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SANTIAGO, Oct 17 (Reuters) – The shine may soon come off Chile’s decade-long copper boom as technical and regulatory problems in getting new mines into production highlight just how hard it will be to keep ratcheting up the supply.
Chile is expected to produce a record 5.83 million tonnes of copper this year, rising to 6.23 million next year, state copper commission Cochilco forecast on Friday. Many in the industry are confident new mines will keep boosting supply, and are worried more by falling demand in the key buyer, China.
But the optimism over output may be misplaced. Already, the official estimate for production in 2014 has been downgraded twice, cut from 6.07 million tonnes – a drop equivalent to the output of a medium-sized mine – after teething problems at three new projects and falling output at older ones.
And soon the growth of recent years will likely grind to a halt, industry experts say. “Next year and towards 2016 we will see the peak of production in this decade but I don’t think we will see very significant increases in Chile until the next decade, when we hope large projects in the pipeline will be unblocked,” said Juan Carlos Guajardo, head of local copper think-tank CESCO.
CESCO sees growth in new production falling off sharply after 2016, with a market “balanced or in deficit through to the end of the decade”, Guajardo said.
The easy pickings in Chile have gone, leaving miners to scrabble through stony and contaminated ores at remote locations, where water is scarce and energy expensive.
The investment environment is also not as welcoming as it once was. Some tax incentives were recently removed by President Michelle Bachelet’s new center-left government. Workers are demanding a greater share of the pie and more local communities, often backed by the courts, are fighting against projects they see as degrading the environment.
This month, for instance, Goldcorp’s $3.9 billion El Morro gold and copper mine was halted by Chile’s Supreme Court, which said the company must consult again with local indigenous groups.
“It is a structural phenomenon and it is very much linked to greater technical challenges and regulatory compliance, which new projects have had to deal with,” Sergio Hernandez, vice-president of Cochilco, told Reuters.
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