The Chilean state-owned miner faces US$25 billion in debt and its lowest copper output in 28 years.
As global copper demand accelerates, one of the world’s largest mining companies findsitself in a precarious position.
Chile’s state-owned copper producer Codelco, long regarded as the backbone of the country’s mining industry and a vital source of government revenue, is grappling with US$25 billion in debt and its lowest production level in 28 years. At the same time, it is embroiled in a series of controversies, including a fatal mining accident and investigations into overstated production figures.
These challenges have raised concerns that Codelco’s current model is failing to capitalize on copper prices hovering near record highs, at a time when artificial intelligence and the global energy transition are driving unprecedented demand for the metal. They have also sparked a debate that would have been almost unthinkable only a few years ago: should Codelco scale back its growth ambitions and give private capital a larger role?.
The question has taken on new urgency since conservative President José Antonio Kast took office earlier this year, marking Chile’s sharpest political shift to the right since the Augusto Pinochet dictatorship five decades ago.
Even within the new administration, however, few politicians advocate denationalizing Codelco, making any radical overhaul unlikely. Established in the 1970s after Chile nationalized its vast copper mines from U.S. companies, Codelco became a symbol of the country’s economic sovereignty. Today, it retains an almost sacred place in Chile’s political history, having survived the wave of privatizations carried out during the Pinochet era.
Yet with the global copper market heading toward what could become its largest supply deficit on record, government officials and industry leaders are exploring ways to restructure the company, reduce its debt burden, and restore profitability. Options under consideration range from asset sales and lower capital expenditures to expanding joint ventures and sharing infrastructure. If Chile fails to act, Codelco risks squandering a historic surge in copper demand that has pushed prices to record levels.
“Without copper, we wouldn’t have artificial intelligence, air conditioning, electric vehicles, or the modern economy,” mining entrepreneur Robert Friedland said in an interview last month.
Friedland’s company, I-Pulse Inc., recently began collaborating with Codelco on a new rock fragmentation technology. “Codelco remains extraordinarily important.”
Scrutiny of Codelco has intensified over the past year.
In late July 2025, a collapse at El Teniente—Codelco’s most profitable mine—claimed the lives of six workers. It was Chile’s deadliest mining accident in decades and halted operations in key expansion areas.
An internal audit later uncovered “inconsistencies and concealment of information” in technical reports related to a rockburst that had occurred at the same mine two years earlier, leading to the dismissal of three senior executives. Prosecutors and regulatory authorities are now investigating whether deficiencies in the 2023 reporting process compromised risk oversight before last year’s fatal collapse.
Codelco is also facing multiple investigations over inflated production figures that enabled it to meet corporate targets. An internal review found that the company had overstated its 2025 copper production by nearly 27,000 metric tonnes—roughly 2% of its annual output.
The scandals have reignited a long-standing debate over whether Codelco requires deeper structural reform.
The production overstatement case coincided with the appointment of Bernardo Fontaine as chairman of the board. An economist and businessman named by President Kast in May, Fontaine—along with several senior cabinet ministers—has delivered unusually sharp criticism of Codelco’s performance under former chairman Máximo Pacheco and pledged to overhaul the company’s operations, finances, and corporate governance.
Responding to the production overstatement that triggered performance bonus payments, Economy and Mining Minister Daniel Mas said the company was “out of control,” remarks that likely unsettled private-sector partners and holders of more than US$20 billion in international bonds.
The debate also underscores the broader challenges facing Chile’s copper industry, whose production has stagnated despite more than US$100 billion invested in mining over the past decade, according to estimates by the country’s Mining Council. Codelco’s problems have emerged amid rising public debt and persistent fiscal deficits, limiting the government’s capacity to finance the company’s growing investment needs.
The implications extend well beyond Chile. BloombergNEF forecasts an unprecedented global copper deficit of 7 million tonnes by 2035 under current market conditions.
Although the copper market has historically alternated between surpluses and deficits as part of normal commodity cycles, the imbalance now emerging is fundamentally different. It is being driven by structural forces: rapidly rising demand colliding with declining ore grades, aging mines, and a lack of new projects.
Chile exemplifies that challenge, according to Kwasi Ampofo, Head of Metals and Mining at BloombergNEF.
According to BloombergNEF’s long-term supply model, Chilean copper production is projected to decline from around 5.4 million tonnes today to approximately 4.2 million tonnes by 2050, as existing mines become depleted. Codelco is particularly exposed because its operations are becoming increasingly deeper and more complex, requiring substantially higher capital investment.
