The hurdles for Chilean miners on the road to the energy transition

According to a study by consultancy CRU Group, nearly half of 40 mining companies in Chile – which represent about 55% of the country’s production of metals such as copper, zinc and nickel – do not have clear goals to achieve carbon neutrality by 2050.

Copper mining in Chile faces challenges such as aging deposits, increased environmental permitting requirements, and the need to adopt technologies to boost production while reducing carbon footprints and costs. 

“Chile is less competitive, both in costs and emissions, than 50% of the global industry,” Eric Medel, senior copper cost model analyst at CRU, told BNamericas.

"Costs have increased 40% in the last 10 years and there will be a rise in costs from today's US$1.35/lb to US$3.90/lb by 2050, which demands more technological changes,” Mendel told a seminar hosted by CRU and copper studies center Cesco.

The upward trend in operating costs has also been reported by state copper commission Cochilco. Inflation, leading to higher input prices, and a drop in production have influenced the scenario. 

Larger operations generally have lower costs than smaller ones, Cochilco said, as they tend to have better financial support and energy efficiency, with more access to renewable energy and technologies. 

The best practices in energy use are considered essential to counteract the geological problems of mining. "By 2050 [copper] grades are set to fall 17%," said Medel.

That means higher costs to extract more ore and at greater depths to produce the same amount of copper.

Achieving a low-emissions energy supply that allows for extracting and processing 24 hours a day is a challenge for mining. In the energy transition, the first users who are capable of transforming their production models will be the first to benefit, the CRU event was told.

However, the supply of green fuels is still insufficient to meet all the needs of the industry and agreements with local suppliers are required to obtain energy from renewable sources.

"We have seen a large deployment of PPAs [power purchase agreements] in the mining industry that will lead to 50% of the sector's energy demand being covered with renewable energy by 2023-24," said Medel.

Some PPAs that have been agreed with miners in Chile involve Antofagasta Minerals (AMSA) and Colbún to supply the Zaldívar mine; AMSA with Engie Energy for Antucoya; Collahuasi with the Pozo Almonte photovoltaic plant; Candelaria with AES Chile; BHP's Escondida and Spence units with Enel and Colbún, respectively; Caserones with Enel; Sierra Gorda with AES Gener; and Lomas Bayas with Engie.

To accelerate the transfer to carbon neutrality, Chile has an energy efficiency and energy storage and electromobility laws. Both incorporate benefits to promote clean energy in operations.

"They have speeded up the issue, but we still need to understand how the best use of energy can help businesses in terms of costs and productivity, in addition to reducing emissions," Natacha Henríquez, a consultant in mining processes and energy efficiency at local firm Optimmet told BNamericas.

The copper industry needs to adopt a green mining model, where water and energy efficiency are prioritized, Elio Cuneo, president of energy consultancy Orrisk, said in an interview with BNamericas in October.

By 2035, an additional 7.6Mt of copper a year is forecast to be needed to meet global decarbonization goals, as the metal is critical for electric vehicles and renewable energy storage.

This is equivalent to the total production of Chile, the world’s largest producer, and number two Peru. Together, the two account for almost 40% of the current global supply. 

"Every year a mine with similar characteristics to [Chile’s] Collahuasi should be opened to fill the supply gap," Medel said.

However, copper production is expected to fall from 2025 to 2026 and "there will be a significant supply gap of around 6Mt by 2035," said Erik Heimlich, head of base metals supply at CRU.