(Adds Codelco CEO’s comments, paragraphs 5-6)
SANTIAGO, Dec 1 (Reuters) - Chile’s government will give state-owned copper miner Codelco $975 million in capitalization so the cash-strapped firm can finance its ambitious investment plans, Finance Minister Rodrigo Valdes said on Thursday.
World no.1 copper producer Codelco returns all its profits to the state and is funded by a mix of capitalization and debt.
“This year the government has decided to capitalize Codelco with $975 million ... this money will allow the company to continue developing its investment program,” Valdes said at a news conference. Last year, the government handed Codelco $600 million.
Codelco wants to invest $18 billion through 2020 to revamp and expand its existing mines in order to keep copper output flowing. It had previously planned to invest upwards of $25 billion, but was forced to slash that because of a falling copper price.
Codelco Chief Executive Officer Nelson Pizarro said the capitalization would allow the company to make progress with its projects, which include the transformation of Chuquicamata, the century old biggest open pit copper mine in the world, into an underground mine.
“With this we will move forward according to our plans and next year we’ll see what situation we find ourselves in,” Pizarro told reporters.
Some Chileans argue that Codelco could have more cash if the government were to abolish the so-called “Reserved Copper Law,” inherited from General Augusto Pinochet’s dictatorship, which forces the company to hand over the equivalent of 10 percent of its sales to finance the military.
“Codelco has needed to indebt itself in order to pay the state because of this law ... the impact of a lower copper price and the Reserved Copper Law have in conjunction led to increased debt,” finance minister Valdes said.
He said to give temporary relief, center-left President Michelle Bachelet will send Congress a bill during December that aims to divert some of those funds back to Codelco for two years, while lawmakers discuss a longer term solution.
Depending on what happens with the copper price, that could be worth as much as $475 million annually. (Reporting by Fabian Cambero; Writing by Anthony Esposito; Editing by Marguerita Choy and Grant McCool)