Mine reductions in Chile cast doubt on future copper output

When the pandemic struck the world and mines worldwide closed, people discovered a way to continue producing copper for Chinese smelters in Chile. They sent nonessential staff at home and introduced longer schedules. Chile has become an epicenter of the coronavirus, unfortunately. However, according to the latest data, the mines are working with increased production.

To do so, they postponed projects and have operated in areas that are easier to access. Such practices could limit copper’s future production.

Chile represents more than a quarter of the world’s copper. Disruptions in the production of the commodity could shake the world. According to Andrew Cosgrove, a senior analyst at Bloomberg Intelligence, it is one of the reasons the metal’s prices are holding up.

Some mines are faced with a small workforce, and they are depleting stockpiles. They are solely focused on producing copper in the short term, limiting the mining work they usually do to prepare future mining areas. 

Mines will keep operating this way at Collahuasi, Chile’s number 2 copper mine, at least until September. This could lead to problems next year. 

Copper mining sector in the country could suffer losses

If there is no development in cleaning up the extraction of the mineral, later losses are possible. 

Staffing levels differ according to the individual characteristics of each mine, as companies maintain production while ensuring distance and other measures to keep workers healthy.

For companies with flexible mining plans, another option may be to extract the easier and more productive parts of their operations. 

Cesar Perez, an analyst at BTG Pactual, states that companies can compensate for lost mineral extractions that occurred between March and May by moving to higher-grade deposits. The second half of the year will make everything evident. 

Without a doubt, the tactics used by Chilean mines to avoid the pandemic without sacrificing production are similar to those used by producers with high costs to support low prices. And typically, mines begin their life with a higher-grade ore, which decreases over time. 

Coronavirus cases have skyrocketed in Chile

In recent weeks, the coronavirus cases in Chile have skyrocketed. The country now has one of the highest infection rates per capita in the world. The number of infected cases has already reached 255 thousand, with almost seven thousand deaths. The country’s population is more than 19 million. With this number of infections, Chile ranks third in Latin America after Brazil and Peru. Currently, the US, Brazil, and Russia are the hardest-hit in the world.

Coronavirus cases in mines are still growing, and authorities have tightened restrictions to curb the spread of the virus. This adds to the uncertainty as to when mines will be able to operate with a full workforce. 

The most immediate concern for the market now is Chinese smelters facing limited supplies of semi-processed copper from mines. They are speculating over whether the surge of pandemic cases in Latin America will slow down or cause copper production to stop.