CRU-CESCO-Chilena Antofagasta expects caution in mining investments despite recent rise in copper prices

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CRU-CESCO-Chilena Antofagasta expects caution in mining investments despite recent rise in copper prices




File image of Iván Arriagada, CEO of Chilean mining company Antofagasta Minerals Plc, during an interview with Reuters in Santiago, Chile.


© Reuters/Stringer
File image of Iván Arriagada, CEO of Chilean mining company Antofagasta Minerals Plc, during an interview with Reuters in Santiago, Chile.


By Fabián Andrés Cambero

SANTIAGO, Apr 11 (Reuters) – The recent rise in the price of copper would not be able to entice large miners to rush into projects without guaranteeing their future profitability, the head of Chile’s Antofagasta, one of the world’s largest producers, told Reuters of metal.

Metal prices have hit a decade high this year amid expectations of a vigorous economic recovery from the coronavirus pandemic.

But Iván Arriagada, executive president of the mining company, recalled that in recent years of the “super cycle” of prices supported by the growth of the Chinese economy, deposits of high cost and marginal profitability were inaugurated, which were “punished” once the prices fell.

“Investors are cautious from a project point of view and in that sense I do not see an impetus to accelerate and make investments that do not reflect a very reflective process of the probabilities they have of renting what is expected,” he said.

He also noted that inorganic growth in the industry is “challenging” as there are not many opportunities for prospects or attractive fields for sale.

“This is an industry where there have been no major discoveries in recent times … The copper industry has a tremendous challenge to be able to respond to demand,” he added.

For his part, he ruled out that Antofagasta thinks of any initiative outside of the two currently planned. “We make our investment decisions according to our long-term view of prices, precisely because we know that the price, as it rises, is going to fall.”

Antofagasta is ready to bring an upgrade to its flagship Los Pelambres mine online next year, which will bring it an additional 60,000 tons per year.

It also plans to submit to an investment decision in 2022 an expansion of its Sentinel division that would add 140,000 tons of the metal per year.

However, he recalled that part of the new production will serve to mitigate the drop in the mineral grades of the deposits.

Although he said that the company has a solid financial position, with almost no net indebtedness, if it approves the progress of the Centinela project – with projected investments of some 2.7 billion dollars – “we would seek a part of the financing for that project in the market.”

STRONG PRICE IN 2021 AND 2022

The global economic recovery, led by China and the United States, as well as the more vigorous drive to combat the effects of climate change are giving a solid foundation to the price of copper, according to Arriagada.

But he recognizes that this has attracted investors who add volatility to the short-term value by adding the speculative factor since it is not based on the demand and consumption of physical copper.

“We expect the price trajectory to be favorable, between $ 3.5 and $ 4.5 this year and next, and what happens next will depend on how the health crisis, the recovery, and the actions associated with it continue to evolve. climate change, “he said.

However, he stressed that “we are in a context of high volatility and greater uncertainty than usual and therefore these estimates and projections may be affected.”

Despite the uncertainty, Arriagada is confident that the company will perform this year in its production according to the estimated range of between 730,000 and 760,000 tons.

“We believe that as conditions are today, we currently expect to be in the middle part of this range,” he commented.

(Report by Fabián Andrés Cambero)

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