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Copper Mining in Latin America: Project Overview

With Chile´s largest mining exposition (Expomin) approaching in April, many of the companies visiting will be wondering what is in store for the copper industry in the Region. We expect Expomin will attract the usual players along with a good amount of new companies who are hoping they can introduce new technologies or ways of doing things that can help miners reduce costs, operate safer and improve productivity.

Copper prices have been in difficult waters this past year although analysts seem to have favorable medium to long-term projections. The International Copper Study Group’s (ICSG), most recent projections see world mine production increasing 4.2% to 19.5Mt in 2016 with the market moving into a deficit of around 130,000t as demand growth outpaces production growth, after a surplus of 41,000t in 2015.

With strong investments in copper projects throughout the world these past few years, deficits are projected mainly due to ongoing demand strength, albeit at lower rates, supply disruptions and production cuts. Lower prices this past year has also caused major miners to shelve plans for production growth and new developments to focus instead on cost cutting and productivity at existing operations.

New mines that came online over the last couple years continue to be plagued by ramp-up problems. For example, Lumina Copper’s Caserones mine in Chile, which started operations in 2014 and has potential capacity of around 150,000t/year, produced only 64,000t in 2015 due to a series of operational hitches and was operating at just 60% of capacity in early 2016.

With all that being said, Latin America still leads the world in copper mine production. Latin America’s share of global mined copper output as a region grew from 19% in 1960 to over 40% in 2014, and this share will continue to expand as the project portfolio evolves.

Below we have outlined on a country basis some of the projects that companies should be watching for:

Chile

Chile remains by far the biggest copper producer although its share in world production has declined and is projected to stay flat in 2016. The only new project to start up in 2015 was Antofagasta Minerals’ US$1.9 billion Antucoya mine that has design capacity of 85,000t/year and will be ramping up in 2016.

In 2015, the list of mining projects compiled by state copper commission Cochilco, shrunk by US$30 billion, with overall investment in the sector expected to be US$74.226 billion between 2015 and 2025 versus a projected US$105 billion in the 2014-23 period the previous year.

There was a number of mines bought and sold in 2015 along with new partnerships such as the one with Goldcorp and Teck Resources announced last year. The merging of the El Morro gold and Relincho copper projects to create the 50:50 JV Corridor project. The two projects are 40km apart, and the merger will allow substantial cost reductions.

In the meantime, miners such as Codelco, BHP Billiton and Antofagasta Minerals continue to invest through the down cycle, pushing ahead with multiple multi-billion-dollar copper development projects that will help support the sector’s investment profile in the coming years.

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Peru

Peru is the second largest copper producer in Latin America and is about to ascend the ranks to second only Chile in terms of global production. Copper output in Peru rose 23.5% to a record 1.70Mt in 2015 from 1.38Mt the year before, according to the energy and mines ministry (MEM).

Peru has an estimated US$64bn in mining projects, but the uncertainty shrouding the commodities markets may delay new developments despite the record US$34bn invested since 2011. Projects now on hold due to the unfavourable price environment include Anglo American’s US$3.3bn Quellaveco, Hochschild Mining’s US$111mn Crespo, Southern Copper’s Los Chancas and Rio Alto Mining’s La Arena copper sulfides expansion.

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Outlook for the Rest of Latin America

 

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Mexico –

Grupo México will lead the country to significant growth in its copper production. The major expansion projects at Buenavista del Cobre are due to add 460,000t of copper this year and 500,000t in 2017, making it responsible for the lion’s share of the country’s output (522,000t in 2014).

Buenavista del Cobre, has invested US$3bn to date with an additional US$1.58bn planned to be spent in 2016. This will be the third largest copper mine in the world. The company also has plans to develop the El Pilar project and is looking into possible synergies with Buenavista, about 45km away.

Brazil –

With copper mine production of around 300,000t in 2014, about three times what it was a decade ago. Brazil hosts four copper producing mines: Vale’s Sossego and Salobo (110,000t and 98,000t copper in concentrate, respectively, in 2014), Yamana Gold’s Chapada (60,555t in concentrate) and Mineração Caraíba’s Pilar (nominal capacity of 30,000t/y in concentrate and 5,000t/y SX-EW cathode).

Vale’s expansion project Salobo II continued to ramp up in 2015 and was expected to reach design capacity in Q4, lifting overall output at the operation to 200,000t/y. Caraíba has three copper projects – Suçuarana, Vermelhos and Boa Esperança, the latter of which is targeted to start production this year to produce 30,000t/y, according to minerals production department DNPM.

Argentina –

Argentina’s shared border with Chile lends it favorable geological potential for copper exploration. It also has four potential large-scale projects: Agua Rica (Yamana Gold), El Pachón (Glencore), Los Azules (McEwen Mining) and Taca Taca (First Quantum). Only El Pachón has a fixed start-up date, but with Mauricio Macri’s more investment-friendly policies, the coming years just might see some of the other projects move forward.

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Panama –

First Quantum Minerals’ Cobre Panamá, with capex of US$5.95bn, is on track for first production in late 2017. Output is expected to average 320,000t/y copper, 100,000oz/y gold, 2Moz/y silver and 3,500t/y molybdenum, over a 40-year mine life. Significant progress is expected in 2016, with spending estimated at US$880mn.

Ecuador –

The US$1.4 billion Mirador project is being developed by Chinese-owned EcuaCorriente in partnership with the government. However, other advanced mining projects in the country have stalled as their owners hit deadlock in talks over investment contracts with the state. The country is actively trying to improve investment in the mining industry so there is hope that more projects will be developed in the coming years.

Conclusion:

New projects in the Region will offer mining service companies a great opportunity to introduce new products, technology or ways of doing things. Operating mines in the Region also offer an incredible opportunity because they are looking to improve productivity, reduce costs and improve safety in a tough pricing environment. It is safe to say that Latin America will continue to attract copper miners, especially since companies such as Wood Mackenzie estimate that the world will need 10 Escondidas to fill a 10Mt supply deficit by 2028.

For companies wanting to keep an eye on projects and new developments in the Region, we highly recommend BNamericas. A free trial can be accessed here.

Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. Over the last 15 years we have been supporting foreign companies with their growth in Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets. 

To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at cmm@hgomezgroup.com.