Cash costs of Chilean copper miners climb in 2017

A new study by Chile's copper commission Cochilco showed that the cash costs of domestic miners were up 6.9% to US$1.39/lb in 2017 compared to the previous year, mainly due to increases in energy and fuel prices, higher remunerations and the appreciation of the peso against the US dollar.

The annual study published by Cochilco's costs observatory has been published since 2015 and takes into account 21 operations that represent 91.7% of total copper production in Chile.

"There is a slight rise in costs that is slowing the downward trend from previous years. Since 2014 there has been a progressive downward trend, parallel to a decrease in average copper prices, but from 2017 onwards, this trend has stopped in parallel with an increase in the average copper price," said Cochilco executive vice president Sergio Hernández in an event to present the study.

Hernández said that cash costs had gone up US$0.089/lb during 2017 due to management factors (US$0.008/lb), market factors (US$0.04/lb) and geological factors or declining ore grades (US$0.042/lb).

Cochilco's study, entitled Desafío del Control de Costos en un Escenario de Mayores Precios del Cobre (The challenge of cost control in a scenario of higher copper prices), shows that an important factor in the hike in costs was the increase in staffing, particularly in contractors, where there was a rise of 8.1% compared to 2016, with a total of 6,000 new jobs.

There is also a substantial effect from the depreciation of the US dollar against the peso which had a negative impact on elements of expenditure in local currency, such as remunerations, third-party services and supplies.

Cochilco studies director Jorge Cantallopts, said that a drop in production in Chilean mines also contributed to hike in cash costs. "Escondida's strike and another 13 operations stopped producing 55,000t of fine copper."

Also very important to the rise in costs in 2017 was the increase in the price of electric power, the studies director said.

Cantallopts said that within the study sample, a total of seven operations reduced their cash costs, while another 14 operations saw them increase. "Some operations were favored by higher by-product credits, especially those that produce and commercialize molybdenum, which increased 26.6% in price," he said.