Codelco is a very difficult subject for Chile,” says the economist, arguing that the targets based on structural projects have no longer been met and will not be achieved, and that adaptation will be more challenging than commonly believed. Regarding the copper market, he warns that it will remain tight because “there are no significant projects coming on stream during this decade.”
One of the most widely referenced analysts in the mining industry, his work frequently requires travel to different countries. While passing through Chile—after relocating with his family to Australia a couple of years ago—Juan Carlos Guajardo, Chief Executive Officer of Plusmining, spoke with Voces Mineras about trends in the copper market, price outlooks, the timing and feasibility of new projects, his view on Argentina, and the situation at Codelco.
In his view, the market will remain very tight, which supports upward revisions to copper price forecasts. On the demand side, he expects it to remain relatively stable, with an upward bias driven by the growing influence of new trends such as artificial intelligence and the energy transition. On the supply side, he estimates that new production will only begin to make a meaningful contribution from 2030 onward, with most viable greenfield projects in Latin
America located in Argentina.
Regarding Codelco, he believes the company will fail to reach its 2030 production target of 1.7 million tonnes, and that it is going through a very complex period, as projections based on structural projects will not materialize and the company will necessarily have to adapt to this reality.
Copper Price and Market Balance
Cochilco has revised its copper price forecast to an average of USD 4.55 per pound for 2026, while other institutions place it above USD 5. What is your estimate?
– We had a projection below USD 5, but we will have to update it, because developments have accelerated recently and there is little to suggest—unless something highly unexpected occurs—that there will be a significant price correction. On the contrary, I see greater upside potential than downside risk. Most likely, we will need to revise our forecast to above USD 5 in our next report.
Closer to USD 5 or USD 6?
– In nominal terms, the price is currently at record levels, but in real terms it is not at its highest. That does not mean it must reach a real-term record in the coming months, but it is an important indicator, as it suggests there is still room for further increases. The current real price level, compared with 2007, 2011, or the 1950s after World War II, remains lower.
How much room do you think remains?
– There have been isolated instances of daily real prices close to USD 7, and monthly averages close to USD 6. This suggests there is still room for prices to continue rising. Why do we believe this could happen? Because the impact on supply has been very significant. Between this year and next, and into part of 2027, around 1.4 million tonnes of copper will be lost due to accidents and other issues at major mines, which is substantial.
Typically, the supply-demand balance fluctuates between 200,000 and 300,000 tonnes, or up to 500,000 tonnes, either as a deficit or surplus. Losing 700,000 tonnes per year completely shifts the balance and leads to a clear deficit for an extended period.
Another known factor is that there are no significant projects entering production this decade. No matter how much one tries to accelerate output, there are no projects that can ramp up quickly. Some reopenings may occur—always at high cost—but they will not be sufficient to balance the market in the coming years.
Nor are there major demand shocks expected from China or the United States. It would take a war, a financial crisis, or a burst in the artificial intelligence bubble, or something of that magnitude. Since such events are unpredictable, one assumes the market will remain very tight.
And we should not forget treatment and refining charges (TCRCs), which reflect the severe shortage of concentrates. It is evident that there is a significant gap between smelters and mining companies, which are unable to reach agreements due to expectations of prolonged concentrate deficits.
How has demand behaved so far, particularly in China, and what outlook do you see?
– China’s growth rests on two pillars: an export-oriented economy and domestic demand, in which the real estate sector is highly relevant. The real estate market has been undergoing an adjustment for several years, which has significantly constrained China’s growth. However, China has avoided a real estate bubble burst like that of the United States in 2008; instead, authorities have chosen to deflate it gradually, meaning this process will continue for some time without becoming destabilizing.
On the export side, one might have expected tensions with the United States to cause a sharp decline, but China has worked hard to diversify its exports and has succeeded in maintaining its export-oriented industrial base. More recently, in response to weak economic data, China decided to introduce stimulus measures aimed at preserving economic stability.
In short, while China has faced challenges, it has been very cautious in preserving resources to support its economy and maintain stability. Although growth is no longer as explosive as in the past, China remains a major source of demand growth and will continue to provide relative stability.
As for Western economies, growth remains somewhat uneven. The United States is expected to lower interest rates, which should help offset some cooling, and there are no clear signals of an imminent crisis. The main concern lies in artificial intelligence, which has led to the overvaluation of many companies.
Could there be a kind of bubble there?
– That is the major concern. For copper and metals in general, what matters is the growth rate of data centers, which are indirectly linked to artificial intelligence through increased data usage. Greater computer use requires more data centers and cooling, which in turn drives demand for copper and other materials. All indications suggest we have reached a point where this is beginning to have a tangible impact on physical copper demand.
Do you have an estimate of how significant that could be?
– There are too many estimates to provide a precise figure, but in meetings I have attended in recent months, the data center component is beginning to appear in charts, accounting for around 5% to 10%.
Projects in Chile and Argentina
On the supply side, what do you think of the mining investment portfolio of over USD 100 billion through 2034 reported by Cochilco?
– I have not analyzed this latest information, so I cannot offer a definitive opinion. However, in many cases we have observed that project CAPEX increases due to rising costs, which inflates the portfolio value not because there are more projects, but because existing ones are becoming more expensive. Therefore, these figures must be interpreted with caution.
That said, there is no doubt that interest in investing in minerals will increase—there is no alternative.
When do you think we will see a change in supply or the entry of more significant projects?
– According to our projections, new production associated with projects will become more relevant from 2030 onward. Unfortunately, during this decade, timelines will not allow for a significant increase in output.
