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Spotlight: Enami's crisis and its impact on Chile's medium-sized copper mining industry

Bnamericas
Spotlight: Enami's crisis and its impact on Chile's medium-sized copper mining industry

Supply shortages, debts, outdated equipment and an overstock of untreated copper concentrates due to a lack of capacity are some of the problems facing Chile’s state-owned minerals processing company Enami.

With losses last year and in the first quarter, the company is weighing up its finances to continue serving small and medium-scale miners, who are demanding the modernization of Enami’s Hernán Videla Lira smelter in Atacama region.

The lack of smelting capacity affects, in particular, medium-sized miners, which represented 80% of Enami's exports last year with 73,756t of copper cathodes, largely processed at the smelter also known as Paipote before being refined elsewhere.

For this year electro-refined products would rise to 92,599t, CEO Jaime Pérez de Arce told a seminar hosted by mining association Sonami on Tuesday.

Despite doubts about the viability of the modernization project, which, according to mining undersecretary Willy Kracht would not be profitable and would lead to greater debt for the state company, Pérez de Arce told BNamericas that "in the worst scenario, the project will have low but positive profitability, and if we manage to solve the financing, construction would begin in 2025 to be finished by the end of 2026.”

He added that the company is carrying out the feasibility study and will submit the environmental impact study for evaluation in October. “We raised [capacity] from 700,000t to 805,000t. Therefore, the NPV [net present value] would be between US$300mn and US$400mn for an investment that exceeds US$1.2bn.”

The government's strategy to strengthen the country's smelting and refining capacity requires Enami to deliver "a modern, economically profitable smelter with the highest environmental standards," the document states.

Medium-sized mining players in the region, such as Pucobre, Atacama Kozan and Carola Coemin, agreed at the Sonami event that Paipote is key to the value chains due to its proximity.

Another advantage that the modernization would bring is facilitating the diversification of mining exports, since 70% of the installed smelting capacity in Chile is state-owned, with 63% from Codelco and 7% from Enami. But while 26% of Codelco's exports are copper concentrate, Enami exports 100% of its products in cathodes, according to a report by copper commission Cochilco.

The short-term debt registered last year by Enami was around US$500mn.

ENAMI LITHIUM PROJECT

Enami is key in Chile’s national lithium strategy and is carrying out early exploration at a lithium project in Atacama region. It involves the La Isla, Aguilar, Las Parinas, Infieles and Grande salt flats, located in the Siete Salares area.

The firm requested a lithium operation contract (Ceol) from the mining ministry and meanwhile, "we are looking for a private partner that not only finances, but also knows the industry and teaches us about it." In other words, it must build, develop, bring the technologies and operate, "providing majority benefits for the State," said Pérez de Arce.

Rio Tinto, Eramet, Tsingshan and Tianqi have already held meetings with Enami, he added.

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