(Bloomberg) — Codelco, the world’s biggest copper supplier, lowered its annual production guidance and raised cost estimates after another disappointing quarter at its mines and projects in Chile.
The state-owned behemoth’s output is running at the lowest in a quarter century, prices are down and costs are up — all at a time when the world needs more copper for batteries and electric grids in the shift away from fossil fuels.
Codelco’s woes are part of an industrywide story as ore grades decline and new deposits get harder and costlier to develop amid supply chain disruptions, inflation and construction bottlenecks. The firm is investing about $3.5 billion a year in a bid to reverse the output slump, juggling four major upgrade projects that have been hit by delays and cost blowouts.
Second-quarter production dropped 17% from a year earlier, based on calculations from first-half results reported by the Santiago-based firm on Friday. The annual projection was cut to between 1.31 million and 1.35 million metric tons from a previous call of 1.35 million to 1.42 million.
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The output decline has accelerated due to project delays and mishaps at mines, hindering Codelco’s contributions to a government that needs more money to fight festering inequalities. Damage from a seismic event Monday will curb production at the giant El Teniente underground mine.
Besides the production guidance cut, Codelco lifted its cost estimate for the year to $2.20-$2.35 a pound from $1.90-$2.02.
Chief Executive Officer Andre Sougarret resigned last month after failing to reconcile the demands of the job with those of his personal life. His replacement may by announced next month.
Chairman Maximo Pacheco, the former government minister and paper company executive, has become the public face of Codelco, attempting to get projects back on track while also taking on a prominent role in Chile’s new state-led approach to lithium.
Pacheco expects Codelco’s copper production to begin to recover next year as new projects ramp up. The investment burden and project challenges that Codelco is enduring now will set up the company for another 50 years of production, he said earlier this month.
(Adds increase in annual cost guidance in sixth paragraph)