Chile’s state-owned copper producer Codelco may have turned the corner in its quests to stop an ongoing decline in production at its century-old operations as preliminary data indicates that output for 2024 rose by 3,000 to 4,000 tonnes, bringing the total to 1.329 million tonnes.

The figure is up from 2023’s 1.325 million tonnes and puts the miner on track to the company’s long-term goal of producing 1.7 million tonnes of fine copper annually by the end of the decade, chairman Maximo Pacheco told local publication Diario Financiero.

“We overcame the production valley in 2024 and are poised to enter 2025 on an upward trajectory,” Pacheco said, adding that December’s output exceeded 160,000 tonnes.

The executive believes that 2024 will go down in the books as the year the miner, once the world’s largest copper producer, began to regain lost ground. According to Pacheco, Codelco’s earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 35%, with the company achieving $5,500 million in cash generation.

Lost leadership

Codelco is in the midst of implementing an ambitious plan to extend the productive life of its mines, address declining ore grades and manage rising costs at its century-old operations.

Codelco now faces stiff competition from companies like US-based Freeport-McMoRan (NYSE: FCX) and BHP (ASX, LON, NYSE: BHP) which have expanded operations and output significantly.

With copper prices boosted by demand for electric vehicles (EVs) and renewable energy systems, the stakes for dominance in the sector are higher than ever. 

At the heart of Codelco’s difficulties lies its aging infrastructure. Mines like Chuquicamata, which has transitioned from an open-pit operation to an underground mine, are emblematic of the company’s struggles. The underground transformation, while essential for extending the mine’s lifespan, has proven both complex and expensive, requiring years of investment and facing repeated setbacks. 

Chairman Maximo Pacheco said 2024 will go down in the books as the year Codelco, once the world’s largest copper producer, began to regain lost ground

Similarly, plans to boost output at El Teniente, the world’s largest underground copper mine, have been postponed due to engineering challenges and funding constraints. 

Codelco’s financial position has also come under pressure. The Chilean government, which relies heavily on revenues from the state miner, has provided support to fund its ambitious capital expenditure plans. The company’s rising debt levels and the escalating costs of its projects, however, have limited its ability to invest in other promising opportunities, such as new mine developments. 

Despite the headwinds, Codelco remains a key actor of the global copper market, holding vast untapped reserves. 

Demand for the metal is poised to jump at least 60% by 2050, according to the International Energy Agency. Analysts at Jefferies expect prices for the red metal to rise more than 40% in the next two years.

Lithium game

Codelco is making progress in taking on the responsibility of leading the development of Chile’s lithium sector. This follows President Gabriel Boric’s 2023 directive for the state miner to spearhead the industry’s expansion.

Looking ahead, Pacheco said the company expects to secure binding offers from potential joint venture partners for its Maricunga lithium project during the first quarter of 2025. Construction is expected to begin in early 2027, with the goal of kicking off production in early 2030.

The Maricunga lithium project sits on its namesake salt flat, Chile’s second-largest in terms of reserves. (Archive image by Lithium Power International.)

Chile, the world’s no. 2 producer of lithium after Australia and holder of the largest known deposits of the coveted battery metal, opened up last year more than 20 lithium salt flats to private investors.

Additionally, Codelco is collaborating with Chilean lithium producer SQM (NYSE: SQM), the world’s second largest, to mine the metal in the Salar de Atacama salt flat.

Pacheco reported that the compliance requirements for this joint venture are nearly complete, paving the way for final approval of the contract, which replaces the one inked by SQM in 2018 with the Chilean economic development agency (Corfo). The Codelco-SQM partnership will run through 2060, with Codelco overseeing general management as of 2031.

Source: MINING.COM – Read More