Crash copper mining threatens profitability and development projects
Chores and lower grade old already operating at a cost higher than the price of the metal, while paralyzed investments grow. It is the local mining scene
A decline of 23% in twelve months shows the price of copper on international markets. The fall has ignited alarms in a sector of the economy since 2006 shows historical figures, bankruptcy records and reached earnings unseen.
Tuesday, copper closed at U.S. 3.01 USD per pound, representing the lowest figure in nearly three years and that left him to a step of the dreaded ghost of the U.S. 3 USD per pound. The situation relates with a strong global uncertainty, although this low not entirely surprise. In recent months the metal has been falling sharply, amid a veritable perfect storm, with questions about China, Europe with slow recovery and the United States in a similar situation. For this reason, mining companies have already taken several measures which include strong cost-cutting plan and expenses (in Chile, Codelco spearhead) and the suspension and / or postponement of investment projects.
Still, the fears persist, as these plans have not been fully consolidated. For this reason, in the industry argue that the risk of low price is much higher now than before, because the costs are much higher. While Codelco itself had in 2008 a cost C1 (which eliminates by-product credits and corporate costs) of U.S. $ 0.7 per pound, today that figure climbs to U.S. $ 1.63 and up. Moreover, in the case of Chuquicamata, C1 cost is U.S. $ 1.93 per pound, representing an increase of 78% in just two years.
That is, if in 2008 (the last period on the price of copper, which coincided with the global economic crisis) had some slack to keep running the vast majority of local mining operations (which benefited from rapid recovery quote, which in November 2009 had returned to a value greater than U.S. $ 3), in 2013 and it is not. Even more, total costs and expenses of Codelco, known as C4, is U.S. $ 2.47. Just U.S. $ 0.7 on Friday’s closing metal.
Even so, the scene has some good points. In mining there is consensus that the fall in copper drag down to the products and services associated with mining, today shot and in the center of the debate between mining themselves. This, because a reduction in the price, in the context of a general decline in the price of metals, also generates a drop in demand for business inputs, such as grinding balls, and equipment, as general a quote on ground forces halt projects.
In a recent presentation, under Exponor 2013, Codelco’s CEO, Thomas Keller, listed a total of seven major mining projects have been modifying their original schedule, mainly by issues of profitability. This is the first signs of a low cycle, something for which Chilean mining had lost the habit.
Source: Pulso
