Although copper prices are hovering around US$6 per pound, lower investment in previous years due to regulatory uncertainty, the lingering effects of the pandemic, and aging mines are among the factors that have reduced production volumes at Chile’s major mining operations.
Five main factors appear to explain the sustained decline in Chile’s copper production.
This is reflected in the weak Monthly Economic Activity Index (Imacec), which posted a 0.9% year-on-year decline through May. According to Chilean Copper Commission (Cochilco) figures, copper production fell 8.8% during the first five months of the year, totaling 2.0375 million tonnes.
According to Juan Carlos Guajardo, Executive Director of Plusmining, the decline stems from lower sustained investment in mining due to project complexity and delays; the lack of certainty for investment decisions in previous years; the financial discipline adopted after China’s commodity supercycle, which translated into lower capital expenditures; and the impact of the pandemic, which forced companies to scale back exploration, maintenance, and mine development.
Guajardo adds that the industry has become more vulnerable because of insufficient investment and the aging of mines, reflected in declining ore grades, leading to production challenges.
Cristián Cifuentes, Senior Leader of Studies and Content at Cesco, adds another factor: prolonged water stress—particularly in northern Chile—and increasingly frequent extreme weather events.
He notes that operations such as Collahuasi (owned by Anglo American and Glencore, with production down 3.4% through May), Spence (BHP, down 28.2%), and Centinela Oxides and Sulfides (Antofagasta Minerals, down 25% and 8.5%, respectively) have faced water shortages and declining ore grades, forcing them to adjust their mine plans.
Los Pelambres, Antofagasta Minerals’ flagship operation, also recorded a decline during the first half of the year due to lower mining volumes and lower ore grades. AMSA reduced copper production by 9.5% to 285,000 tonnes in the first half, although it maintained its production guidance of 650,000–700,000 tonnes for the full year.
A few days ago, Australia’s BHP reported lower copper production from its Chilean operations for fiscal year 2026 (July 2025–June 2026). Production at Escondida declined by 3%, to 1.26 million tonnes of copper. BHP attributed the decrease to lower ore grades, which averaged 0.90% in 2026, compared with 1.02% in 2025.
Álvaro Merino Lacoste, Executive Director of Núcleo Minero, attributes the decline to lower ore grades, the need for greater investment, financing constraints, more demanding environmental and community regulations, and the uncertainty created by Chile’s constitutional reform processes. He also points to the lengthy approval process for the mining royalty legislation.
Codelco: A Permanent Loss of Production
Regarding Codelco, Guajardo believes the situation is even more serious. “It is the result of a permanent loss of production and governance failures stemming from attempting to execute too many large-scale projects simultaneously (the structural projects). We estimate that Codelco has permanently lost around 400,000 tonnes of annual production, equivalent to the output of a large-scale mine.”
Overall, this represents slightly less than the annual production of Collahuasi (406,000 tonnes in 2025).
Cifuentes adds that another temporary but prolonged issue at the state-owned company is El Teniente, following the 2025 accident that claimed six lives. Through May, the division had produced 103,000 tonnes, a 27.2% decline year over year.
“Recovering that production will not take just a few months—it will likely take the remainder of the year. The area where the accident occurred contained the production lines that were expected to sustain El Teniente’s operations over the coming years.”
According to Guajardo, there is “light at the end of the tunnel,” although still a distant one. If the approximately US$20 billion in mining investments announced in recent months are carried out, sustained production growth would likely not materialize until around 2032.
Uncertainty
According to Guajardo, mine life extension and sustaining capital projects have been delayed because of the lack of investment certainty in previous years—not solely because of the political environment.
“Mining companies have not invested heavily in capital expenditures in recent years. I believe this dates back to 2011, when China’s first commodity supercycle came to an end. Companies were left heavily indebted and paid few dividends.” Since then, he says, mining companies have adopted an extremely disciplined approach to capital allocation, taking care not to overspend.
Slower Investment Pace
Although lower production results from a combination of operational factors—including lower ore grades, water shortages, and reduced ore processing—Guajardo argues that there is a more fundamental cause. “Mining involves highly complex and capital-intensive processes, with large-scale equipment and limited operational flexibility. Everything has to function correctly all the time. If investment levels are not maintained at an adequate pace, operational vulnerabilities inevitably become more frequent.”
The Lingering Effects of the Pandemic
The pandemic forced mining companies to make difficult trade-offs to sustain production, the consequences of which are only becoming evident years later.
Guajardo explains that mine development slowed, exploration programs were reduced, and mine planning activities were postponed.
“Years later, companies no longer have a clear understanding of the ore bodies they need to mine, resulting in the extraction of lower-grade material. Certain maintenance activities were also postponed, increasing equipment failures and downtime.”
Extreme Weather
According to Cifuentes, the causes of lower production are multifaceted. In addition to investment considerations and more conservative mine planning regardless of commodity price cycles, Chile’s status as a mature mining country has resulted in declining ore grades that are weighing on production.
He also highlights increasingly severe climate conditions, including prolonged droughts that have significantly increased water costs in northern Chile.
“Operations are also affected by isolated extreme weather events, such as heavy snowfall, which can halt mining activities, particularly at high-altitude operations.”
Lengthy Project Permitting
Merino argues that stricter environmental and community regulations, together with the constitutional reform process, created uncertainty that discouraged mining investment.
He also cites the implementation of the new mining royalty and, above all, the lengthy permitting process for mining projects. “The extended timeline required to obtain approval for a mining project naturally demands greater financial resources and time, and ultimately acts as a significant disincentive to investment—something particularly important for a mining country like Chile.”
Source: El Mercurio