At the state-owned company, older deposits with lower ore grades and greater geological complexity are compounded by a heavier operational structure.
At the end of this month, Codelco will have a new chairman, Bernardo Fontaine. One of the tasks he will have to undertake is to delve not only into the company’s debt, the ongoing production audit, and labor safety policies, but also into why its costs are higher than those of its private-sector peers. Among specialists, there is a preliminary answer: declining ore grades and a heavier operating structure.
Codelco reports two types of costs: the cash cost, or C1, and the total cost (also referred to as C3). In 2025, the state- wned miner’s cash cost reached 208.6 cents per pound, representing a 5% increase compared to the previous year. This cost reflects the price of extracting and processing copper up to the point of sale, explains Juan Cristóbal Ciudad, Senior Market and Industry Analyst at Plusmining. In other words, it represents the operational cost. This metric may include revenues from by-products such as gold, silver, and molybdenum, which mining companies usually treat as a “credit” deducted from costs.
Francisco Sánchez, an academic at the University of Chile’s School of Economics and Business (FEN), points out that Codelco, unlike companies such as Antofagasta Minerals, does not report this cost before deducting by-product credits. “That would be ideal, because it would effectively measure mining efficiency and make comparisons easier, as there would be no noise from by-products,” he says.
What Codelco does report is total cost, an indicator that private mining companies generally do not disclose in their annual reports. According to Ciudad, this figure encompasses all costs attributable to production, adding capital costs (such as depreciation and amortization), net financial costs, and indirect costs to the C1 metric. In 2025, Codelco’s total cost reached 372.9 cents per pound, a 14% increase over the previous year. By contrast, the average copper price in 2025 was 451 cents per pound.
Private Miners’ Costs
“C1 cost is commonly used as a benchmark for comparative analysis because it reflects short-term operating costs and measures operational efficiency. However, it is based on specific criteria without external audits, which allows comparisons between assets, although it should be interpreted with caution,” Ciudad explains.
Private mining companies report cash costs far lower than those of Codelco. In the case of Antofagasta Minerals, its global C1 cost was 119 cents per pound. However, at Centinela, once by-product credits are applied, the cost drops to 75 cents per pound. At Escondida — the world’s largest copper mine operated by BHP — the cost of producing one pound of copper is 112 cents. In contrast, at Spence, also operated by BHP, the cash cost reaches 205 cents per pound, close to Codelco’s levels.
The Factors Behind Higher Costs
Codelco’s higher costs compared to private mining companies are explained by a combination of structural and operational factors.
“First, there is the lower ore grade. Codelco operates with ore grades around 0.6%, while several private operations are between 0.8% and 1%. This means that a larger amount of material must be moved and processed to produce the same quantity of copper, directly impacting costs,” says Hernán de Solminihac, member of the Executive Committee of CES
UC and former Codelco board director.
“Second, the maturity of the deposits plays a role. Many of Codelco’s operations are older, deeper, geologically more complex, and involve longer transportation distances, all of which increase extraction costs. A third factor is the operational structure, which offers less flexibility in cost management compared to some private operations,” he adds.
He further notes that Codelco faces the challenge of major structural projects under development, which “put pressure on costs in the short term but are necessary to sustain future production.”
Along the same lines, Ciudad states that Codelco’s higher costs “are not only about management, but also the operational reality of its deposits: the corporation is currently struggling with the maturity of its mines (older and more complex assets, lower grades and recoveries), operational disruptions, and increasingly demanding underground geology.” Added to this is “a constant flow of investments aimed exclusively at the physical survival of its operations, a lower contribution from by-products to revenues, less business flexibility, and greater organizational rigidity.”
In addition to greater geological complexity, Sánchez explains that Codelco has “a heavier operational and organizational structure, with higher indirect expenses and productivity challenges. Although it has by-products such as molybdenum that help reduce net costs, this effect is not sufficient to offset a more demanding cost base.”
“By contrast, the private sector moves at a different pace. By focusing on strategic assets with high efficiency margins and leaner corporate structures, companies such as Antofagasta and BHP manage to turn their scale and by-products into an advantage, demonstrating that, along with management differences, differences in deposit characteristics also play a role,” says Ciudad.
Sánchez concludes that “the gap with companies such as Antofagasta Minerals reflects both geological conditions and differences in operational and organizational efficiency.”
Source: El Mercurio