Lower production, higher cash costs for Chile's copper miners

Chile's copper production fell 1.9% to 5.63Mt in 2021 amid rising operational costs, according to a study released Friday by government body Cochilco.

Of the 22 large-scale copper mining operations in the study, 16 posted an increase in cash costs. The cash costs of the 22 were US$1.328/lb last year, an increase of U$0.10/lb over 2020, driven by rising inflation including higher prices for energy, fuel, freight and sulfuric acid.

Lower copper grades were a factor in last year's drop in production.

Cash costs are costs up to the sale of the product (cathode), minus income from byproducts such as molybdenum, acids, gold and silver. Salaries, fuel, electricity, materials, acid, smelting, refining and maritime transport are some of the factors included in the cash cost. 

The net cost to cathode is considered a vital data point in the current mining royalty debate, as it shows the wide range of costs in the local industry, said mining undersecretary Willy Kracht during the study's launch. 

Cochilco highlighted the increase in prices of molybdenum (82%), silver (23%) and gold (2%), which had a positive impact on byproduct credits and prevented cash costs from jumping higher.

Despite the increase, the 2021 cash costs remained below pre-pandemic levels. 

 

At the launch of the study, Cochilco head Joaquín Morales said companies must increase production considering the new technologies, in order to reduce costs and achieve sustainability. In addition, he stressed that the study aims to contribute to both the mining industry and government, to facilitate better decision-making and the formulation of new policies.