Codelco reports 'second best production in history'

Chilean state copper producer Codelco made a pre-tax profit of US$2.9bn in 2017, six times more than the US$500mn reported the previous year, thanks to an increase in average copper prices, cost reductions and higher productivity.

Codelco CEO Nelson Pizarro said during a conference on results that the state-owned company kept its costs competitive in spite of a 10% drop in ore grade since 2013.

C1 costs were 18% lower than the average for the rest of the industry. Nevertheless the company's C1 costs were up 7.8% to US$1.359/lb in 2017. The decline in the exchange rate and higher input prices explained this increase in direct costs, said the executive.

Pizarro also highlighted that Codelco achieved its second best annual production in its history, reaching 1.73Mt in 2017, up 1.5% from 2016.

"This overwhelming figure demonstrates that we successfully overcame the litmus test imposed by the rise in prices. We didn't relax, we maintained an efficient rate and we achieved production that competes with our historical record," said Pizarro.

The El Teniente and Chuquicamata divisions were the top producing units, with 464,000t and 331.000t, respectively, followed by Radomiro Tomic (319,000t), Andina (220,000t), Ministro Hales (215,000t), Gabriela Mistral (123,000t) and Salvador (62,000t).

Codelco's Ebitda was US$5.661bn in 2017, thanks to the higher copper prices and greater efficiency.

The state-own company's financial debt was also highlighted during the presentation. Gross financial debt fell in 2017 for the first time in nine years, falling from US$14.2bn in 2016 to US$14.0bn in 2017.

2018 PLANS

Codelco expects production this year to be in line with last year's output and reach 1.7Mt.

Pizarro said the company plans to invest approximately US$4.3bn across its different operations this year. These investments are US$1.5bn higher than those made in 2017, which reached US$2.8bn.

The company will focus on structural projects, which are designed to increase production to 2Mt by 2025.

As such, the company's main focus for this year will continue at Chuquicamata underground, the connectivity between open pit and underground facilities at Andina, the New Mine Level at El Teniente, the Rajo Inca mine, Andina's future development and the District North desalination plant.

Pizarro said that in the case of Chuquicamata underground the project is now 51.3% complete, which means 96km of the total 140km underground tunnels have now been built.

In the case of the Andina transfer project, currently 48.6% complete, Pizarro said the company finished the primary crushing excavation.

The new mine at El Teniente is 44.6% complete, where the company is focusing on maintaining safety measures.

The Rajo Inca project is in its feasibility stage and Pizarro said the company expects to finish it this year. Final revisions are being carried out on the future expansion of Andina to define a feasibility study.

The District North desalination plant project was environmentally approved in January 2018 and it is now in the tender process.

As for lithium, the company recently received a special lithium operating contract (CEOL) from the mining ministry to develop lithium assets.