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Chile's Codelco Says Quake Won't Affect Investment Plans
May 14,2010 09:03CST
industry news

Santiago, May 13, 2010 (EFE via COMTEX) -- The funds needed to finance Chile's reconstruction effort following the Feb. 27 earthquake will not affect state-owned copper company Corporacion Nacional del Cobre's $2.4 billion investment plan for this year, CEO Jose Pablo Arellano said Thursday.

"The company is in a position to carry out its investment program," Arellano told a press conference in which he gave an overview of his four years at the helm of Codelco, the world's largest copper miner.

Arellano, who next week will be replaced by Diego Hernandez, currently the head of base metals at multinational BHP Billiton, acknowledged that profit reinvestment will be lower than what had been forecast prior to the devastating, magnitude-8.8 earthquake, but he said Codelco can compensate by using its own resources or taking on debt.

The challenge facing Codelco's new board of directors is to ensure investment funds are available to carry out structural projects, compensate for ore-grade depletion affecting several mines and improve productivity, Arellano said.

Regarding the impact of market volatility on copper prices, Arellano said he remained optimistic because of solid demand from emerging markets like China and India.

"However, the recovery of the developed economies has been slow and that's affecting our market," he said.

"The recovery is not going to be as quick, easy and strong as we would have wanted, especially in Europe and the United States, because they have to overcome their structural imbalances," he added.

He said that thanks to the implementation of a corporative governance business model, one of Arellano's objectives as CEO, "Codelco is now a company that responds much more to the state and less to the government."

A corporative governance law for Codelco was approved last year with the aim of making the company more efficient and less subject to political pressure.

"People come and go, but institutions remain," according to the outgoing chief of Codelco, which starting next week will have a board and CEO not directly appointed by the government.

Arellano said he was proud of the company's performance during the four years he was in charge, a time when Codelco earned $26.7 billion in profit, the same amount posted in the 16 years prior to his arrival in constant-currency terms.

And although 2009 was not the best year with respect to copper prices, Codelco made strides in terms of competitiveness, increasing productivity by 16 percent and reducing costs by 11 percent.

"The country has to capitalize on the current opportunity to produce a third of (the world's) copper," taking into account Codelco's output and the production of private companies operating in Chile, Arellano said.

Codelco, which has assets valued at $16 billion and $5 billion in equity, funds government spending on social programs and even defense purchases. 



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