Joaquín Villarino: “The mining projects have not been eliminated, but have been postponed.”
The large mining sector is going through a 2013 Chilean caution. While the ghosts of copper at a price below U.S. $ 3 per pound have been away metal partly-closed yesterday at a price slightly above the U.S. $ 3.3 per pound, which means an increase of 9.7% in just 45 days, the focus today is on, rather than invest and grow, to reduce costs, fired in the last time, in order to ensure the profitability of existing and future mining operations.
This caution also impacted investment announcements in the mining industry. In fact, in the last year have not met more projects than previously known and announced and one thing that has increased the total projected investment in the sector by 2021 The Cochilco final report Cochilco rises to U.S. $ 112 million investment projections for the period, an amount 7.9% higher than the previous projection, against all odds, have been, again, increases in investment costs.
According to the CEO of the Mining Council, Joaquín Villarino, the good new from Cochilco report is that projects “in doubt” were not removed, but have been postponed, waiting for better weather and price, especially , costs.
Is it too optimistic investment estimates made by Cochilco?
Cochilco has information that allows today say that is the portfolio of mining projects that could be developed by 2021, but from the Mining Council we believe that although this is the portfolio of projects, which has been demonstrating in recent years , especially with the rising costs and productivity declines, it is very difficult for all those projects to be developed by 2021.
What redeems this land through projects register made by Cochilco ?
What is important from Cochilco data is that these projects have not been removed, but have been postponed. However, we believe that the delay will be even higher according to the data we handle.
There are projects that have been developed even as the economic and technical analysis figures do not add up, as Cerro Casale or expansion of Salvador. Could we expect that the portfolio could increase rather than decrease?
Keep in mind that any investment portfolio is enhanced by increased costs, ie to increase the investment portfolio is not necessarily linked to increased production, but also because today continue to produce the same 5 million tons produced annually by Chile costs more money, and then you have to invest more. That’s what we’ve seen in the last 10 years, we continue to invest a lot of money as a sector, but the volume of production remains the same, between 4.8 and 5.2 million tons annually. So can we say that we will increase to U.S. $ 112 million investment? I get a little perplexed, because how much of that $ 112 million involve only maintain production or increase production, or simply maintain production because there are higher costs? A clear example is electricity: if energy rises 40%, then you have to invest more to produce the same, but it will not increase production. The report sees increase concentrate production and will represent about 82% of the entire portfolio. Contrary cathode production, which increasingly diminishes more. Can we speak of a loss of value added for the sector?
We have made an analysis in which the loss of value added is not greater, and refineries in Chile are not very competitive when compared to refining other countries like China and Japan, where they receive large subsidies. Chile today is not competitive not because it is inefficient, but because countries now have large subsidies to refinery therefore should refine further.
Source: Pulso
