Chile's Codelco, the world's top copper miner, has once again made drastic changes to its ambitious five-year investment plan as falling copper prices continue to dry up the company's earnings.
The state-owned miner, which faces what its chief executive Nelson Pizarro recently called its "worst crisis ever" since created in 1976, has decided to reduce its investment budget by $2.25 billion, local news site El Pulso reports (in Spanish).
Phase two of the Radomiro Tomic sulphide project will be postponed to 2024, while construction of a new level at El Teniente, originally set to be done by 2020, now it is expected to complete in 2023.The figure, though significant, is minor when taken in the context of Codelco's ambitious investment plan, originally pegged at $25 billion (now sitting at $18bn), aimed at upgrading its aging mines and dealing with dwindling ore grades.
"We have modified our strategy for the projects. Instead of carrying them out simultaneously, development will now take place sequentially," the miner said in an internal newsletter sent to staff quoted by El Pulso.
Among the affected plans, Codelco noted that phase two of its Radomiro Tomic sulphide project will be postponed to 2024, while construction of a new level at El Teniente, originally set to be done by 2020, now it is expected to complete in 2023.
The company, however, won't touch a much needed expansion project at its century-old Chuquicamata mine underground, currently underway, which is due to be completed by 2019.
The investment cuts come despite Chile's government injected $600 million of capital into the copper giant earlier this year.
But Codelco, which hands over all its profits to the state, has received only 10% of its surplus over the past decade. In comparison, private copper miners reinvest an average of about 40% of their profits.
The miner's output amounts to around a tenth of global supply and it has been one of the main forces behind Chile's transition from one of Latin America's poorest countries to one of the richest over the past 40 years.
Base metals suffered a broad-based sell-off Tuesday after the dollar hit a multi-month high, but the slide has since slowed down. Copper for December settlement on the Comex division of the New York Mercantile Exchange gained 0.85 cents or 0.4% Wednesday to $2.1755 per pound. Trade has ranged from $2.1585 to $2.1815 so far today.