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MeneameControversy generated over alleged "losses" at Chile's state copper producer Codelco due to future sales contracts signed at prices below current levels demonstrates a lack of knowledge regarding the industry, an inside source told BNamericas.
The controversy started when paper La Tercera quoted Codelco board member Andres Tagle as saying the company lost US$1.9bn over the last four years and could lose another US$2.68bn within the next three years due to future sales contracts signed during the 2000-06 period.
Tagle's statements caused some lower house members to call for the creation of a special committee to investigate possible irregularities in the contracts' negotiations.
Some of the deals expired at the beginning of this year and the remainder will do so in 2013. The agreements were signed at prices of US$1.5-2.26/lb. During 2000-05, prices on the London Metal Exchange fluctuated between US$0.82/lb and US$1.67/lb.
"Nobody in the industry was able to foresee at the time that copper prices were going to move to averages of over US$3/lb for several years, only dropping during the global financial crisis, and then returning to the same levels now," the source said.
The source added funds obtained from the future sales were used by the company at that time to increase cash flow and finance development projects, such as the Gaby mine in northern region II.
Meanwhile, former Codelco CEO Juan Villarzu, who was in charge when most of the contracts were signed, ruled out any possible irregularities in the negotiations and said that they were intended to create value for Codelco.
"These contracts bring benefits and costs for Codelco. Just focusing on the costs and overreacting to them implies ignorance or bad faith," Villarzu was quoted as saying by La Tercera.
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