According to Cochilco’s portfolio, only 19% corresponds to smaller greenfield projects. Is there potential for a major new discovery in Chile?
– My view is rather critical. Chile has lagged in grassroots exploration aimed at new discoveries. Most exploration spending is focused on consolidating or expanding known deposits. Recent legislative changes could help increase grassroots exploration, but the results will only become visible in 10, 15, or even 20 years. In the meantime, we will face a significant gap in net production growth, with efforts focused on maintaining output from existing assets. Reversing this will take a long time.
Why did Chile reach this situation?
– In my view, the mining property system strongly favored legal certainty, which is positive, but adjustments should have been made earlier to incentivize investment in those properties. That did not happen; priority was given to maintaining ownership, which led to stagnation and underinvestment, creating today’s gap. Recent legal changes are moving in the right direction by encouraging renewed investment in mining properties and, therefore, exploration, discovery, and project development. However, the gap already exists and cannot be fully recovered.
What is your view on Argentina and its ambitious project portfolio?
– First, Argentina is encountering this project portfolio at a very favorable moment. Historically, it has not developed large-scale mining projects (with few exceptions), even though many have been identified but remained inactive for years. Now, in a context of project scarcity, market conditions are favorable for development. At the same time, Argentina faces strong political incentives to advance these projects in order to recover economically. After a severe crisis, the country needs substantial investment, which increases the likelihood that at least some projects will be developed.
But these projects would only come on stream in the next decade. Will it still be a good moment for Argentina?
– Absolutely, because investment decisions must be made now. If one looks at the pipeline of viable greenfield projects, most are located in Argentina, some in Africa, and perhaps a couple in Chile at best. Argentina offers the projects with the greatest investment potential in the coming years.
Codelco in Difficult Times
How do you see Codelco in terms of results and production?
– Codelco is a very difficult subject for Chile. It is in the midst of a very complex process, because projections based on structural projects will not be achieved. They were not met as originally planned, and the implications of that reality still need to be fully understood. Chile will have to live with a company that must adapt to this new reality. Part of that adaptation has already begun, and credit must be given to Máximo Pacheco for opening the company to new business opportunities and asset utilization.
You are referring to the partnerships being signed…
– That is one of the adaptation paths Codelco will have to pursue, because structural projects—the company’s core—will continue to face significant challenges, and the divisions will not deliver what Codelco needs to remain competitive.
Do you also believe Codelco will fail to recover its production by 2030?
– I believe Codelco will not exceed 1.5 million tonnes by 2030, and likely for several years beyond. This implies continued upward pressure on costs, requiring the company to manage this reality and diversify its revenue sources. It is a process of adaptation to a new reality that will be more difficult than Chileans generally expect.
Do you still see its debt as a major concern?
– Debt is a symptom of the problem I have described. Unfortunately, given the nature of these large projects, capital expenditures cannot easily be halted unless very drastic decisions are made. As a result, debt is likely to continue increasing significantly over the next five years—possibly by 30% to 40%.
That much?
– Yes, simply by maintaining the objective of continuing project development as currently planned, and given the production levels I mentioned, without any meaningful output increase.
Reviewing the agreements signed by the company, what is your view on the one with Anglo American for Andina and Los Bronces?
– In most cases, these are framework agreements that still need to be implemented. In the case of Los Bronces and Andina, the potential for a very good agreement is high, as there has long been recognition of trapped value in that area, and this agreement could unlock it.
Do both parties benefit equally?
– The agreement has the potential to do so, but as the saying goes, the devil is in the details. We need to see how it ultimately concludes. There are several logical elements, such as geomechanical constraints of having two operations so close together, available processing capacity at Los Bronces, and water availability differences. However, it must be negotiated carefully to ensure a balanced and mutually beneficial outcome.
An agreement that is already close to implementation is the one between Codelco and SQM…
– From the outset, I have expressed my doubts, because it was clear that there were alternative ways to proceed. In fact, a tender process had been planned, and significant efforts were made toward that end, led by Codelco board member Eduardo Bitran. Suddenly, overnight, a direct agreement was presented, raising many concerns, particularly regarding the so-called production valley that Codelco must internalize. That has never fully made sense to me. Direct lithium extraction technologies are advancing rapidly, yet this factor was not considered. There are many elements that raise red flags.
Unfortunately, all the time spent discussing this agreement is time lost that could have been used to prepare a tender. With 2026 approaching, I wonder whether a tender could realistically be conducted within four years, or whether the time lost has effectively locked us into this agreement. I have not seen the contracts, nor are they all publicly available, and I would very much like to study them in depth, but I remain skeptical that this was the best available option.
What is your view on the agreements with Rio Tinto, both for developing a mining district in the Atacama region and for lithium production in Maricunga?
– The first is quite interesting, as it involves a district with copper potential that has lagged over time—what was historically Potrerillos. I do not know how large it could ultimately be, but logically, one would expect remaining resources from decades past that could now be economically viable, especially at current prices.
As for lithium, Rio Tinto is one of the world’s leading mining companies. While it may not have the most extensive lithium experience, it is a major international player with whom a reasonable business case could be developed in Maricunga. These will not be massive ventures, but they could be suitable for Codelco’s new phase of adaptation.
There is also the recently announced agreement with Glencore for a new smelter. Does it make sense for Codelco to be involved in such a project?
– From Codelco’s perspective, one would expect this new capacity to allow the closure of inefficient facilities, because each day of operation at Codelco’s existing smelters represents losses for the country. At the same time, there are many complex ores in the region that could be processed at a new smelter with higher standards. This would provide commercial benefits to both Codelco and Glencore.
Source: Voces Mineras