Analysts: Chilean copper production stagnant, the world's largest copper producer may change ownership

Despite billions of dollars spent on new projects over the past 18 years, Chile's copper production is still lower than expected, putting its crown as the world's largest copper producer at risk, BMO analyst Colin Hamilton warned on Thursday.

Hamilton said he had received several questions about weak Chilean copper production in the past week as mining companies with operations in Chile released first-quarter production reports.

Chile is currently the world's largest copper producer, accounting for nearly 1 percent of the world's supply. According to the data, Chilean copper production in January was 425700 tons, down 7.5 per cent from a year earlier and the lowest level in 11 years. Chile's National Copper Commission (Cochilco) cited reasons for the sharp decline in production capacity, including declining ore quality, water shortages and other short-term problems.

The Hamilton expects Chile's copper production in 2022 to be lower than in 2004, when it produced just over 5.4 million tonnes, equivalent to 37 per cent of world production.

Hamilton points out that after steady growth in the 1990s and early 2000s, Chilean copper production levels have been stagnant and the annual production target of more than 6 million tonnes has never been met.

Diego Hern á ndez, president of the Chilean National Mining Association (Sonami), remains optimistic and expects Chilean copper production to rise this year as Teck Resources's Quebrtada Blanca mine is expanded to start production in the second half of this year.

However, Hamilton believes that the decline in copper production in Chile is not only a problem of investment and expansion in new projects, but also an important reason for the aging of existing assets.

"most notably, copper cathode production in Chile continues to show an unstoppable decline and is now about 500000 tons below its peak a decade ago," Hamilton said. From an investment perspective, Chilean production is likely to continue to be lower than expected than short-term problems. "

Chile is currently in the process of redrafting its constitution, which includes a number of issues closely related to the mining industry, such as raising mining royalties and financing the expansion of social projects. The most damaging thing for major mining companies is the proposal to nationalize Chile's domestic minerals. Some mining companies have suspended investment decisions in Chile because of the uncertain future.