.0% from 1H16, largely impacted by the 43-day strike at BHP's Escondida mine (pictured) in February-March, as well as lower output by state copper giant Codelco.

Since the end of the commodities boom, miners across the globe have introduced strict cost cutting efforts, including the selling of assets, massive layoffs, contract renegotiations and more efficient use of key supplies like oil, energy and steel.

Cochilco said that of the 21 operations, only eight managed to lower costs in the first six months. Combined production of the 21 mines was 2.30Mt, representing 91.2% of the country's copper output.

The operations taken into account by Cochilco include BHP's Escondida, Cerro Colorado and Spence; state giant Codelco's El Teniente, Radomiro Tomic, Chuquicamata, Ministro Hales, Andina, Gabriela Mistral and Salvador; Antofagasta Minerals' Los Pelambres and Centinela; and Anglo American's Anglo American Sur and Collahuasi, a JV with Glencore.