At the same time, ore grades—a measure of the amount of metal contained in the extracted rock—continue to decline, increasing production costs and reducing copper recoveries.
Codelco’s production costs are more than 50% higher than the average of the world’s three largest copper mining companies. Unlike other major global producers, the state-owned company is almost entirely concentrated in a single country.
Copper demand could receive an additional boost following the conflict between the United States and Iran, as escalating geopolitical tensions drive spending on electrification, renewable energy, artificial intelligence, and defense, analysts at Goldman Sachs Group Inc., including Samantha Dart, wrote in a note to clients last month.
“We believe that investing in aging Western power grids is a national security priority because of their critical role in artificial intelligence and energy security,” the analysts wrote.
Chile remains the world’s largest copper producer, but its share of global output has fallen from more than one-third in the mid-2000s to less than one-quarter today. At the center of that decline is Codelco, whose production remains about 30% below the levels projected two decades ago, while its debt metrics rank among the weakest in the industry. As Chile
debates how to revitalize its flagship mining company, the outcome will help determine whether the world can bring sufficient new copper supply to the market.
Fontaine, a long-time critic of Codelco’s management and operational efficiency, is leading a strategic review aimed at restoring profitability, reducing debt, and improving transparency. As he told members of Chile’s Lower House on June 24, the review includes assessing the company’s asset portfolio to determine whether investments should be postponed and whether asset sales or strategic partnerships should be pursued. Fontaine has pledged to “put the house in order” and to avoid producing “for production’s sake.”
“Our goal is to make Codelco profitable again. We don’t need to be bigger—we need to be profitable,” Fontaine said. Codelco did not immediately respond to requests for comment.
Chilean mining research and consulting group Cesco has put forward proposals that would allow Codelco to spin off undeveloped exploration assets and raise financing through capital markets, Chief Executive Jorge Cantallopts said in a June interview. Another proposal would reorganize Codelco as a holding company with more autonomous business units, improving accountability while providing greater flexibility to partner with competitors.
Juan Carlos Guajardo, founder of consulting firm Plusmining, argues that more far-reaching reforms are needed. To stabilize its finances, Codelco may need to divest certain assets, close others, and decentralize its organizational structure, he said. Such measures would require careful management to avoid labor disputes, given that the state-owned miner employs more than 76,000 people, including contractors.
Above all, Guajardo argues, the company should abandon its goal of restoring annual copper production to the pre-pandemic target of 1.7 million metric tonnes and instead consolidate output around current levels of approximately 1.3 million tonnes, or potentially even lower.
“The company simply does not have the capacity to produce at that level,” Guajardo said. “Forcing the company to pursue that target has been part of the explanation for the current crisis.”
In a presentation earlier this June, Chile’s Copper Commission (Cochilco) stated that Codelco has consistently failed to meet its production targets since at least 2020, citing recurring shortcomings in planning and operational execution. The commission also highlighted unusually high production spikes recorded in December, which—following the internal audit into the overstatement of 2025 production—have raised broader concerns about the reliability of the company’s production reporting.
A more decentralized corporate structure could also pave the way for partnerships at existing mining operations. Until now, joint ventures with major mining companies have largely been limited to exploration activities because Codelco is prohibited from selling all or part of its historic mining assets.
However, it may be possible to share capital and risk in certain expansion projects or to partner with neighboring privately owned mining operations.
“Codelco needs to be recapitalized, which is very different from privatization,” said Carlo Arqueros, a conservative lawmaker and member of the Lower House Mining and Energy Committee. “These projects, or joint capitalization initiatives with strategic partners, represent a viable alternative.”
Pacheco, however, argued during the final days of his tenure as chairman that the company had already adopted a more disciplined approach to capital allocation and operational stability. He maintained that Codelco’s debt burden largely reflects the need to recover from decades of underinvestment while continuing to transfer profits to the government and meet legacy financial obligations dating back to Chile’s military regime.
Jorge Alessandri, a conservative lawmaker and Speaker of Chile’s Lower House, said in an interview that Codelco’s growing indebtedness is fueling the debate over structural reform.
Nevertheless, any initiative to introduce private capital directly into Codelco or its historic mining assets would require congressional approval and, potentially, constitutional amendments, making it politically difficult.
Alessandri stopped short of endorsing privatization, arguing that Codelco should remain under Chilean ownership. However, he pointed to the agreement reached under the previous administration to integrate Codelco’s Andina mine with Anglo American Plc’s neighboring Los Bronces operation as evidence that even left-leaning governments recognize the need for greater public-private cooperation.
Source: El Mercurio