An emblematic project that began operating this year is fueling expectations that the African continent will take a relevant role in the production of the red mineral.
“We consider this to be the best new copper mine built in the world over the last decade and it should be one of the ten most profitable copper mines by 2023.” With this auspicious description, a Citi report reveals the role that Kamoa-Kakula, a copper deposit located in the Democratic Republic of the Congo, can play in the future of the industry, putting pressure on the Chilean operations. .
The mine, owned by Ivanhoe Mines (39.6%), Zijin Mining Group (39.6%), Crystal River Global Limited (0.8%) and the government (20%) seeks to produce 200 thousand tons per year By 2022, with a view to growing to 400 thousand tons in the future, fighting for the first places of the largest operations in the world, behind Minera Escondida, which is around one million tons per year.
“This project would allow the Congo to be in an important productive position, where it currently does not occupy more than 7% of world participation, but may reach 10% by 2023, when phase I and II are in full operation,” says the coordinator. strategy and public policies of the Chilean Copper Commission (Cochilco), Cristian Cifuentes.
Juan Carlos Guajardo, executive director of the consulting firm on the mining industry, Plusmining, comments that what is happening is “important because the Congo, along with Zambia, came to be on par with Chile and Peru, at some point in the years 70. They were the largest copper producing countries in the world. And later, for reasons of mining policies, these countries lagged behind and Chile and Peru managed to take off and be among the first places. Latin America seems to no longer have so many advantages and Africa could, under certain conditions, improve.This does not happen overnight, but this is an important sign to watch.
Pressure in Chile?
The start of operations at Kamoa-Kakula has raised expectations that Africa will take a more relevant role in copper production. It is estimated that this continent has about a third of the world’s mineral reserves.
Another point in favor is that the deposits have better ore grades, which implies that fewer tons of material must be moved to obtain the same production as in other countries. This deposit in the Congo has a grade of 5%, well above what is being seen in Chile, which is around 0.9%, and down.
“The concentration of copper is very important because it makes exploitation cheaper. The higher the copper grade, the cheaper it is to exploit, therefore, I believe that this mine will be very profitable, ”says Gustavo Lagos, an academic from the Department of Mining Engineering of the Catholic University. It is estimated that this task would have a direct cost (C1) of less than US $ 1 per pound.
However, the African continent still has important challenges in terms of political stability, to attract and develop long-term investments, such as mining.
The discount rate with a surcharge for country risk in January this year, based on Moody’s sovereign bond classification, establishes that Chile has a risk 0.68% higher than that of the United States, while the Congo is by 7.26%.
“In 2020, it is estimated that copper production (from the Congo) reached just over 1,350,000 tons. Beyond the Kamoa-Kakula expansion, there are several important brownfield-type projects in the coming years, such as Tenke Fungurume, Mutanda, Deziwa or Kansanshi. There is development of projects, although smaller, and a lot of prospecting in the Kalahari belt in Botswana and Namibia ”, says Erik Heimlich of the international consultancy CRU.
Thus, the pressure on Chile will be subject to conditions, emphasizes Gustavo Lagos. “The project will affect the world market to the extent that it produces enough copper, so of course it will occupy a part of the space that is available to invest in the future. As that happens, it will put pressure on Chile. This project already puts some pressure, but by itself it will not remove Chile from its leadership in copper, what it can do is if something radical happens with our institutional framework and our taxation, that if it could achieve it, “he says.
Source: Diario Financiero