(Adds comments on debt, comments from Antofagasta CEO)
By Anthony Esposito and Pratima Desai
SANTIAGO, April 5 (Reuters) - Chile’s state copper producer Codelco is slashing spending by $6 billion over the next five years in the wake of a steep fall in the price of copper, significantly reducing its targeted output, Chief Executive Nelson Pizarro said on Tuesday.
The world no.1 copper miner has previously said it would trim some $4 billion of budgeted spending from its key investment plan.
Added to other cost cuts, that implied around $6 billion spending cuts over the next five years - meaning a loss of 13 percent of planned output over the next 25 years, said Pizarro at the annual Cesco/CRU copper conference in capital Santiago.
Cooling demand in key buyer China has driven the copper price to over a six-year low in recent months, leading miners globally to reduce production, freeze operations and lay off workers. The cumulative effect of those cuts would likely lead the market to a deficit from 2018, said Pizarro.
Although the price slide had hit some small mining operations in Chile, the larger outfits could easily survive at the current market level, said Diego Hernandez, chief executive of London-listed copper miner Antofagasta, on the sidelines of the conference.
“There are no signs that the price will change this year...and we have to adapt ourselves to this reality,” he said. Antofagasta had cash positive operations and “most large mining operations in Chile can resist current prices,” he said.
But for Codelco, the copper price fall has come just as it was seeking to implement an ambitious investment plan to open new mine projects and revamp older ones.
Its spending cuts would mean 70,000 fewer tonnes of refined copper between 2015 and 2019, rising to 600,000 tonnes less in the next five years, Pizarro said.
Over 25 years, that would add up to 4 million tonnes, about 13 percent of the 44 million tonnes it had planned. Last year Chile overall produced around 5.76 million tonnes of copper.
Codelco returns its profits to the state and is funded by a combination of government financing and debt issuance. Pizarro said that 2016 was already financed and no more funds were needed, but that there remained a gap for 2017.
“Next year we have an investment plan of around $3 billion and probably we will need an additional loan injection,” he said. When asked if the shortfall would be made up with a debt issue, he replied “yes”. (Reporting by Anthony Esposito and Pratima Desai, Additonal reporting by Felipe Iturrieta, Writing by Rosalba O‘Brien; Editing by Marguerita Choy and Andrew Hay)