Experts point out that higher costs are due to older copper deposits, as well as environmental regulations and operational requirements that result in increased expenses.
By Catalina Muñoz-Kappes
Since 2020, copper mining production costs have risen more in Chile than in the rest of the world. That year, producing the metal in the country was in line with the international standard, at approximately 239 cents per pound (cUS$). However, data from the first half of last year already showed a significant increase in costs, reaching cUS$ 340 per pound in Chile. In contrast, the same operation elsewhere in the world had a cost of cUS$ 306, according to information from the Mining Council and consulting firm Plusmining.
One of the key factors explaining the rise in production costs in recent years is the aging of Chilean mines. “Most of Chile’s major mines are over 20 years old and have aged. There has not been a significant number of greenfield projects in recent years that could increase the country’s net production and provide low-cost output to offset the rising costs associated with aging mines,” explains Juan Carlos Guajardo, Executive Director of Plusmining.
By contrast, copper deposits in other countries are more recent and therefore have lower associated costs. “Over the past two decades, there has been an increase in production through new, and therefore low-cost, projects in Peru, the Democratic Republic of Congo, and other countries. This makes the comparison between Chile’s cost trends and the global average less favorable for us,” he adds.
Additional Costs
In addition to the declining ore grades due to the aging of deposits, there are other associated costs that impact production. “Energy costs—particularly at the transmission and distribution levels—water scarcity, and the inclusion of desalination as a water supply alternative translate into higher transportation costs for supplies and increased energy costs related to pumping,” states Cristián Cifuentes, Senior Analyst at the Center for Copper and Mining Studies (Cesco).
The expert also highlights high wages and regulatory hurdles as significant factors. “In Chile, the workforce is highly skilled compared to other emerging mining regions. Additionally, environmental regulations often lead to delays and additional costs,” he notes.
Regarding regulatory costs, Guajardo believes that “increasing regulatory requirements is a global trend, though there are signs that the tendency toward over-regulation may be reversing. In Chile’s specific case, however, the rise in regulations has lost an overall perspective, and we now face a situation with redundancies and unnecessary complexities, as well as opportunities for various stakeholders to intervene in the permitting process, weakening the certainty that a project requires.”
Decline in 2024
Although copper mining production costs in Chile, as well as globally, experienced a sustained increase between 2020 and 2023, costs decreased in the first half of 2024.
According to a Cochilco report comparing copper mining costs between the first half of 2023 and the same period in 2024, costs dropped due to favorable market conditions, such as lower material, energy, and fuel prices. The report also notes that this cost reduction was more pronounced in smaller operations and that a 17% increase in the exchange rate contributed positively.
Nevertheless, Cochilco points out that costs remain above the average levels recorded between 2015 and 2021.
Source: El Mercurio