Copper exceeds US $ 4 after nine years and analysts predict acceleration of investments

The country’s main export came to US $ 4.11 for every pound.

Reactivation would be seen first in smaller initiatives, such as exploration, but it would benefit the entire portfolio of projects that exists for the decade.

Many already saw it coming and yesterday it happened. In a new day on the rise, the price of copper surpassed US $ 4 a pound, in a 14-day rally in which it accumulated an advance of 59 cents (17%).

Only yesterday it rose 2.96% on the London Metal Exchange and closed at US $ 4.11 a pound. This is the highest value since September 2011.

One of the reasons is the diminished stocks that currently exist in London, a figure of around 75 thousand tons, and which have fallen by up to 30% so far this year, putting pressure on the market each time.

According to the experts, the positive trend that the country’s main export is experiencing could even lead the price to exceed US $ 4.5.

The better prospects could accelerate the pace of investments, especially for those projects that already have their environmental permits and that are awaiting the investment decision by the boards.

“We are going to see the reactivation of projects, because the projections point to this level lasting at least 2 years. What happens is that there is a lot of liquidity in the markets, which will continue to rise, especially after the stimulus package promoted in the US by President Joe Biden. With this, people start buying copper and building and when there is a lot of money, investors invest in a procyclical way, ”says academic Gustavo Lagos, from the Catholic University.

According to the latest mining cadastre of Cochilco, as of 2020, for the current decade there are 35 initiatives for the development of copper mines, which concentrate more than US $ 66 billion in disbursements.

Regarding the works that are expected to materialize and start up until 2023, they reach US $ 15.3 billion, which would be the ones that could reap the greatest benefit in the period due to the high prices.

“Certainly the price, which is an indicator of the expectation of future income, is very important in investment decisions, but you have to be very careful, because investment decisions in mining are long-term, so you have to distinguish by stages. In the long term, this is a powerful signal for all types of projects and, in the immediate term, it must be segmented ”, assured the executive director of Plusmining, Juan Carlos Guajardo.

The expert points out that the first thing that will be reactivated will be the exploration activity, and then continue with small producers. He adds that medium and large initiatives also depend on other factors, but progress can be seen in previous stages, such as financial and environmental studies.

Guajardo reveals that another advantage that the country has —and that has sometimes been criticized— is that most of the projects are expansions or part of current operations. “It is easier to resort to these initiatives than to start from scratch, so the Chilean portfolio could have a faster journey and find more benefits than countries with greenfield projects, such as Peru, which has large projects, whose obstacles to materialize are higher. ”.

On the other hand, exploration, a key stage for the development of new projects, during the last year was one of the most affected segments of the mining industry. According to Cochilco figures, the world budget showed a 10% drop, reaching US $ 8,328 million, with Chile being the country with the highest disbursement at the regional level and the fourth place worldwide: In detail, a budget was registered in the country in mining exploration for the year 2020 of US $ 458 million, a decrease of 30% compared to the previous period.

Finally, it is also expected that a wave of mergers and acquisitions may be generated in the industry, seeking to take advantage of the good moment of the listing. Part of this trend has already been seen in recent days, when mining giants like Barrick have announced the sale of assets, such as a site in Peru, and Canada’s Teck, which decided to focus on the development of the Quebrada Blanca Phase II megaproject, and eventually get rid of initiatives in Mexico and Peru.

Hacienda puts cold cloths on the historic streak of the mineral

The good moment that the price of copper is going through is closely followed by the Government, since it is about important positive effects for the collection, in the middle of a delicate moment for the fiscal coffers.

The biminister of Energy and Mining, Juan Carlos Jobet, pointed out that the current level of the mineral “has long-term fundamentals” and that it puts the country “in a unique position of opportunity to continue developing the mining sector, increase production capacity and thus meet this expected rise in demand ”.

The head of the Treasury, Rodrigo Cerda, described the moment as good news, but called for prudence. “We know that commodities in general, and the price of copper is one of them, have volatility and that means that there are periods where it can rise, but there are also periods where it can tend to decrease. In that sense, we look closely at what that is happening with the price of copper, but we must be prudent and see if this is maintained in the medium term or is subsequently corrected ”.

Meanwhile, Codelco also addressed the situation, and, according to Reuters, the vice president of Marketing of the state mining company, Carlos Alvarado, explained that the investment plan of the state company is based on long-term decisions “that are not altered by specific price situations (..) However, this situation gives us a good opportunity to contribute with our cash generation and the financing of our investment portfolio, instead of increasing debt ”.

Source: El Mercurio

Translated with Google Translator