Codelco holds production as profits plunge

Vancouver Falling copper prices took their toll on the world’s largest producer during the first nine months of 2001.

Chile’s state-owned copper miner, Codelco, saw its pre-tax earnings plunge of 38% to US$330 million, from US$534 million tallied in the first nine months of 2000. The company cites falling copper prices, which averaged US74 per lb. in the Jan-through-Sept. period, compared to US82 per lb. in the corresponding period of 2000. Copper prices tumbled to their lowest level since Feb. 1987 after the Sept. 11 attacks in the United States and U.S. retaliation in Afghanistan.

Despite the shortfall, Codelco does not plan to follow in the footsteps of Phelps Dodge (PD-N) and London-based Antofagasto, both of which announced plans to trim output. Phelps Dodge, the world’s number 2 producer, recently announced that it would cut about 14% of its annual copper output and dismiss almost 1,500 workers because of weak copper prices. Antofagasta followed suit by dismissing 100 workers at its Michilla mine in Chile and putting new projects elsewhere on hold at least until 2005. The Michilla mine and Lince refinery, which produced 51,100 tonnes of cathodes last year, is expected to have a cash cost of 73 per lb. next year up from 69.4 this year. Next April or May, the company will decide whether to shut down the mine altogether or keep it running.

Codelco, on the other hand, says it will maintain current production levels and move forward with expansions and new projects. The Salvador mine has the highest cash costs to produce a lb. of copper of its five wholly owned copper mines. But at last report, the company says that the mine would not only remain open but that an upgrade at the mine’s smelter, which began this year, will continue. The major also sees no delays in exploration programs for the Mansa Mina and Gaby deposits, both located in northern Chile near the Chuquicamata mine. Codelco’s other mines are El Teniente, Andina and Radomiro Tomic, as well as a 49% stake in El Abra, which is majority-owned by Phelps Dodge.

The company, which had an average cash cost of US44 per lb. in the first half of this year, expects to increase copper production by 4% this year to 1.68 million lb.