Dropping copper prices threaten Codelco mines
santiagotimes.cl
The drop in the price of copper to US$ 2.70 a pound has the mining world worried. After holding steady for a few weeks, the price began to plunge, and the experts are unable to predict when it will stop dropping.
Production costs have been steadily rising over the past years along with the price of copper, and this week’s plunge has caught miners at a time when their production costs are higher than ever.
In the worst week for copper since the '80s, the commodity clocked out last Friday at US$2.70, a third less than July’s high price of US$4.07 a pound.
Mining operations are generally considered to cease to be profitable at production costs in excess of US$1.80 a pound. Based on this calculation, the Salvador mine – a division of State-owned Chilean copper company CODELCO, whose production costs are about US$2.50 – is in trouble. CODELCO has averted too-low earnings thanks to the rising dollar, which has made the company's peso-based costs lower, and anticipates further help from the recently-active “Gaby” project, a mine named after Chilean writer Gabriela Mistral that is expected to be a big money-maker. The public company also declared that it will try to cut production costs.
Private mines are also feeling the squeeze. “We must be prepared for a price drop in commodities on a global level,” said the executive president of Antofagasta Minerals, of the Luksic group, whose teams are “working on lowering production costs right now.” |
