By Pratima Desai and Julian Luk
LONDON (Reuters) – Chile’s Codelco, the world’s largest copper producer, is reassessing the cost structure at its mine projects, its chairman said on Friday, given recent overruns.
Chairman Maximo Pacheco also told Reuters in an interview in London that the state-run company would maintain capital spending next year at $4 billion, roughly in line with 2023.
The company, which has some of the highest input costs for miners in Chile, said in July direct production costs during the first six months of the year jumped 41.3% to hit about $2.12 per pound, from $1.506 the year before.
Pacheco reiterated ahead of the London Metal Exchange industry gathering next week that Codelco expects copper output to rebound in 2024 after it touched the lowest in 25 years last year.
“The market clearly knows we are facing a reduction in production,” Pacheco said.
“This is not just about the level of production, it is about the extension of the life of our mines.”
Pacheco said last week that Codelco’s mine plan overhaul would address factors holding back production, including plants that have capacity far superior to the mineral grade being mined.
He said on Friday that China remained an important market accounting for 40%-45% of Codelco sales despite a restructure in its sales strategy.
Codelco has been grappling with a host of challenges apart from issues at mining sites.
Chile’s Centre for Copper and Mining Studies (CESCO) said in a report seen by Reuters in August that Codelco is at risk of insolvency due to rising costs and a growing debt pile.
In response, Codelco said it had a solid financial position and broad access to financial markets.
On Thursday, Codelco announced its Chief Financial Officer Alejandro Rivera had resigned effective Nov. 3, amid a credit rating downgrade from Moody’s Investor Services and mounting debt.
Rivera’s resignation came just months after the surprise June resignation of Codelco’s CEO.
Pacheco also reiterated the company expected to reach an agreement with lithium miner SQM by the end of the year.
Chile’s government earlier this year announced plans to strengthen state control of the white metal, only allowing public-private partnerships to participate in lithium exploitation.
The South American country has the world’s largest lithium reserves.
(This story has been officially corrected to rectify the chairman, Maximo Pacheco’s comment, in paragraph 1 and the headline)
(Reporting by Pratima Desai and Julian Luk; Writing by Eric Onstad; Editing by Jan Harvey, Veronica Brown and Sharon Singleton)
