Chile's Enami requires sustained govt support to solve its financial crisis

Chilean state miner Enami will need US$25 million annually to continue operating and stabilize its financial situation, company vice president Iván Mlynarz told the senate's mining committee.

Enami's debt will rise from US$596mn to US$784mn this year and is on track to reach US$1.2 billion by the end of the decade because of increasing interest payments.

The debt broke the US$400mn ceiling in 2021, which led to problems with lenders. The company financed operational problems through loans, but “last year, the credit was denied,” Mlynarz said.

The Hernán Videla Lira (HVL) smelter is the main problem, generating daily losses of 200mn pesos (US$210,000), “approximately 75% of Enami's loss in 2023,” mining minister Aurora Williams told the committee.

HVL, located in Paipote, Atacama region, has been paralyzed since February. “If we continued operating, there would be US$278mn in losses this year, but because we stopped it, [the loss] will be US$184mn,” Mlynarz said, adding that the reduction does not represent a solution to the company's problems.

This year, Enami will have to pay about US$65mn in interest, while the closure of HVL – one reason being non-compliance with environmental regulations – affects small and medium-sized miners.

Enami buys minerals from small and medium-sized companies, processes and sells them, which is why modernizing and restarting HVL is essential. Such plans, however, would involve US$1.4bn – which the company does not have.

Sector associations, lawmakers and government authorities have warned about Enami's situation. This week, President Gabriel Boric told the mining committee that he wants to relaunch the smelter before the end of his term in March 2026 and send a financing proposal soon.

Enami, for its part, is developing a plan to ensure continuity, stability and operational optimization, with guidelines expected to be presented in August, while the mining and finance ministries are defining capitalization instruments.

QUEBRADA BLANCA

One potential source of income is Enami's 10% share in the Quebrada Blanca (QB) copper operation, in which Canada's Teck Resources holds 60% and Japan's Sumitomo 30%. Teck and Sumitomo are investing US$8.8bn in the QB2 expansion to increase production.

Enami's profit share would reach US$26mn in 2029 and US$23mn in 2030, Mlynarz said. Williams cautioned that “future dividends will always be conditional on the decision of shareholders.”

Media reports about state copper giant Codelco buying Enami's share emerged, but mining association Sonami opposes such a move, writing in a letter to Boric that “we're not going to allow Enami to continue being dismantled because that will dismantle mining.”

Sonami highlighted that the sale would strip the company of its most valuable asset and future income, apart from extraction.

But Mlynarz said selling the share could help contain the debt.

Enami currently offers the Esperanza copper mine for sale or lease.