Financing crunch leaves Codelco's investment plans in pieces
By Fabian Cambero
CALAMA, Chile, Sept 7 (Reuters) - The ambitious investment plans of Chile's state-run copper producer Codelco are in tatters as it faces delays to mine expansions and keeps at least one unprofitable project running with global copper prices plumbing multi-year lows.
Expansion of the key Andina mine has been delayed by two years and a plan to take the century-old Chuquicamata mine underground is behind schedule, hampered by operational setbacks and financing and environmental concerns, company insiders say.
Meanwhile, Codelco, the world's No. 1 copper supplier, is keeping unprofitable mines like Salvador open, apparently to protect jobs and save President Michelle Bachelet's leftist government more confrontations with unions.
"The juncture at this moment is awful," Carlos Caballero, head of Codelco's new Ministro Hales mine, told Reuters.
Codelco's troubled outlook raises doubts over whether it will be able to bolster production to a targeted 2 million tonnes per year by 2026, from 1.67 million tonnes in 2014.
It also puts Bachelet in a difficult position because Codelco, hit by an end to the commodities boom, is generating less of the income she needs to finance ambitious and long-promised social programs.
Codelco says it needs to invest $25 billion over five years to dig deeper at new and existing sites and keep production flowing. With copper prices at a six-year-low, the cash-strapped government has so far pledged just $4 billion in returned profits between 2015 and 2020.
Codelco hands its profits to the state, and is funded in part by the return of some profit and in part by issuing debt. Continuación...