Codelco contain rising costs in copper production after eight years
The company attribute the result to the containment plan initiated in 2010. The state company is positioned in this Item below the rest of the domestic industry and on par with international mining
One of the major headaches that had Codelco’s management, led by Thomas Keller, is cost escalation in its main sites. To address this situation, the company began implementing an ambitious cost containment plan, according to its own figures, would be working.
As explained from the state comapny, in 2013 the company was able to stop for the first time in eight years the growth of the so-called cash cost (C1)-item calculated only operating expenses in the production of copper and it is discounted benefits by-products such as molybdenum-scoring its first decline since 2005.
Preliminary figures used in Codelco at end-2013 on the basis of a study by the consultancy Wood Mackenzie suggested a decline of 0.3%, after rising to C1 of 162.9 cents per pound of copper versus 163.5 cents that were recorded in 2012.
Since the company say the cost curb responds to the good results that has thrown the cost containment plan began to be implemented in 2010 and deepened in 2012 by the Productivity and Costs Structural Project (PEPC).
The latter allowed the state company to reduce by more than $ 400 million its 2013 expenses, improving its cash ultimately cost average among all divisions.
Among the measures implemented for lower renegotiation costs and suspension of service contracts with third parties, the increase in the recovery of molybdenum sites such as El Teniente, the decrease in the use of explosives and fuels, and optimization in activities and internal processes are recognized within divisions.-
For next year the goal set by the administration is to cut spending by another $ 400 million.
Despite this, during the last ten years Codelco has risen 308% its operating cost, going from C1 of 40.1 cents per pound for copper in 2003 to the current 2013 162.9 cents.
This strong growth is explained by the age of some sites in the state company which today exhibit lower ore-percentage of copper extracted per ton of earth-generating a higher production cost. An example of this are the Chuquicamata (1915) and Salvador (1926) sites, which are two of the divisions with high costs in the company.
To this is the rising labor costs and increased energy prices for businesses also added.
Position against other mining companies
Despite the increase that has exhibited the Codelco’s cash cost since 2005, this is below the weighted average of major private mining country. According to Wood Mackenzie, the C1 of such operations is 183.5 cents per pound. This difference responds to deteriorating ore grade of the vast majority of domestic chores, which occurred five to ten years after the law begin to fall in Codelco’s sites.
As for the comparison with the world’s largest mining, the latter averaged 161.4 cents C1, roughly in line with the state company.-
Source: El Mercurio
