Codelco CEO’s exit puts copper giant in a bind as output stalls.

By Fabian Cambero

The surprise exit of Chilean mining firm Codelco’s CEO will put the state copper giant in a bind, analysts and insider sources said, even as it tries to revive flagging production of the red metal and make a foray into electric-vehicle mineral lithium.

The world’s largest copper producer said on Tuesday that chief executive officer Andre Sougarret would step down by the end of August, only a year after he took the role, citing “complexities” around the business and personal strain.

Codelco posted its lowest copper production in a quarter of a century last year and has been tasked with spearheading the state’s push to take more control over lithium development in the country, which has the largest reserves of the EV metal.

Four company sources and one industry source cited potential risks of missing production targets this year, issues from weather to accidents hitting some projects and internal politics between Sougarret and powerful chairman Maximo Pacheco.

“It’s not too surprising, taking into account the very different personalities between André and Maximo,” said Juan Carlos Guajardo, head of the Plusmining consultancy in Santiago.

“There have been several other changes in the administration which probably reflect the desire to make more changes.”

The departure of Sougarret, a respected engineer who gained plaudits for leading the 2010 rescue of 33 miners trapped for 69 days, will raise pressure on Codelco to find a quick replacement at a delicate juncture for its copper business.

One of the company sources said Sougarret had been pushing for “realistic” investment to strengthen the copper production pipeline, but that “the politicians did not want to be honest about the medium-to-long-term outlook.”

Codelco delivers all of its profit to the state, though it currently has approval to reinvest some 30% of profit annually.

“There was operational frustration,” said another of the sources, a long-time analyst who asked not to be named talking about internal company politics.

Pacheco and Sougarret did not immediately respond to requests for comment for this story. Codelco and the mining ministry declined to comment.


At Codelco the board chairman is usually the political bridge to the government, while the CEO is in charge of technical operations. Pacheco is a former minister of Energy and was also Codelco’s vice president of operations in the 1990s.

A third company source with knowledge of production said that so far this year it looked challenging for the firm to meet annual targets, which it had set in March at between 1.35 million and 1.42 million metric tons of copper. Concerns over meeting targets had put more pressure on the executive team.

In recent months the company has faced operational problems, accidents and adverse weather events that have affected its activities, while so-called structural projects have suffered delays in their development.

Some key executives have also now been shifted to managing the firm’s entry into lithium, after the government charged Codelco in April with leading a major shift to take state control over the sector, a relatively new area for the miner.

Several of the sources said that in the current environment it might prove difficult for the state miner to find a high-profile candidate to succeed Sougarret and to attract the experts it needs to boost copper and lithium projects.

“I don’t think the person will come from outside. The replacement should come from a vice president,” Guajardo said.

Source: Yahoo Finance