Diego Hernández urges Government to clarify its energy policy
16-Oct-2012 La Tercera – News
CEO of Antofagasta Minerals asserted “we need increased participation of State in order to have a long-term Energy Policy”
Chilean Government must make progress in clarifying energy policy to help resolving the supply problems that jeopardize million-worth investments, Diego Hernández, CEO of Antofagasta Minerals said to Reuters.
Mining activity consumes approximately a third of energy in Chile. But the companies that operate in largest copper producer country in the world, which expects to attract US$100,000 million investment up to the end of the decade, are now placing energy supply on top of their ranking of concerns.
Besides, lowering mineral grades, lack of labor, and regulatory problems must also be considered.
Experts blame the inappropriate land use regulation and a decision-making centralized system that removes obstacles to social groups opposing against hydroelectric and thermoelectric plants throughout the country.
“We need an increased participation of State in order to have a long-term Energy Policy”, Hernández said to Reuters.
“Not to build generation units but to facilitiate and decide what areas of the country are enabled to build power plants. Because it is the case the new projects today must face the fact that nobody wants an energy plant in their region”, he added.
Years of low investment, a 8.8 earthquake in 2010, drought, and logistics problems due to the length of country land, have weakened electric power network in Chile.
Last August, being one of largest setbacks the electric power companies have faced, highest court of Chile ruled out the US$5,000 million Castilla thermoelectric plant.
“The electricity issue is certainly affecting (mining) projects. We still do not know if we will have energy available on time”, Hernández said.
However, the 64-year old executive that until last May was the head of Codelco, the largest copper producer in the world, also asked mining companies to show more “discipline” when negotiating power supply in order to keep costs rising under control.
Hernández pointed out that between 2004-2005, 40% of Chilean production was in lowest costs quartile. For 2020 this proportion might be as low as 10-15%.
Antucoya in progress
Antofagasta holds some of largest capital projects in mining industry, including Antucoya which is estimated will cost US$1,700 million in 2014 when it is completed. Annual production per ton cost will be US$21,000.
Hernández commented that Antucoya was in progress and the company is to decide by end of this year whether they will proceed with the acid plant that would add US$300-350 million to cost but would reduce the company exposure to the very volatile sulphuric acid market.
He also confirmed his August forecast where he stated that 2013 would offer a balanced copper market and potentially will provide a small surplus.
“We believe this year supply and demand will continue being difficult. Next year market will continue being tough for supply and demand scenario, however if the so announced copper arrives to the market, we could be possibly observing a very small surplus”, he explained.
The mining executive sees “good signs” in China, including low inflation, although the market is “considering what else to do”.
“There is room for optimism”, he said.
