Mining companies report falls in production and put pressure on the price of copper

The metal yesterday traded at US $ 4.26 a pound.

Both BHP and Antofagasta Minerals reported setbacks in their reports, and there is even talk of a restricted supply that could take the metal to record values.

Nine months are those that the local mining industry accumulates with consecutive falls in the inter-annual production of copper (from June 2020 to February of this year), a factor that is not less and that is putting a significant pressure on the price of the metal, which for these days is experiencing a new positive streak and is close to exceeding its highest value in almost a decade.

Along with the financial effects linked to the depreciation of the dollar, experts indicate that concern regarding the supply of the mineral is gaining weight, first linked to the announcements made in China that make it more complex to produce in that country, but to what announcements from the main mining companies operating in Chile have been added.

First it was the Anglo-Australian BHP, operator of the largest mine in the world, Minera Escondida, which revealed this week that in the period between July 2020 and March of this year, the production of said deposit fell by 8%, completing 821 thousand tons of copper.

Along these lines, yesterday it was the turn of the local mining company Antofagasta Minerals (AMSA), the mining arm of the Luksic group, a company that completed a production of 183 thousand tons in the first quarter of the year, which although it is in line with the projections of the firm, is 5.7% less than in the same quarter in 2020 and 5% less than in the fourth quarter of 2020.

In this scenario, the executive president of the AMSA group, Iván Arriagada, stated that “the copper market continues to have a solid performance and we expect this to continue, since the structural supply and demand dynamics support a restricted physical market . In the meantime, we maintain our focus on cost control and disciplined capital allocation. ”

However, the company continues to feel the effects of the pandemic, which is why it announced that to prevent the spread of the virus, the major maintenance planned for the second quarter at Minera Los Pelambres, which requires a large number of additional workers, is being revised to be able to reschedule non-critical activities for later.

Regarding the impact of this situation on the copper price, the executive director of Plusmining, Juan Carlos Guajardo, points out that the market is very deep, so the price is determined by the interaction of many actors who buy and sell, and that is why there are several elements that influence the price.

“At this time, the factors that predominate with the greatest force are, firstly, macroeconomic and financial conditions, especially reflected in the dollar, but then, in a period like this, news of supply restrictions becomes more relevant. , such as the increased restrictions on smelters in China and the results reported by mining companies regarding greater evidence of lower copper production, Given the increased focus on raw material markets, the supply situation has a greater impact on them. markets, “he said.

In this scenario, the loss of competitiveness that the local industry is seeing in the last decade plays an important role and that keeps production stagnant, among other things, due to the fall in mineral grades, which I know is increasingly needed greater earth movement to maintain production. Proof of this is that Escondida achieved a record performance from its concentrators in the last nine months, thereby partially offsetting the drop in ore grade.

The UC academic Gustavo Lagos explains that in times of high prices like the current one, the mining companies reorganize their plans, trying to increase production, and for that they have to use the total capacity of the concentrators and increase the supply of rock, reducing the law, but the more it produces, as the cost remains variable, the greater the utility at the higher price.

“The issue of supply is very important, because it is common in the last 15 years for mines to produce less than what they advertise, it is more difficult to comply with production plans because they are large, complex mines, and they encounter many problems. It is a matter of looking at the production of Chile, which is over 5 million tons since 2004 and we still have not reached 6 million, “explains Lagos.

Deputies prepare to vote in particular on the mining royalty project

A long discussion is expected for next Monday in the Mining commission of the Chamber of Deputies, an instance in which the royalty project that seeks to be established regarding the sales of copper and lithium that are made in the country.

Yesterday ended the period to enter indications to the initiative, totaling more than a dozen proposals, such as that of the deputy Francisco Eguiguren (RN), who is of the idea that the figure is 3%, applying it to the net sales of companies, but this amount can deduct compensation expenses, freight costs, among others.

Where there were major divergences was regarding the destination of the funds collected, despite the fact that in the opinion of the Executive this is an unconstitutional project. Most of the participants proposed having these resources or part of them for the communes where the mining activity takes place. The financing of projects of the Ministry of Sciences, which are developed in the framework of research on covid-19, was also pointed out.

Meanwhile, the deputies of the Christian Democracy (DC) pointed out that a part of the eventual Revenue be used for the creation of a basic and universal emergency income in the context of the constitutional state of exception of catastrophe due to the pandemic.

For their part, the deputies Pablo Vidal (ind.) And Marcela Hernando (PR) proposed that the compensation be differentiated, depending on whether the mining operators maintain a relationship with activities that promote the industrial development present in Chile and generate added value, by. Example, through the foundry business in national territory.

However, one of the points that has been highlighted by the Government in the middle of the debate is that there is no rush in the discussion of the initiative, since a large part of the mining industry has tax invariance at least until 2023, therefore that there would be no impact on the collection until that date.

Faced with this situation, Deputy Daniel Núñez (PC), who participated as a guest of the Mining Commission, called on the mining companies to negotiate this invariable condition with the Government, with the intention of raising funds to face the effects of the pandemic.

Source: El Mercurio